Commission Rebates in Houston - What You Should Know

Homebuying is rarely a straightforward affair. Budgeting can get complicated, closing costs can be tough to swallow, and affordability is often a perpetual challenge for most Houston buyers.

Luckily, commission rebates can help solve the affordability issue. 

Very few real estate tools put money back in the buyer’s pocket, but commission rebates are one of the simplest ways to do so. It’ll be an invaluable boost to your purchasing power in a city packed with unique neighborhoods and desirable real estate. So how do you get it?

The key is working with a buyer’s agent that offers commission rebates. 

What are commission rebates in Houston?

Simply put, a commission rebate, or a homebuyer rebate, is a portion of your buyer’s agent commission given back to you after closing on a home. 

Modern brokerages like Prevu Real Estate seek to change the outdated real estate model where everyone walks away with cash in their pocket after the transaction, except the buyer. 

Buyers who go through Prevu to buy a home can expect a sizable rebate post-closing depending on the purchase price and the commission offered to buyers agents by the owner. These savings can total thousands of dollars and help bridge the affordability gap for many aspiring homeowners.

A commission rebate can serve as an excellent tool to help offset closing costs, jumpstart a renovation project, or simply replenish your hard-earned savings after a sizable down payment.

How do commission rebates work?

Each brokerage works differently when it comes to offering commission rebates. Be sure to explore as many options as possible to familiarize yourself with each real estate firm’s approach. 

Prevu prefers a transparent process that starts with an accurate estimate of the potential commission rebate buyers can expect to receive, visible on every listing. If you see a property that fits your needs, you can instantly be connected with an agent to guide you through your home purchase process.

For example, if you decide to browse listings in River Oaks and a particular home catches your eye that fits the price range, you can immediately see a possible rebate amount before you even make an offer on the home. Knowing you stand to save can help give a significant confidence boost if you need to offer over the asking price.

How do I get a commission rebate in Houston?

It’s important to understand that commission rebates are only accessible through brokerages specializing in them.

However, offering commission rebates shouldn’t come at the expense of expert service. Be sure to interview potential brokerages and buyer agents to ensure they are the right fit. Just because they offer a rebate doesn’t always mean they provide full service.

Agents should work with their clients from the early moments of their home search to when they receive their rebate check in the mail. Easy communication with clients should be a given, as well; your agent should always be accessible and keep you updated during every step of the home-buying process.

Are commission rebates legal in Houston?

Commission rebates are legal in 40 states, and Texas is one of them. Because many brokerages don’t offset them, the process may seem new to some buyers.

To shed some light on the issue, the Department of Justice issued a statement on the benefits of rebates as a pro-consumer practice that helps make homebuying more affordable. 

A common misconception is that rebates are "illegal" because they would provide commission to an unlicensed person. This is untrue when related to the homebuyer, as they are exempt from such a scenario because they are a party to the transaction. 

Do I have to pay taxes on my commission rebate?

Every homebuyer should always seek tax advice from their accountant, as real estate brokerages are not allowed to offer tax advice.

That being said, the IRS helped clear up confusion regarding tax in a 2007 letter on rebates by recommending the treatment of rebates as reducing a purchaser’s cost basis. This prevents them from being treated as income, removing any need for a 1099 form.