Real Estate and Technology

Gone are the days when an agent met with their clients and wrote a bunch of requirements down in a notebook and then went and looked in their MLS book which was published weekly to see if they could find listings that matched the requirements. This required a lot of time and effort! It was also much more expensive as the people compiling those books had to be paid. You as a consumer didn’t have access to these books. You had to rely on the agent for information. You also had to rely on your agent to be thorough in searching those books for potential matches for your requirements. Then along comes the internet with its MLS services and IDX connections. Then lo and behold, Zillow, Redfin and Trulia! Information is everywhere now! As a result buyers and sellers are much more informed than they used to be. Sellers have looked at market data and through these sites using an Automated Valuation Method they can see what their home’s value is. While these AVM tools are often incorrect because they don’t account for property condition etc. a rough estimate can be obtained. Buyers are going to Zillow and searching for homes they’re interested in and providing a list to their Realtor. The Realtor then takes the buyers to see the list of homes they chose. Realtors also setup portals for their clients where the clients get notified any time a listing comes on the market that matches their criteria. Either way buyers are finding the homes they want to see and telling Realtor what they want to see. The end result of all of this change is the real estate business is now, more than ever, a partnership between Realtor and client. They both play a significant role in the process. Technology has changed the job of a Realtor. This is why at Treat Realty Group we’ve decided to share some of the rewards with our clients.

Commission Rebates

A commission rebate, sometimes called a buyer or seller rebate, is essentially an act whereby a broker or an agent shares part of their commission with the buyer or seller. While certain states don’t allow brokers and agents to give rebates to their clients but many states like California do. A commission lowers the out of pocket expenses for clients on either side of the transaction. The details of the rebate should be included in the agency contract.

Tax Reporting For Commission Rebates

Many of you may be wondering about the tax implications of a commission rebate. Do I have to pay taxes on a commission rebate? Does my broker or agent have to pay taxes on a commission rebate? According to the IRS the answer is no. The IRS says that a cash rebate paid to a buyer of property at or after closing is an adjustment in the price, and is therefore not taxable income to the buyer. Rather, the buyer should subtract the amount of the rebate from the home’s basis. This will, of course, increase any potential profit when the home is sold. Since they are not taxable income, such rebates need not be reported on Form 1099-MISC. Thus, brokers should not send 1099s to buyers reporting such rebates. Any buyer who has received a 1099 that reports such a payment in error should ask the broker to correct or withdraw it.

How It Works

To understand how much you can save with a 1% commission rebate look at the diagram below. The upper path is for a seller and the lower path for a buyer. If a client is selling and buying they could potentially save on both the sale of their current home and the purchase of a new one!Commission RebateIn this example the home sold for $400,000.00. With the agent offering a 1% commission rebate the seller or buyer gets $4,000.00 in their pocket to help offset the costs of selling or buying. With median home values in the Sacramento area ranging from around $300K to almost $600K depending on the location this can be a significant savings. At Treat Realty Group we understand how technology has changed the game. We view our clients as partners in any real estate transaction and as a result we are offering to pay a 1% commission rebate on recurring and non-recurring closing costs at closing for any buyer or seller that works with us. This is our way of giving back to the community we serve and saying thank you to our loyal clients/partners. We still work just as hard to ensure our clients’ interests are protected. We utilize the latest and greatest technologies in our marketing plans and work diligently to ensure our clients receive top returns on their investments. The differentiator is our recognition of you, the client, as a vested partner in the transaction. Contact us today to discuss how we might partner with you to accomplish your real estate goals.

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