Home buyer rebates: How they work and how to get one

Q: Are home buyer rebates legal?

Yes, in most states. Roughly 40 permit them, and the Department of Justice has long supported rebates as pro-consumer competition. About ten states restrict or ban them. Michigan allows commission rebates. Where legal, the rebate must be disclosed to all parties in the transaction and, if you are financing, documented on your Closing Disclosure.

Q: How much can you get from a home buyer rebate?

Typically 0.25% to 1% of the purchase price, or up to half of the buyer's agent's commission, depending on the brokerage. On a $300,000 home, that's roughly $750 to $3,000. Some programs cap rebates at a flat dollar amount or reduce them based on how many homes you tour with the agent.

Written by Samantha SheltonNMLS 1647301Updated September 2026

Home buyer shaking hands with her agent on a porch after negotiating a home buyer rebate agreement

A home buyer rebate, also called a commission rebate, is a portion of the buyer’s agent’s commission returned to you at closing, usually as a credit toward your closing costs. Rebates are calculated either as a percentage of the agent’s commission or as a flat percentage of the purchase price: a 1% rebate on a $400,000 home puts $4,000 back in your pocket.

Rebates are legal in most states, including Michigan, but two things have to happen first: you negotiate the terms with your agent up front, in writing, and your lender documents the credit on your Closing Disclosure. Neither step happens on its own.

Learn more about home buyer rebates, including how the two formulas compare, how the 2024 NAR settlement changed your negotiating position, and what your lender needs to apply the credit at closing. If you’re earlier in the process, start with our Home Buying guide.

Key takeaways:

What it is: A home buyer rebate is a share of the buyer’s agent’s commission credited back to the buyer, most often applied to closing costs at settlement.
The math varies: Some agents rebate a percentage of their own commission while others offer a flat percentage of the purchase price, 1% on a $400,000 home is $4,000, so compare offers in writing before you sign.
Your lender has a vote: The rebate must appear on your Closing Disclosure, and loan program rules cap total interested-party credits at 2% – 9% of the price depending on program, occupancy, and down payment.

What is a home buyer rebate?

A home buyer rebate is money your own real estate agent gives back out of the commission they earn on your purchase, usually as a closing-cost credit rather than a check. It is not a seller discount, not a lender credit, and not a government program, it comes out of the agent’s compensation.

That distinction matters, because the three sources of credit at a closing table behave differently:

Seller concessions: The seller pays part of your closing costs. This reduces the seller’s net proceeds.
Lender credits: Your lender covers some closing costs in exchange for a higher interest rate. You pay for it over time.
Agent commission rebates: Your buyer’s agent returns part of their fee. No rate changes and the seller’s proceeds don’t move, the money comes off the agent’s side of the settlement statement.

Because a rebate is funded by your agent, it’s the only one of the three you negotiate before you look at a house, and the only one that costs neither the seller nor your interest rate anything.

How does a home buyer rebate work?

A rebate works in three steps: you agree on the formula in your buyer-agency agreement, your agent’s brokerage discloses the credit to the lender and closing agent once you’re under contract, and it appears on your Closing Disclosure at settlement. Only two formulas are in common use, and they produce different numbers on the same house.

Say you’re buying a $400,000 home and your agent’s negotiated fee is 2.5% of the price, or $10,000.¹

Feature	Percentage-of-commission rebate	Percentage-of-price rebate
How it’s calculated	A set share of your agent’s earned commission	A flat percentage of the purchase price
Result on a $400,000 home	25% of a $10,000 commission = $2,500	1% of $400,000 = $4,000
What moves the number	The fee your agent negotiates on that deal	The price of the home you buy
Predictable while shopping?	Not precisely. The fee can differ by listing	Yes, compute it from any list price
Fine print to check	A lower agent fee shrinks your rebate	Often capped at a flat dollar ceiling

Rebate offers commonly land between 0.25% and 1% of the purchase price, or a negotiated share of the buyer-agent fee. Nothing in that range is standardized. Commissions are set by negotiation, not by law, so the rebate on top of them is negotiable too.

One detail catches buyers off guard: most lenders won’t let a rebate be paid to you in cash. It’s applied against costs you actually owe, so a $4,000 rebate works fully on a file with $6,200 in closing costs, but delivers only $2,900 on a file with $2,900 in costs.

