Home buyer rebates can save you thousands of dollars at closing. And with U.S. home prices at all-time highs, every bit of money home buyers can save counts.
A home buyer rebate is when a buyer's agent shares a portion of their commission with their client. We’re talking about a nice chunk of cash: “Rebates typically amount to several thousand dollars, so it is worthwhile for buyers to make the request,” says Stephen Brobeck, a real estate brokerage expert and a senior fellow at the Consumer Federation of America, a nonprofit consumer advocacy and research organization.
But not everyone is eligible for home buyer rebates. Many real estate agents and brokers refuse to offer buyers rebates because it cuts into their commission, and eight states have banned them altogether. That said, it’s easier to get a home buyer rebate than you might think.
How to get a home buyer rebate
- Go through a company that offers home buyer rebates as a built-in service
- Try to negotiate a home buyer rebate on your own
Work with a brand that offers built-in home buyer rebates or cash rebates
A growing number of brokerages and real estate services offer built-in rebates and cash back for home buyers. But not all programs are created equal: some brands offer higher buyer savings, but with service tradeoffs. Others don't guarantee the full amount, or are available only in a handful of markets.
Our pick: Clever Real Estate
Clever Real Estate is an agent-matching service that connects you with the best local agents for free. If you buy a home with a Clever agent, you’ll get .5% Clever Cash Back after closing on eligible homes over $150,000. We like cash back rebates better than commission rebates because it frees you to spend the money on whatever you want. To give you an idea of how much money that can be, you’d get a check for $2,500 after purchasing a $500,000 house.
Like Clever, UpNest matches you with local real estate agents for free. But UpNest agents aren’t required to offer buyer rebates, meaning you may have to talk to multiple agents before finding one that’s willing to offer you a portion of their commission in the form of a rebate. Learn more about how UpNest and Clever savings compare.
Redfin’s rebate program, called Redfin Refund, changes depending on where you live. Although Redfin says its average Redfin Refund is $1,500, our research found that the average Redfin home buyer rebate is only 0.22% of a home’s sale price. Another caveat: unlike with Clever, you'll work with a Redfin agent instead of a traditional real estate agent. Redfin agents often juggle a lot of clients at the same time, so you may not receive the same level of attention that you would from a traditional realtor. When you work with Clever, you get a full-service, local, and personalized agent.
Home buyers searching for a luxury home in California, Connecticut, Massachusetts, New York, Pennsylvania, or Washington state may find a Prevu agent to be a good fit. The company offers a 2% commission rebate on homes that sell for close to $1 million or more. Buyers shopping for a less-expensive home typically get a significantly smaller rebate—if they qualify for one at all.
If your budget is under $350,000, you could earn up to half your agent’s commission by working with a Trelora agent. However, the company caps buyer rebates at $6,000, which means you can likely get more from other companies if you have a higher-priced home.
SimpleShowing offers rebates of up to 50% of an agent’s commission fee, but buyers can qualify only for a full rebate if they tour five or fewer homes before purchasing one. Once a buyer has toured six homes, the rebate begins to shrink, and it gets smaller the more homes you tour. (Note: A recent NAR survey found the typical buyer tours nine homes.)
If you’re buying in a market where cash offers are common, Homie might be a good fit. Homie is a flat fee discount brokerage that lets you borrow the funds to place all-cash offers on homes, and you can also earn a commission rebate worth up to half the buyer’s agent fee. The drawbacks? Homie agents handle about ten times as many transactions as typical realtors. With your agent juggling so many other customers at once, you should expect less personalized customer service than you’d expect from a traditional agent. In addition, Homie requires buyers who want a rebate to use the company’s in-house mortgage and title services, which often end up being more expensive than options you could find elsewhere.
Like Clever, Realtor.com offers a cash back program. It’s not as appetizing—buyers receive only 0.3% of their home’s purchase price as a reward (compared to Clever’s .5%). There are also some notable restrictions: buyers must purchase a home that costs at least $150,000, and the cash back program is available only in certain markets.
» LEARN: Homie vs. Realtor
How to negotiate a home buyer rebate with an agent
Rebates are 100% negotiable according to Kevin Schatz, a loan officer at Santa Ana-based Caliber Home Loans. “We typically see rebates that are given to the buyer with a signed addendum or broker credit letter signed by the agent’s broker,” he says. “This negotiated figure can cover all or part of the total closing costs being charged by the lender, title company, and third parties.”
Negotiating a home buyer rebate will be easier if any of the following apply to your situation:
- You’re buying a higher priced home, so your agent will get a bigger commission
- You’re using a newer agent who is trying to get their business off the ground
- You’re selling your current home with the same agent, so they’ll be receiving commissions on two transactions
- You’re shopping for a home in an area where demand is low and buyer clients are hard to come by
You also have better odds of negotiating with your agent to give you a home buyer rebate if you’ve done some of the legwork for them, like if you’ve already found the home that you want to purchase.
Keep in mind, though, “whether a real estate agent is willing to provide a rebate is [only] one factor that home buyers should consider in selecting an agent,” Stephen Brobeck says. You should also assess prospective agents based on their experience, how well they know the area where you’re looking to buy a home, and their online reviews from previous clients.
