Can a Real Estate Agent Give Commission to a Buyer?

Chris at Hauseit (https://www.hauseit.com) goes over whether a real estate agent can give commission to a home buyer.

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Yes, we'll explain in this video that it's completely legal in 40 states for a real estate agent to give commission to buyer as a customer incentive. This is otherwise known as a buyer closing credit, buyer rebate, buyer agent rebate, buyer commission rebate, buyer broker rebate, etc.

In fact, this rebate that you receive at closing from typically your buyer's agent won't be considered as income by the IRS per a IRS ruling, and you won't receive a 1099 at closing. Instead, the rebate will be considered a reduction of your cost basis when you sell. Of course, please confirm this with your accountant as we do not provide tax or legal advice.

What typically happens is the buyer's agent will offer some portion of his or her commission to a buyer as an incentive for the buyer to choose that agent to represent him or her a buyer's agent. When the buyer's agent submits an offer and helps close a property for the buyer, the buyer's agent will get paid a split of the listing commission.

This listing commission can vary based on the listing, but is very often 6% of the sales price. This is then split often 50/50 depending on local MLS rules between the seller's agent and the buyer's agent.

The buyer's agent receives 3% in this case, and will then share a portion of that commission with the buyer. Often how much is pre-determined via a buyer agent rebate agreement. This agreement is typically non-exclusive in nature.

At Hauseit for example, our simple non-exclusive closing gift agreement stipulates that the buyer will be paid 2/3 of the buyer broker's commission, subject to the buyer broker keeping a minimum of 1% or $7,500, whichever is greater as of this writing.
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https://www.hauseit.com

Save money when buying, selling and renting real estate in New York and Florida with Hauseit (https://hauseit.com). Available in NYC, Long Island, the Hudson Valley and South Florida. Est 2014.

Hauseit Group LLC, Licensed Real Estate Corporation
Tel: (888) 494-8258 | https://www.hauseit.com
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