What You Need to Know About Giving Rebates on Your Commission

 

If you’re a real estate agent in Texas, you’ve probably heard the term ‘rebates’ come up before. Rebates are like coupons or rewards that you can give to customers to encourage them to make a purchase.

In this article, we’ll explain what exactly a rebate is and how you can use them to incentivize buyers into making a purchase. We’ll also explain how to give them, what paperwork you need to include with the 50% buyers rebate or less, and how to record the transaction.

What is a Rebate?

A rebate is a marketing strategy used to offer a 50% refund to the buying party on the total commission of the buyer’s agent to encourage them to make a purchase. As the industry has started to shift, rebates have become one of the most popular tools for new clients.

The idea behind a rebate is that if a customer buys your real estate with the help of agents, they are subject to getting the rebate. It has to be discussed with the brokerage and the seller in the initial stage if they have any objections in case the opposite party agent rebates 50% of his commission to the buyer. It means sellers don’t have to worry about giving it out when the customer requests it or setting up a meeting for handing out rebates.

For example, let’s say a brokerage agent representing a seller shares a percentage of his service commission with buying agents every time someone purchases from them. With this model, the brokers can keep track of who’s buying, can calculate how much profit they share and how much profit they make. 

A rebate streamlines the process by issuing the rebate when a buyer makes their first purchase with your company. It ensures that everyone involved in the deal gets their share, and the company agrees to offer a rebate to the person who makes a purchase.

Who Can Give Rebates?

Any licensed real estate agent in Houston has the ability to offer a rebate. The licensed agent must have written approval from his/her brokerage company and the seller they represent. You can only give a real estate commission rebate to buyers, not sellers.

How to Give Rebates?

The first step to understanding how to use rebates is figuring out what they are. A rebate is an offered discount to the buyer by his/her agent. The rebate can be applied to the final purchase price or at a partial price.

For example, the brokerage has a buyer who wants to buy a home for $300,000, and you have an agreement upon a standard of 2.5% buyer's agent commission rate i.e., $75,00.

The 50% buyer's rebate applies to the entire commission of the agent representing the buyer, which will be 50% of the buyer’s agent commission i.e., $3750 giving the buyer $296,250 as of the final purchase price. 

As for how to give the rebate itself, there are other different ways depending on the buyer agent commission rebate agreement:

• Cash
• A gift certificates
• Closing cost payment
• Part of the down payment (if agreed by the lender) 

However, if you decide on giving their rebate as credit instead of cash, make sure you specify in your contract.

Key Considerations for Giving Rebates

Before you offer a rebate, there are a few things you might want to consider. You have to make sure that the value of the rebate is less than the commission earned from the deal. If it costs more than the commission, it isn't worth giving the rebate. The reason is that your company is still losing money on each sale - but it can be worth giving up a commission if it means getting more business.

Another consideration is how much time commissions last. For example, many real estate agents offer rebates to get a home sold when they have an open listing and no buyers. Since this type of commission doesn't expire (for any buyer), you can offer them as long as you like to get the property sold.

However, another type of commission expires after a specific amount of time - like a discount for first-time buyers or an introductory rate for new listings - which means they will not work long-term, and buyers should only use them while they're active.

Conclusion

Giving rebates are a great way to boost your sales and increase your chances of gaining commission. But you have to be careful when doing so. If you’re not careful, you might be construed as unethical. If you want to give a rebate on your commission, make sure you do it in a fair and ethical manner.