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What is a commission rebate and why would you give one?


The way real estate agents are paid has evolved over time to point now where the system really does not make logical sense in many ways. The first real estate agents were hired by property sellers and paid a commission when they were able to bring the sale to a successful closing. The agent clearly worked for the seller of the property on terms they had both approved. If a buyer wanted to buy the property, they dealt with the seller’s agent. If the buyer wanted their own real estate adviser, they hired and paid them on their own.

Things started getting a little murky when real estate agents realized they could benefit from sharing information and commissions and created the multiple listing system. Agents still all worked for the seller, who had agreed to pay the commission, but agreed to share information and access to properties amongst each other and divide the total commission if more than 1 agent was involved in the sale. As that system proliferated, issues regarding who the different agents really worked for began to become a problem. A real estate agent might work with and develop a relationship with a buyer over a long period of time and the viewing a number of properties. Once that buyer settled on a property they wanted to buy, the agent was put in a position of legally representing the interests of a seller they had never met over the interests of a buyer they had developed a relationship with and who may have revealed information the buyer would prefer the seller not know. In response to that, the concept of the buyer’s agent was born. This has cleaned up who an agent’s client is, but has left us with a system where the seller and listing agent still determine how much a buyer’s agent will be paid.

My belief is that how much I get paid should be determined between me and my client, not by the seller and their agent. What I look at in determining how much I should get paid is based on how much in time and resources I will spend and the whether or not me getting paid is guaranteed or at risk depending on a certain outcome (like the closing of a sale). Some buyers require far less time and resources than others, some buyers are willing to commit to paying me for my time whether they close or not. The straight commission system tends to penalize “good” clients (those who close) in order to make up for time and resources spent on “bad” clients (those who don’t close).

I offer programs that reward the “good” clients with rebates of some or all of the buyer agent commission, but also require a commitment on the part of the client. If a buyer is willing to pay me by the hour, thus guaranteeing me that I will get paid for my time, I can rebate the entire amount of the commission the seller and their agent have offered. If a buyer is willing to pay a retainer upfront, I can usually rebate a significant part of that commission, with the remainder going to complete my fee for working with the buyer.

Rebates are paid at closing out of the total commission offered by the seller and their agent. Rebates have to be disclosed to all parties, appear on closing statements and be approved by any lender involved. Rebates are not discounts, they are based on up front agreements detailing the services and compensation to be rendered and allow me as an agent to provide non biased guidance and advice geared toward my client’s best interests, rather than steering the client to a property or closing that will pay me the highest commission. If you are a serious buyer, rebates are a win-win situation for you and for me.

To find out more about how rebates work and to discuss your individual situation and how a rebate might work for you, feel free to contact John Goddin at 919-968-2100 or John@GoddinRealestate.com