Are realtor rebates worth it? | Where to find a home buyer rebate
If you’re buying a house in a state that allows home buyer rebates, it's worth looking into.
Many brokerages — both national and local — have commission rebate programs, with potential savings that range from a few hundred to several thousand dollars. There are also free companies that match you with top-rated local agents — and provide cash back to eligible buyers after closing.
However, we caution against just looking for the largest rebate available. Some discount real estate brands advertise huge savings, but the eligibility criteria is often complicated, and there may be service tradeoffs that make the discount less than worthwhile.
Alabama, Alaska, Kansas, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee.
Rebates not allowed in your state? Find other ways to save here.
We've researched more than a dozen nationwide and regional companies that offer real estate rebates — and combed through thousands of customer reviews — to find which brands offer the biggest savings and best overall value.
👉 More sections: How commission refunds work | How to compare rebates | Where to find a rebate | Where are they legal? | How to negotiate a rebate | Other ways to save FAQ
Is a home buyer rebate worth it?
Home buyer rebates may sound like a no-brainer — after all, who doesn't like free cash? — but some home buyer rebates offer more value than others. And recent changes to the way real estate commissions work may make commission rebates less valuable than they used to be.
Until recently, home sellers paid agent fees for both their listing agent and the buyer's agent out of their sale proceeds. This way, neither side had to bring extra cash to close. A listing agent would charge a total commission of about 5–6%, and split it with the agent who brought the buyer.
However, a recent ruling has forced the National Association of Realtors to change how real estate professionals do business. Now, sellers and buyers negotiate commission rates separately with their own agents. Currently, the average listing agent fee is 2.74%, while the average buyer's agent fee is 2.58%.
Most buyers will still ask sellers to pay their agent's fee as a concession from the home sale proceeds, but it's in your best interest to negotiate a fair rate with your agent upfront. The less you ask a seller to pay in agent fees, the more attractive you look as a prospective home buyer.
Just as important as getting a fair commission rate is finding the agent that's going to get you the best possible deal on a house. So in addition to the gross amount of commission your agent charges — or the rebate they offer — look at the value they provide for the fee.
Having an experienced real estate agent on your side to help you find the right house and negotiate a great deal is more important than saving a few extra bucks. Choosing the wrong house because your agent didn’t give you enough hands-on service could cost you a lot more in the long run than you’d gain from the rebate.
How to compare home buyer rebates
Here are some factors to consider when comparing the options available in your area.
What kind of home buyer rebate is it?
Some home buyer rebate programs distribute refunds as a closing cost credit. Others give you cash back, which means you get an actual check after closing.
Closing cost credits often promise the biggest savings. But in practice, that’s not always the case. Your agent can’t guarantee the full rebate amount because closing cost credits have complicated restrictions and require lender approval.
Depending on your loan type and what seller concessions you negotiated in your purchase contract, your lender might be forced to limit the size of your rebate.
Cash-back refunds don’t always advertise the largest savings, but the full rebate amount is guaranteed on all purchases that match the eligibility criteria. You get the money after closing, so the refund doesn’t affect your loan situation — and won’t require lender approval.
Not needing lender approval means you don’t have to worry about last-minute snags that could put your rebate in jeopardy. And since the company issues your rebate as cash, you can spend the money however you want.
What are the terms and limitations?
When comparing home buyer rebate programs, be sure to look past the initial advertised amount to the specific terms laid out in the contract. Some buyers are lured by the promise of a generous commission refund, only to find that they qualify for a much lesser rebate — or none at all — once they get down to the fine print.
Most companies have minimum commission fees, which means your agent must earn a set dollar amount before they’ll give you anything back. If you buy a lower-priced home or a seller offers a lower-than-average commission, you may not get a full refund.
Regional brokerage Prevu advertises a buyer rebate of up to 1%. However, your actual refund amount depends on the home price and agent commission being offered. Homes listed for less than $500,000 on Prevu's site tend to advertise lower rebates or none at all.
