Commission Rebates in Maryland - How Buyers Can Save
By Sean Creamer on October 10, 2023
Oftentimes, people come for work in the Capitol Hill area but fall in love with the nearby scenery of Maryland
As such, inventory is tight in the state, and competition makes prices seem like they are unlikely to fall. Couple that with a period of rising interest rates, and you can expect to see many buyers wondering how they can save.
Many folks rely on their buyer’s agent to augment their home search, attend property tours, help prepare an offer and streamline negotiations. But if you team up with a broker offering commission rebates, you can potentially save a large chunk of your funds.
Below, the team from Prevu Real Estate put together a quick guide on how buyers can save money after closing on a home in Maryland.
What is a commission rebate?
Depending on who you speak with, these tools are also known as home buyer rebates or commission refunds.
A commission rebate is when a buyer’s agent provides a portion of their commission back to homeowners after they purchase a property. When buying a home in Maryland, you can get the largest commission rebate in the state from Prevu. The commission rebate from the brokerage can total up to 1% of the purchase price of a home.
Prevu invests in digital home-buying tools that streamline the search process and simplify communication between agents and buyers. This means that you can unlock huge savings by getting a rebate from your agent.
Commission Rebate in Maryland - Example $1,250,000
- Purchase Price: $1,250,000
- Buyer’s Agent Commission (3% of Price): $37,500
- Commission Rebate (1% of Price): $12,500
Find a broker offering commission rebates
Often, buyers and sellers work with the first real estate agent they meet based on recommendations from friends, family, or internet testimonials. Considering that real estate transactions are usually the most expensive purchase a person can make, you want to ensure you understand the process and who is representing you.
As you prepare to search for a home, create a shortlist of agents to interview. Ask about their experience selling and buying homes across Maryland, and walk you through the particulars of recent deals they worked on. Most importantly, you want to ask if they offer a commission rebate.
Most people do not know about commission rebates, as most traditional buyer’s brokers do not offer them. Buyer’s agents typically receive a commission paid by the owner when the home sale closes. As such, some buyer’s brokers sell their services as "free", but this isn’t exactly true.
As a buyer, you’re synthetically paying the broker fee, which is woven into the home's sale price by the seller. So before signing a buyer’s agent representation agreement, ask each agent you speak to if they’ll offer you a commission refund. If not, keep searching for one that can help you buy the home of your dreams and also give you money back at closing.
What can Maryland homebuyers do with a rebate?
Navigating a home sale in Maryland is a complex endeavor with many moving parts.
Buyers must organize home inspections and title searches and then convene with their broker to determine a negotiation strategy. This is a lot of work, but if you work with the right agent, a commission refund will be waiting when you get the keys to your new abode.
Folks who work with Prevu to purchase a home get an email at the end of the transaction process congratulating them on finishing the deal. Soon after, you’ll get your commission rebate check, which can be used for various purposes. Some folks use the funds to remodel the kitchen, bathroom, or bedroom.
Others furnish a room or build an outdoor patio to enjoy Maryland's serene evenings. But you could also put the capital towards rebuilding your savings after a costly down payment.
Are commission rebates legal in Maryland?
Depending on who you speak to, some uninformed agents will tell you rebates are illegal as it is a payment to an unlicensed person. Yet since buyers are a party to the transaction, they are legally allowed to accept the funds from a broker in the form of a commission rebate.
Commission refunds are legal in 40 states, including Maryland. In fact, this practice is encouraged by the Department of Justice as a means to promote competition and innovation in the real estate market.
Of course, folks worry about taxation, and that is understandable. Whether you stand to get a commission refund or not, buyers should consult with their accountant before buying a home in Maryland. Real estate brokers are not required to issue a 1099 form when providing a commission rebate.
There is guidance from the IRS noting that rebates can be treated as a reduction in the cost basis of a property.
Interested in buying a home in Maryland? Browse listings and see how much you can save with Prevu’s Smart Buyer Rebate.