How much can I save with a home buyer rebate?
How much you can save with a home buyer rebate depends on what your agent is willing to offer you and the final sale price of the home that you buy. But let’s look at an example to get a ballpark idea of how much money you can save.
If your agent gave you a 1% home buyer rebate on a $391,000 home purchase—the current U.S. median home sale price—you’d get a $3,910 credit at closing, no strings attached.That may seem like a small amount when you’re plunking down six figures on a home, but it still knocks nearly $4,000 off your closing costs.
In practice, your actual rebate amount will vary based on several factors:
- What rebate your real estate broker or agent is willing to offer
- The home’s final sale price
- Your lender’s approval (and any rules or restrictions it imposes)
How to calculate your home buyer rebate
What are the legal restrictions on home buyer rebates?
Home buyer rebates are legal in 42 out of 50 states and Washington, D.C. Home buyer rebates are banned in the following states:
Why are they banned in these states? Because some view rebates as giving an unfair advantage to certain agents; others perceive rebates as a threat to the real estate industry.
Even in states that allow buyer rebates, rebates are governed by certain rules and regulations. For instance, “Rebates can never be used towards the buyer’s down payment,” Schatz explains. “The down payment must come directly from the buyer’s own funds, gift from relatives, or down payment assistance programs.”
Your lender also plays a role in whether you’re eligible for a buyer rebate, since a rebate affects the cost basis of your home—the total amount you pay for the property, including the sale price, closing costs, and any other financial investments you make in the home.
The cost basis affects your mortgage’s loan-to-value (LTV) ratio, a fancy term for the amount you borrowed compared to the value of your home. Because most lenders like to keep a borrower’s LTV ratio at 80% or lower, your lender may need to adjust your loan if a rebate would drive your mortgage’s LTV above 80%. Failing to disclose a rebate to your lender can be considered mortgage fraud, a crime that can result in a large fine or even prison time.
Nonetheless, the U.S. Department of Justice maintains that blocking rebates inflates the cost of real estate services and harms consumers.That’s why it supports legalizing rebates across the country.
Cash back programs, like the one from Clever Real Estate, aren’t as tightly regulated, making them a better choice for many buyers. Since the money is coming from a third party outside after the transaction, cash back isn't subject to lender approval and won't impact your financing.
Are home buyer rebates taxable?
No, home buyer rebates are not taxable. The IRS doesn’t consider a home buyer rebate to be income. The rebate is just money that you’re getting back (not earning) when you purchase a home.
That said, taking a rebate lowers your loan’s cost basis, which could affect your capital gains taxes down the road. Capital gains are taxes that you pay on the increase in your property’s value when you sell the home. Your home can seem like it gained more value than it actually did if you have a lower cost basis upfront, which means your future capital gains taxes will be higher.
Quick summary: Home buyer rebates
- A buyer rebate is when a real estate agent or business shares a portion of the fee they collect on a transaction with the home purchaser.
- Buyer rebates can knock thousands of dollars off your closing costs.
- There are a number of brokerages and businesses that offer home buyer rebates.
- Clever Cash Back is an alternative to buyer rebates. It matches buyers with agents that offer eligible buyers a cash refund equivalent to 0.5% of their new home’s purchase price.
- Home buyer rebates are legal in 42 states and Washington, D.C.
- Buyer rebates are negotiable when they come from an agent.
- Your lender has the ultimate say on whether you can have a home buyer rebate.
🎯 Find your agent with Clever, get cash back after closing.
Buy with a top local agent, get up to 0.5% cash back. Start your agent search with Clever—it's 100% free, zero obligation.
FAQ about home buyer rebates
Unlike traditional buyer rebates, which come from an agent’s commission, first-time home buyer rebates are grants, tax credits, or other financial assistance from the government for your first home purchase. Some options include no-penalty IRA withdrawals, grants from the U.S. Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA) loans, and state-sponsored programs for first-time buyers. You can check with your state’s housing finance agency to see what’s available where you live.
Why trust me
Daniel Bortz is a real estate agent in Northern Virginia, where he’s been selling homes for almost a decade. He’s also covered the housing market as a reporter for The New York Times, The Washington Post, Money Magazine, Consumer Reports, Realtor.com, and other publications.
To research home buyer rebates for this piece, Bortz spoke to Kevin Schatz, a loan officer at Santa Ana, California-based Caliber Home Loans. Schatz has 21 years of experience in the mortgage industry.
Bortz also interviewed Stephen Brobeck, a senior fellow at the Consumer Federation of America who served as CFA’s executive director from 1980 to 2018. Brobeck researches residential real estate brokerage for the nonprofit organization.
National Association of Realtors. "2021 Home Buyers and Seller's Generational Trends Report." Accessed 06/15/2022. Updated 06/15/2022.
National Association of Realtors. "Existing-Home Sales Retract 2.4% in April." Accessed 06/15/2022. Updated 06/15/2022.
Department of Justice. "COMPETITION IN REAL ESTATE: QUESTIONS AND ANSWERS." Accessed 06/15/2022. Updated 06/15/2022.
Internal Revenue Service. "Real Estate Hearing." Accessed 06/15/2022. Updated 06/15/2022.