SimpleShowing also advertises a 1% rebate, but that's only after guaranteeing a minimum $5,000 commission for their agents — meaning you won't get anything back unless your agent's earnings exceed that cutoff. Popular discount brokerage Redfin offers a modest buyer rebate worth 0.25% of the purchase price, but only if you sign with a Redfin agent before your second showing AND buy a home within 180 days.
Will there be any service trade-offs?
Some agents offer discounts in exchange for limited service.
For example, regional discount broker Simple Showing advertises a generous buyer rebate of up to 1% of the home sale price, but the rebate amount gets cut in half after your first 10 home tours. So if you plan to look at more than 10 homes before buying (which may be a necessity in more competitive markets), you could be disappointed with your refund.
Other discount brokers like Redfin juggle many agents at once, which may give them less tie to devote to you individually.
The same holds true for companies like Trelora, which offers a generous rebate of up to 1.5% (subject to a 1% commission minimum for your agent), but at the expense of giving you a dedicated point of contact. Instead, the company uses an assembly line-style agent model where sellers work with different personnel at each stage of the home sale, from touring, to putting in offers, to negotiating, to closing.
Is the value I get from my agent worth the discount?
A huge rebate can sound good on paper, but if you compromise on customer service, the trade-offs might not be worth it. Going with the wrong agent could mean getting a worse deal on a house, or potentially not getting the house at all.
Agent-finding services like Clever Real Estate and Upnest partner with traditional agents from top brokerages like RE/MAX and Keller Williams to offer rebates. So while the rebates may be more modest, buyers don’t have to worry about service trade-offs because they’ll get the exact same experience as working with a traditional agent who doesn’t offer rebates.
It's worth noting that with Upnest, whether or not you get a rebate depends on your agent. Some agents who source clients through the platform offer rebates, while others don't. The amount is also at the discretion of the agent.
Clever Real Estate offers $250 cash back at closing regardless of which agent you work with, and $500 if you work with their agents to sell a home also.
Where to find a home buyer rebate
Below are some of the better-known national and regional companies offering home buyer rebates. However, most buyers can choose from multiple local brokerages to find commission savings.
To save yourself time, consider starting with a free agent-finding service like Clever, UpNest, or HomeLight. These companies partner with top agents across the country to help you find the right agent for your needs.
Top-rated options like Clever Real Estate also offer cash back at closing in states where it's permitted. Simply tell them what you're looking for, review agent profiles without obligation, and get cash back when you buy.
| 🏠 Company | 💰 Max. rebate | ✍️ Details | Availability |
| Clever Real Estate | $500 | $250 cash back when you buy, $500 when you buy and sell | Nationwide |
| Prevu | 1% | Largest savings on homes above $1 million; savings may not apply to lower-priced listings | CA, CO, CT, MA, NY, PA, TX, WA |
| Redfin | 0.25% | Must sign with a Redfin agent before 2nd home tour and buy a home within 180 days | Nationwide (select markets) |
| SimpleShowing | 1% | Rebate applies after meeting minimum commission requirement of $5,000 to the buyer's agent; rebate drops to 0.5% after 10 home tours | FL, GA, TX |
| Trelora | 1.5% | Rebate applies after meeting minimum commission requirement of 1% to the buyer's agent | AZ, CA, CO, GA, NC, SC, WA |
| UpNest | Varies | No guaranteed savings, but some agents offer rebates | Nationwide |
How home buyer rebates work
Negotiating a buyer rebate | Where they're legal | Tax considerations | First-time home buyer rebates | FAQ
Agents often advertise home buyer rebates as a percentage of the final sale price — for example, a 1% rebate on a $500,000 home would equal $5,000.
Sometimes agents offer rebates as a percentage of the fee they earn on the sale, which is a little more complicated. As an example, if an agent earns a 3% commission and offers you a 50% rebate, you’d get back half their commission, or 1.5% of the sale price.
