What Could Go Wrong with a Realtor Rebate in NYC?

The concept of a Realtor rebate and discounting in general has been around for as long as there have been real estate agents.

While it’s tempting to sign up for the first Realtor rebate you find online, it’s important to understand what could go wrong with a buyer agent commission rebate in NYC and why everyone isn’t doing it.

Why Isn’t Receiving a Real Estate Rebate More Common in NYC?
Who Is Your Typical Rebate Agent in New York?
How to Get a NYC Commission Rebate Safely
When Is It Too Late to Loop in a Rebate Agent on My Deal in NYC?

A cashback Realtor is a rarity in New York State and New York City because the vast majority of real estate agents work for traditional brokerages that are loathe to cannibalize their full commission (non-rebate) business by openly advertising rebates.

After all, there are still thousands of buyers in NYC each year who don’t expect to receive any rebate from their buyer’s agents.

Moreover, most traditional brokerages discourage and often outright prohibit their real estate salespeople from working for less than the typical commission rate in New York State and NYC.

Furthermore, a smaller brokerage who tries to openly advertise a Realtor commission rebate could be subject to adverse treatment from traditional firms and agents who may feel threatened.

After all, wouldn’t it simply be human nature for a traditional broker to harbor resentment towards a discount broker whose business practices are contributing to lower commissions industrywide, and therefore indirectly threatening the earnings potential of traditional agents?

Furthermore, a small brokerage who tries to break ranks by offering a Realtor cashback to its clients will undercut its normal referral business.

Think about it. If a small brokerage decides to become a cashback Realtor and openly advertises that it’s willing to give a buyer agent commission refund, won’t the next full commission referral demand the same discount?

As a result, a small brokerage that openly advertises rebates will permanently destroy its ability to earn a full commission rate on clients who are sourced through other marketing mediums. Moreover, this brokerage may incur the wrath of the wider brokerage community whose cooperation they need in order to successfully do business.

But why take this risk when you can just as easily receive the same discount without having to work with a broker who openly discounts?

Moreover, there are many undetectable ways a listing agent could ‘penalize’ the buyer who works with a discount broker:

• The listing agent might not return your buyer’s agent’s calls, even though the listing agent calls back all the other buyer’s agents who want to speak.

• The listing agent may share less information with your buyer’s agent about other offers, the seller’s situation, etc. compared to what the listing agent is sharing with others.

• The listing agent may frame your offer in a less appealing light vs. other offers when speaking with the seller.

• The listing agent may be slower to present your offer to the seller vs. other offers.

• The listing agent may inform the seller of your rebate arrangement in order to encourage the seller to be less flexible on price for you specifically.

Since none of the tactics above can be easily proven, you essentially have no recourse if think you’re being subjected to adverse treatment as a result of working with a broker who openly discounts.

To reiterate, working with a buyer’s agent who openly discounts does not guarantee that you will be treated differently or face additional hurdles vs. buyers who work with traditional buyer’s agents. However, it’s important to be mindful of potential pitfalls.

The only way to get a buyer agent commission refund without risking adverse treatment from listing agents is to work with a traditional buyer’s agent who never openly advertises rebates.

The easiest way to do this is by requesting a Hauseit Buyer Closing Credit.

All of Hauseit’s partner buyer’s agents in NYC are traditional firms who do not openly advertise rebates or other reduced commission services.

The alternative to signing up for a Hauseit Buyer Closing Credit is to contact each buyer’s agent you know individually and ask if she or he is willing to offer a rebate. Aside from being incredibly time consuming and inefficient, there are several additional challenges with this approach:

• Many agents don’t know what a rebate is, so you’ll potentially have to explain it to them before even asking whether or not they’ll agree to offer you one.

• Some agents will lie and say that rebates are not allowed (despite being completely legal in NY).

• Most traditional agents will decline to offer any rebate whatsoever.

• You may offend and potentially initiate a confrontation/argument by asking a traditional agent to offer a rebate.

• The agent who reluctantly agrees to provide a rebate will probably offer you a fraction of what you’d receive through a Hauseit Buyer Closing Credit.

It’s also important to understand what level of service is being offered before signing up with a buyer’s agent who is offering a rebate. Many rebate brokers in NYC provide a watered-down service, meaning they might not personally accompany you to showings or have time to give you ongoing advice as you navigate the buying process.

How much personalized support and attention you receive throughout the process is a particularly important factor in hiring a buyer’s agent if you are a first time home buyer.

Aside from the level of attention and overall service a rebate broker will provide, some agents do not have very much experience and only do a handful of deals a year. The real estate market in NYC can shift dramatically over the course of just a few months, so it’s important to work with a buyer’s agent who has a pulse on the market. This means having recently negotiated similar transactions.

Rebate or no rebate, a property transaction in New York is highly complex. There’s also generally lots of competition from fellow home buyers. The last thing you want is to have a rookie give you bad advice, potentially annoy the listing broker and ultimately lose out on your dream home, just because you want a rebate. What a recipe for disaster that is!

It may be too late to loop in your average discount broker as soon as you have directly inquired on a listing and/or visited a property.

That’s because a typical listing agent will become absolutely furious if you try to loop in a rebate broker just in time to make an offer, but after the the listing broker has shown you the property directly and/or taken time to answer your questions directly.

Your typical listing broker is not going to meekly hand over half their paycheck to a buyer’s agent they may view as having ‘cheated’ to land you as a client by offering you a rebate (and thereby undercutting other brokers on commission rates). As a result, the possibly resentful listing agent could try to make your life as difficult as possible by being uncooperative or downright obstructive or non-responsive.

You may even have to ask your real estate attorney to step in to demand that the listing broker cooperate with your rebate agent.

But ask yourself: how troublesome and embarrassing is all of this? Is the prospect of receiving a rebate even worthwhile if it could cause trouble, headache and possibly kill your deal?

This is why it makes so much more sense to work with a traditional buyer’s agent who discreetly offers you a rebate.

Regardless of who you decide to hire, it may be hard for your buyer’s broker to prove that she or he was the procuring cause of the sale if you loop in your buyer’s agent after you’ve already submitted an offer.

If the offer you submitted directly was not accepted or if you received a counter-offer of some sort, you may still be able to loop in a buyer’s agent.

In this scenario, you will need to really vouch for your buyer’s agent and perhaps even mention that your real estate lawyer was insistent on you having a good, dedicated buyer’s advocate.

Please see below for an example email of what a buyer sent to the listing agent after he had signed up for a buyer agent rebate.

Though not recommended as it’ll be sure to cause much angst to the listing agent, you may be able to loop in a buyer’s agent even after you have an accepted offer directly with the listing agent!

Here is an example email of what a buyer sent after he had signed up for Hauseit Buyer Closing Credit:

Whether or not you’re receiving a buyer agent commission rebate, the proper protocol in NYC is to have your buyer’s agent make first contact with the listing agents for any properties of interest.