For buyers, rebates can be best of all worlds

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. . .

To take your own bite out of the Big Apple, you have the option here to search all available properties privately.

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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
Web site

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