Commission Rebates frequently asked questions

How to Rebate a Buyer's Commission? Is that allowed?

It is not against the law to give a commission rebate to a purchaser. This is not a referral fee of any kind. On the other hand, we strongly suggest that you qualify the promise of reimbursement in three different ways. The proper format is:

#1 As disclosed in the Closing Disclosure 

#2 Paid using escrow 

#3 Not rejected by the lender 

Does the purchase agreement need to include a statement about the rebate? 

Usually not. Nevertheless, the lender ought to be informed of this fact. A refund of an agent's commission to the buyer is required to be mentioned on the third page of the Closing Disclosure under the heading "Other Credits." This requirement is in accordance with the TRID guidelines, which refer to the TILA RESPA Integration Disclosure. 

Will there be an impact on the loan-to-value ratio as a result of the rebate?

It's possible. Before anything else, the lender must be informed about the rebate. When trying to get prequalified for a mortgage, a buyer would do better to inquire of a lender about the lender's policy on rebates. In most cases, a rebate is considered to be a form of seller credit for the buyer's closing costs. Therefore, the lending institution may place a limit on it and restrict its use to things like expenses, fees, impounds and prepaid. The vast majority of lenders won't even consider letting borrowers utilize it as a source of the minimum down payment funds. 

What are the repercussions in the event that the lender does not agree with it?

Because you stipulated that you would do so solely in the event that the lender did not reject your application, there will be no need on your part to pay it. In the event that you failed to do so, the buyer may still be able to file a claim against you for the total amount of the refund even after the transaction has been completed.

Should I send a 1099 form to the purchaser?

No. The credit or rebate given at closing is typically not taxed to the buyer because it is not considered part of the buyer's gross income and is therefore exempt from taxation. Rather, it is a modification that is made to the buyer's basis in the house by effectively lowering the purchase price of the residence.

What if I belong to more than one agency at the same time?

In the event that the transaction involves dual agency, you, in your capacity as a seller's fiduciary, will be required to make the seller aware of the offer of a rebate as soon as the chance presents itself. The existence of the rebate could influence the choices that the seller makes while negotiating the transaction.

Why Realiff?

We know it's hard to get a rebate on your own. You have to make appointments with agents and deal with paperwork. Realiff can take care of that for you - all you have to do is register with us, and we will act as your agent in your transaction. Just sit back and let us do the work! Don't forget, we don't charge any fees either.

You can contact us to get more choices