The WaLaw Real Estate Agent Commission Rebate: How it Works, How You Save Money

Here at WaLaw, our No. 1 question from potential buyer clients is, “How does your rebate work?”  Or, as one potential client recently put it, “If we want to use you as our buyer’s agent, are you able to swoop in and collect that 3% fee?  Is the listing agency left out in the cold?”  While we love the image of WaLaw “swooping in” – It’s a bird.  It’s a plane!  It’s WaLaw!!” – the process isn’t quite that dramatic.  But we are able to capture the 3% commission and rebate it to our client without causing any problems whatsoever.  Here’s how:

We Work Within the Existing Real Estate Broker Commission System

The following illustrates the WaLaw rebate where the buyer (the woman) purchased a home for $500,00 and the seller (the man) offered the typical 3% commission to the buyer’s agent:

How WaLaw's Buyer Agent Commission Rebate Works

Now, the details: When a home appears for sale on the Multiple Listing Service (or MLS), the seller must offer a commission to the agent who represents the buyer.  This requirement flows from the historical origins of the broker system, where all brokers worked for sellers, not buyers.  Some people believe that even the modern system is still bad for buyers.  Regardless, a seller must offer a commission to the buyer’s agent, and this commission is typically – although not always – 3% of the sale price.

Accordingly, when the seller lists the property on the MLS, she signs a “listing agreement” with a real estate broker.  Per the terms of this listing agreement, the seller agrees to pay a total commission to the listing broker, typically – although not always – 6% of the sale price.  The listing agent must then share some of that commission with the buyer’s agent in an amount determined by the seller.  Again, most sellers instruct the listing agent to share 3% of the sale price, or one half of the entire commission, with the buyer’s agent.

Real Estate Agent Commissions and Fees: How They Work and How To Pay LessRELATED POST: Real Estate Agent Commissions and Fees:
How They Work and How To Pay Less
“This post will explain the process by which real estate agents get paid a commission, and what you can do to reduce that commission…”

When you hire WaLaw, you hire us as both your agent and as your attorney.  Because we are your agent, we are entitled to the buyer’s agent’s commission paid by the listing agent.  But we don’t keep that commission.  Rather, we rebate it to you at closing, less the balance of the flat fee you owe us for our services as your agent and as your attorney, as illustrated above.

Note that the listing agent gets paid the full amount due under the listing agreement.  Our rebate has no effect on the listing agent’s commission, or for that matter on the seller’s net proceeds from the sale.  We work completely within the existing system when we rebate our commission to you.  So much for “swooping in,” but at least we’re doing good (the U.S. Department of Justice believes that buyer’s agent’s commission rebates are a good thing and help to reduce the transactional costs of buying a home).

You Save Money With the Buyer’s Agent Commission Rebate

NOT WaLaw Clients

So how much money will you save if you buy a home using WaLaw?  That depends on the final sale price.  Because our rebate is a percentage of the sale price, but you pay us a flat fee, the greater the sale price the greater the savings.  For any home above $300,000, the savings get to be rather dramatic.  In August, twelve of our transactions closed, and our clients saved a combined total of more than $187,000.  The client who purchased a $2.5m waterfront home?  He saved nearly $54,000 by using WaLaw.

Unfortunately, though, we’re not able to deliver the rebate via giant check.  Wouldn’t that be awesome?  Just look at the smile on that guy’s face! Lenders uniformly won’t allow for cash to be returned to a buyer after closing, and if we did it without the lender’s knowledge or permission we would run afoul of federal law.  And here at WaLaw we take our legal obligations seriously.

So instead, the rebate is applied to your closing costs and prepaids at closing.  These costs would otherwise be paid by you out-of-pocket at closing.  Since they are paid by the rebate, your money is kept where it belongs, in your pocket.  So when applied to closing costs and prepaids, the rebate is just as good as cash.  If the rebate exceeds closing costs and prepaids, which is more likely the greater the sale price, then the excess amount is used to reduce the sale price by the same amount.  So you get the full benefit of the rebate, one way or another.  It’s why we like to say…

Washington Lawyers Realty: A Better Way to Buy and Sell a Home


Posted by Marc

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