What is a Home Buyer Rebate?
A number of Toronto real estate brokers are now offering commission rebates to home buyers. So what's this all about?
Home Buyer rebates, as they are called, are one of the hottest trends in today's marketplace. Although they have been around for some time, there is a growing awareness of them as some firms are now dedicating their practice to them. In fact, there are a few companies out there establishing a significant regional footprint. And why not? Everyone would want to do this, right? If you're a buyer, it's free money, isn't it? Not quite. Let's take a look.
A buyer rebate is essentially a plan whereby a broker shares part of their commission with the buyer in exchange for the buyer saving the broker time. Where is there time to be saved these days? The Internet, of course. Now that there is online access to so much information, including that which was previously limited to agents only (e.g. MLS), self-directed buyers have an opportunity to take a much more active role in the search process. In fact, many of today's consumers much prefer to take on that active role ... potentially freeing themselves of nagging agents looking to up-sell them at every turn.
I recently told a friend about buyer rebates and he said, "Interesting, I never thought of that." Now this guy, like most of us, likes to save a few bucks on just about everything he can, so I replied, "You should have. Buying a house is probably the biggest purchase you'll ever make, and we're talking thousands of dollars in commissions at play!" In hopes of making him feel better, I explained that it wasn't free money or some sort of shady discount. I told him that he would have had to put some serious effort into finding his own home. His response: "I always do that anyway. And come to think of it, I'm sick of printing off listings for my agent to drive me to, only to have her nag me about what I think, and then collect a huge commission cheque!" Perhaps my friend had a bad experience with this agent ... there are certainly many excellent traditional full-service agents out there; but it underscores the point: not everyone needs, let alone desires, the traditional full-service model.
So how do you know what's right for you, and if you should pursue a buyer rebate?
First, assess your skills and experience. Are you comfortable working online to screen properties or do you demand a hard copy presented in a face-to-face meeting? Can you work independently or do you need someone to keep a fire lit under you? Are you familiar with the home buying process or would you prefer guidance at every step?
Second, assess your needs. Do you have a good idea of what you're looking for or do you need someone to help you tour neighbourhoods and evaluate all of your options? Do you intend to buy property in the short-term or are you just trying to test the waters?
Third, assess your comfort level in regard to showings. All buyer rebate companies do this differently, so you'll want to have a discussion with them; but most have systems in place to save us time so that we can pass along the savings to you. If you're the type to like to see a couple dozen homes with your agent at your side, you'll definitely want to have this discussion early on.
You should be able to count on the buyer rebate firm to handle your offer and closing processes in the same professional manner as a traditional full-service broker. Although some traditional agents are trying to defend "their territory" by positioning buyer rebates as a get what you pay for proposition, the truth is buyer rebaters are getting less for doing exactly what you want. It's that simple. In fact, you may find yourself exceptionally happy with the transactional services of a buyer rebate firm, because that is what they tend to specialize in.
If you are interested to pursue a buyer rebate, what should you do?
First, check out what the United State Department of Justice says about buyer rebates. The Canadian Competition Bureau holds similiar positions but has made no public comment, that we have seen. And in Ontario there are no restrictions on buyer rebates as long as the are made directly to the named buyer of the property.
Second, search for buyer rebaters in your area. Get a comfort level with their particular approach, and confirm the amount of the rebate they intend to provide — you'll find a range of options in a competitive marketplace.
Third, make sure you get the specifics of the services the buyer rebater will provide and those that they will not. Ontario law requires that you receive a statement of the nature of your representation but be sure you understand the specific details.
Finally, be wary of any company that proposes a buyer rebate to you only if you sell another home with them. With the industry becoming more and more unbundled, I always tell people that while they may find a great one-stop shop, it pays to consider your sell-side needs and your buy-side needs separately.
In summary, seeking part of the commission through a buyer rebate firm can be a fantastic opportunity — as long as you are prepared to roll up your sleeves just a bit. We've all heard that there is no such thing as a free lunch ... but remind yourself that lunch is much cheaper if you make it yourself.
Use the comment section below to tell about any experiences — good or bad — you've had with buyer rebates.