It’s important to clarify with your agent up front whether the rebate percentage they’re offering refers to their commission fee or the home’s sale price. Using the example below of a home purchased for $300,000, the higher percentage doesn’t always equal the higher rebate.
| Rebate type | Agent's commission | Your home buyer rebate |
|---|---|---|
| 0.5% home price rebate | $9,000 | $1,500 |
| 10% agent commission rebate | $9,000 | $900 |
You'll receive your buyer rebate at closing, usually in the form of a closing credit. This means you can only spend it on certain closing costs, like:
- Appraisal fees
- Buying points on your mortgage
- Escrow fees
- Loan origination fees
- Transfer fees
Whether your agent or their brokerage offers a built-in rebate or you negotiate one yourself, the rebate amount should be specified and agreed upon at the outset, before you start touring houses.
» JUMP: Back to where to find a home buyer rebate
A few important notes about buyer rebates
- Real estate rebates must be disclosed to and approved by your lender.
- The promised rebate amount is never guaranteed in full.
- The lender typically dictates how your rebate can be spent.
- Rebates can't be used to fund your down payment.
Cash back vs. closing credits
We recommend looking for a real estate company or brokerage that offers cash back instead of commission rebates. Cash back comes in the form of a check after closing instead of a credit, which offers some big advantages.
Because you get cash back after the transaction, you can spend it however you want with no limitations.
Cash back isn’t subject to the same rules — i.e., lender approval — because it’s coming from a third-party outside of the transaction.
Even still, you should let your lender know you’re getting cash back just to be safe.
Why do buyer's agents offer commission rebates?
Buyer's agents offer commission rebates to:
- Attract and retain new customers. Buyers may be more inclined to work with an agent who promises they'll get several thousand dollars back. And since most buyers don't sign exclusive contracts with their agents until they submit an offer, rebates provide more incentive for a buyer to stick with an agent throughout the process rather than shopping for houses with multiple agents.
- Make a transaction more affordable. Closing costs can be expensive. For buyers, they're usually 3-5% of the sale price. On a $300,000 home, that's as much as $15,000. A buyer who gets thousands of dollars back may be better able to afford these costs.
- Remain competitive. A growing number of companies offer buyer rebates. Agents may feel they need to do the same to avoid losing business.
How to negotiate a buyer rebate with your agent
Many agents are resistant to offering commission rebates because it means they earn less money. However, you'll have better odds of negotiating realtor fees if you're:
- Purchasing a high-priced home, as your agent will receive a large commission
- Working with a newer agent who may find it more difficult to attract customers
- Buying and selling a property with the same agent, so they'll be getting both commissions
- Buying in an area where demand is low and your agent may not have a lot of other business
How to increase your chances of a real estate rebate
To maximize your chances of successfully negotiating a real estate rebate with your agent:
- Do some of the legwork for your agent. If you've already done the hard work of finding a property and you just need help making an offer, an agent may be willing to reduce their commission in the form of a rebate.
- Use the same agent to sell your property. Since the agent will earn a commission for both transactions, they may be more willing to offer a discount.
- Buy a property the agent is selling. Dual agency isn't legal in every state, though, and there's an inherent conflict of interest since the agent represents the seller too. Make sure you fully understand the risks before agreeing to a dual agency sale!
Where are home buyer rebates legal?
Home buyer rebates are legal in 42 out of 50 states.
If you live in these states, you can work with an agent that offers a rebate, try to negotiate for a rebate, or work with a company that offers rebates or cash back.
Some states do limit the size and type of rebate, so it's important to check the regulations in your specific state.
States where home buyer rebates are banned
The real estate lobby has pushed to have rebates banned in eight states, including:
- Alabama*
- Alaska
- Kansas
- Mississippi
- Missouri
- Oklahoma
- Oregon
- Tennessee
In these states, agents can't offer you money back or any type of gift to entice you to use their services.
The U.S. Department of Justice takes the position that blocking rebates inflates the cost of real estate services and harms consumers. That's why it supports legalizing rebates across the country.
*Alabama and home buyer rebates
Alabama doesn't allow commission rebates. But certain types of incentives are allowed, including some cash-back programs and other gifts, so long as the incentive is disclosed to all interested parties (typically the buyer, lender, and seller). [1]
If someone offers you an incentive or cash back in Alabama, check with your lender to make sure it's allowed.
