Rebates can provide extra cash. (Flickr photo by Franco Folini)
It sounds like a bribe.
But the Department of Justice says 40 states allow brokers to give rebates to their clients.
The amount can be substantial, in the thousands of dollars, perhaps 1 percent of the sale price or even more.
As journalist June Fletcher points out, buyers have even more reason to celebrate the benefit than money in the bank: No tax on the sum.
In the opinion of the Internal Revenue Service, a rebate is nothing more than an adjustment to the buyer’s basis in the property, effectively lowering the purchase price.
Yet buyers do need to heed the potential consequences of accepting a rebate. For instance, unless the rebate is shown on the HUD-1 statement provided at closing, it may violate federal law forbidding kickbacks.
A HUD-1 ensures that everyone, especially the lender, has knowledge of the rebate. Why? A rebate may run afoul of lender policies, so ask before agreeing to accept the funds.
Other pitfalls to avoid would be a rebate specifically in compliance with a demand that the buyer list with the broker the home being left behind.
Even though giving up a portion of their commission does not gladden brokers’ hearts, it behooves buyers to ask whether a rebate might be offered.
Tomorrow: Let your fingers. . .
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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
M: 347-886-0248
F: 347-438-3201
Malcolm@ServiceYouCanTrust.com
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