Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Broker commission rebates are legal in NYC real estate, and new business models are making it work. The New York state attorney general has encouraged buyer agent commission rebates. His goal is to foster more price competition between real estate brokerages. If getting approximately 2% of the home purchase price back at closing sounds good to you, here’s everything you need to know about the legality of real estate commission rebates in NYC. Commission rebates are not taxable.
Laws on buyer rebates vary from state to state. However, they are 100% legal in New York state. That means you can get a commission rebate in NYC without having to worry about any legal ramifications. On the federal level, buyer commission rebates are also considered fair for real estate agents to attract clients.
This way, they can offer better pricing to consumers. However, there are a few states where rebates are banned. But none are in the NYC metro area. The ten states that you cannot legally get a home buyer rebate are Alabama, Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee.
NYC commission rebates work because the buyer’s agent will give you a portion of their commission paid by the seller at closing. At NestApple, this means we offer two-thirds of our commission as a rebate. So if we collect a standard 3% fee (from the listing broker).
That means you’re going to get a check for 2% of the purchase price.
So if you’re purchasing a NYC apartment for $1,000,000, you’d get a $20,000 rebate. And best of all, it’s completely legal, and there are no strings attached (although we certainly appreciate a good review and word-of-mouth referrals).
If you’re in the market for a home in NYC, you might be wondering how you should go about finding a real estate agent that can help offer you a buyer commission rebate to save a little bit of money on the purchase of your new home.
After all, The option to offer a commission rebate to a homebuyer is solely on the real estate agent or the real estate agency they work for. Most NYC buyer’s brokers won’t provide any form of a commission rebate. So you’ll have to find an agency that offers rebates.
Finding a buyer agent that offers a buyer’s rebate starts with a simple online search. In no time at all, you can find real estate brokerages that specialize in providing buyer rebates. NestApple has been offering commission rebates in NYC for years since 2017. And we’ve proudly rebated over $4 million to buyers.
At times some buyers might think a rebate sounds too good to be true. Initially, they might not be sure of the legality, or maybe a traditional broker led them to believe they’re not legal, when in fact they are, or they might think that rebate brokers are skimping on services.
Most rebate brokers are more experienced than traditional agents. They will help you negotiate a better deal while giving you the same level of attention to detail as a conventional firm. And this is all possible due to how commission rebates make the transaction more efficient.
After all, offering a NYC buyer a rebate is a great way to gain that person as a client, which can be invaluable to them moving forward. While traditional firms spend most of their time and commissions buying leads, cold-calling, and prospecting for new clients, rebate brokers like NestApple pass on our clients’ savings.
This frees up more time to better serve buyers and negotiate more deals. By offering a 2% rebate, brokers can gain significantly more clients, making it a win-win for everyone.
If you’re thinking about the legal implications of getting a NYC buyer commission rebate, you’re likely also thinking about the tax implications. So that then begs the question, are commission rebates taxable? After floating around in the grey area of the unknown for a while, the IRS ruled and came out with a definitive response to the question.
And the short answer is no. Commission rebates are not taxable. The long answer will also be no, but it takes a bit more understanding of IRS code and tax laws to get there.
We’ll take a crack at it to make it as understandable as possible. The IRS defines a home buyer rebate because it’s an adjustment to the home’s purchase price.
This means that, effectively, the buyer is just paying less for the home than they would without the rebate being in play. The IRS does not consider the rebate as taxable gross income. Therefore, the home buyer rebate is not taxed.
This is why the financial institution loaning you the money can tell you what you can and can’t do with it. This somewhat foggy definition from the IRS affects the bank’s numbers more than your own. This is because they lend you the money for the total purchase. But then you are getting the rebate.
The IRS’s definition only works in totality if you pay for the home in cash rather than taking out a loan. But without getting more and more into the tax code, understand that the money you get from a real estate rebate program is not taxable. And you don’t have to report it to the IRS.The buyer won’t have received any 1099 after a purchase.
In conclusion, NYC commission rebates are not only legal, but they’re a fantastic way for buyers to save a lot of money when purchasing a property. Commission rebates are relatively new. However, they’re certainly here to stay, thanks to forward-thinking brokerages like NestApple.
If you’re ready to purchase a new home in NYC and want to save money with a commission rebate, give us a call today.