Iowa and home buyer rebates
Iowa technically allows buyer rebates, but it limits them to dual agency sales. Dual agency is when one agent represents both the seller and buyer.
These types of transactions are often suspect because the agent isn't neutral. The agent will also be looking out for the seller, meaning you may not get the best deal.
New Jersey and home buyer rebates
New Jersey allows buyer rebates but prohibits rebates to sellers.
Even where legal, buyer rebates are often highly regulated
Even in states that allow buyer rebates, they’re still governed by strict rules and regulations.
For example, you can never use a rebate to fund your down payment. Your lender will have additional stipulations.
Home rebates depend on your lender
Your lender has the ultimate say on whether you can have a home buyer rebate. That's because a buyer rebate affects the cost basis of your home.
What is the cost basis?
The cost basis is the total amount you pay for your home. It includes the sale price, fees you paid during closing, and any other financial investments you make in the home.
Your rebate cancels out some closing costs, lowering the cost basis of your home.
Lenders use the cost basis to calculate your loan-to-value (LTV) ratio, which is the amount you borrowed compared to the value of your home. You can calculate it by dividing the amount of your loan by the cost basis of your home.
If your LTV ratio changes, your lender will need to adjust your financing to keep the ratio low. Ideally, lenders like to keep the LTV ratio at 80% or lower.
Here's a quick example of how a $5,000 commission rebate on a home that costs $250,000 can make your LTV ratio too high.
| Home buyer rebate | Loan amount | Cost basis | LTV ratio |
|---|---|---|---|
| $0 | $200,000 | $250,000 | 80% (just right) |
| $5,000 | $200,000 | $245,000 | 81.6% (too high) |
Not disclosing a rebate can result in your financing falling through, or in worst case scenarios, mortgage fraud.
Cash back isn't as regulated
When a realtor gives cash back to the buyer, the rebate doesn't cause these issues since it's distributed after closing. It doesn't affect the cost basis or LTV ratio, so it’s usually not a concern for lenders.
You won't have the chance to use it on closing costs, but it's a nice way to replenish your bank account afterward.
While cash back technically takes place outside of the transaction and, therefore, doesn't really fall under your lender's purview, it's still a good idea to disclose it to them, just in case.
Buyer rebates must be disclosed on your HUD-1 settlement form
If you're getting a rebate as a closing credit, you also need to disclose it on the HUD-1 settlement form, which covers all settlement costs.
Your agent can help you figure this out. All of the rebate info goes on lines 204-209. You'll also include the name of the person issuing the rebate, which is typically your agent and/or their broker.
Are home buyer rebates taxable?
According to the IRS, home buyer rebates aren't taxable.
That's because you aren't actually getting any income with a rebate. It's money you already had, just coming back to you at the end of the transaction.
That said, real estate agent rebates could affect your taxes through cost basis. This is all the money you've put into a home.
Taking a rebate lowers the cost basis, which could affect capital gains taxes.
What are capital gains taxes?
This is the amount of taxes you pay on the increase in your property's value since you bought it.
A lower cost basis up front can make it seem like your property gained more value than it really did, increasing taxes in the future.
Still, this tax increase should be pretty minimal. Also, you may be eligible for an exemption on capital gains from your main home on up to $500,000 in gains. If you're concerned, talk with a tax professional to get advice about your specific situation.
Other ways to save money as a home buyer
Rebates can potentially put money back in your pocket after you close on a home, which is a great thing. But, there’s a lot of red tape and you shouldn’t necessarily bank on them. Fortunately, there are other ways to save on buying a home.
Look for a first-time home buyer rebate
First-time home buyer rebates are different from commission rebates. These rebates are offered by the state or federal government to help people purchase their first property.
The Housing and Economic Recovery Act created a federal tax credit of $7,500 for first-time home buyers, but this benefit expired in 2010.
Now, you'll need to look a little harder to find a tax credit, grants, and other assistance for your first home purchase. Some options include:
- No-penalty IRA withdrawal: You can withdraw up to $10,000 from your IRA for a home purchase without the 10% penalty for early withdrawal.
- HUD grants: The U.S. Department of Housing and Urban Development (HUD) funds non-profit organizations across the country that can help you with buying a house if you meet certain criteria.
- FHA loans: The Federal Housing Administration (FHA) offers FHA loans to new homebuyers. These loans require a lower down payment than traditional loans and may come with lower interest rates.
- State-specific programs: Each state has its own programs to help first-time home buyers. Check with your state housing finance agency to see what's available where you live.
You may be able to get both first-time home buyer rebates and normal home buyer rebates as long as you work with an eligible agent or real estate company.
Compare lender closing costs
Another way to save money when buying a house is to shop around for closing costs, rather than just going with whatever companies your lender or agent recommends. Getting multiple quotes from local service providers will take a bit more time, but finding lower rates could reduce your closing costs by hundreds or thousands of dollars.
Look for a great agent
Your best option to save money is to find a buyer’s agent who’s an expert negotiator. Even if you don’t get a rebate, the right agent can help you negotiate a great deal on a house — and keep more of your hard-earned money in your pocket.
If you’re not sure where to start your search for a realtor, try a free agent-matching service like Clever Real Estate.
The highest-rated real estate company on Trustpilot, Clever matches you with buyer’s agents from top-rated brokerages in your area, such as Keller Williams and RE/MAX. Interview as many agents as you want until you find the right fit — or walk away at any time with no obligation.
FAQ
Yes. Commission rebates are allowed in 42 states, and many realtors offer them to buyers to win their business. Getting a rebate could save you a lot of money. On a $500,000 home, a 0.5% refund would put $2,500 back in your pocket. Find the best home buyer rebate programs here.
Clever Real Estate, UpNest, and Redfin offer the best home buyer rebates available nationwide. But depending on your location, experience buying real estate, and budget, another company's rebate program may be a better fit for your situation. See our full list of the top realtor rebates.
A home buyer rebate is when a real estate agent or brokerage shares a portion of their commission with a buyer as an incentive to win the customer's business.
A buyer rebate is usually issued as closing credits. With closing credits, you'll get a discount on some of your closing costs, but you're limited in how you can use them. That's why we prefer cash back. With cash back, you'll get a check after your home purchase is finalized, which you can spend however you want. Learn more about how home buyer rebates work.
While real estate agents themselves usually don't offer cash back, they can partner with companies that do. In this scenario, the real estate company will give you part of the agent's referral fee (paid to them from the agent's commission). Unlike home buyer rebates, cash back flows through a third party and is issued after the sale, so it doesn't have as many restrictions, and you can spend it however you want.
Since you can use a commission rebate to cover your closing costs, you might be able to put more of your own money toward your down payment. Theoretically, this could help you afford a larger home. However, because commission rebates aren't guaranteed, it's not something you should bank on.
No. The IRS has said that home buyer rebates are not considered taxable income. But they do alter your home's cost basis, which could affect your taxes in the future if you sell your home and have to pay capital gains taxes on the net profit. Learn more./
Related links
If you're interested in learning more about buying and selling homes, these additional resources can help.
The 10 Best Home Buying Websites: Zillow, Homes.com, and RealtyTrac are among the top 10 websites for home buyers. Learn about these and other websites that can help you find your perfect property.
Realtor Fees: Your Questions, Answered: Find out who pays real estate fees, how much they cost, and more in this helpful guide to the costs of working with a real estate professional.
Buyer’s Agents: What They Are and What They Do for Home Buyers: Buyer's agents offer important assistance when looking for a property and making an offer. Learn how a buyer's agent can help you throughout your purchase process.
Millennial Home Buyer Report (2022 Data): We surveyed 1,000 home buyers to learn about their plans, dreams, and anxieties — including the risks they're willing to take in order to purchase a home.
Negotiating Realtor Fees: 5 Tips to Lower Commission: Negotiating real estate fees centers on knowing the market and your situation, then using that info while talking to multiple agents.