Where do buyer rebates come from?

Rebates come from three kinds of arrangements, and only one requires changing agents. The tradeoff is consistent: the larger the rebate, the more service you give up.

Rebate-model and tech brokerages: These firms advertise a published rebate as their core pitch and run leaner service models to fund it. Read the tour limits, some programs shrink the rebate after a set number of showings.
Discount and flat-fee brokerages: These firms charge a lower buyer-side fee outright, so savings show up as a smaller commission line instead of a rebate line.
Negotiated rebates with a traditional agent: The most overlooked option. A full-service agent who wants your business may credit part of their fee, but ask before you sign, because after that the fee is set.

New construction deserves a warning. The builder is the seller and controls what buyer-agent compensation it pays, and many builders require your agent to register you at your first visit or they pay nothing at all. Killing the rebate before it exists. Register your agent on the first walkthrough, and read the Benefits of Buying a Newly Constructed Home before you tour a model. If you’re building instead of buying, there may be no buyer-agent commission to rebate at all, see Building a Home on a Budget: Tips and Tricks.

How did the NAR settlement change buyer rebates?

The National Association of Realtors settlement practice changes took effect August 17, 2024, and they strengthened your rebate negotiating position rather than weakening it.

Agents working with a buyer must now enter a written buyer agreement before touring a home, and that agreement has to state the amount or rate of compensation the agent will receive. Offers of compensation to buyer agents were also removed from Multiple Listing Services, so the buyer-side fee is no longer something you inherit from the listing.

The practical effect: your agent’s fee is a number you negotiate directly, in writing, before you see a single house. The same document where a rebate belongs. NAR tracks how compensation patterns are shifting in its NAR research and statistics hub.

What your lender needs to apply a rebate credit

Your lender has to see the rebate in writing before closing, because a commission credit from your agent counts as an interested-party contribution and is capped. Fannie Mae’s guidelines name the real estate agent or broker as an interested party alongside the seller and builder, so your rebate shares a ceiling with any seller concessions.

On a conventional loan, that ceiling depends on occupancy and loan-to-value:

Principal residence or second home above 90% LTV: Contributions are capped at 3% of the lower of sales price or appraised value.
Principal residence or second home at 75.01% – 90% LTV: The cap rises to 6%.
Principal residence or second home at 75% LTV or below: The cap rises to 9%.
Investment property, any LTV: The cap is 2%.

FHA financing uses a single 6% limit on contributions from the seller or other interested parties, including real estate agents, toward closing costs, prepaid expenses, and discount points.² Under both rule sets, contributions above the limit stop being credits and get subtracted from the sale price, which changes your LTV.

Two more mechanics: credits can’t exceed your total closing costs, so an oversized rebate gets trimmed to fit, and contributions generally can’t fund your down payment or reserves.

You’ll see the final treatment on the Closing Disclosure your lender must deliver three business days before closing. The CFPB walks through how credits appear on your Closing Disclosure line by line. Check it against your Loan Estimate and your agency agreement.

Where are buyer rebates legal, and how are they taxed?

State rules on rebates

Roughly 40 states and the District of Columbia permit buyer-agent commission rebates, while about ten ban or restrict them. The Department of Justice’s Antitrust Division has argued the pro-consumer case for years, stating that rebate bans artificially inflate the cost of real estate services and force consumers to pay thousands more to buy a home.

The restrictions that remain take three shapes: outright bans, statutes read to prohibit “inducements” to consumers, and states that allow a rebate only as a closing credit rather than cash. Confirm your state’s treatment with your agent’s broker before you budget around a rebate.

How the IRS treats a rebate

A commission rebate is generally not taxable income to you. The IRS has treated a rebate paid to a buyer at or after closing as an adjustment to the purchase price rather than income, the position it took in Private Letter Ruling 200721013 and repeated in Information Letter 2007-0234, and on that reasoning the agent isn’t required to issue you a Form 1099, even above $600.³

There is a consequence. Because the rebate reduces your purchase price, it also reduces your cost basis: a $4,000 rebate on a $400,000 purchase leaves a $396,000 basis, which matters when you sell. If an agent sends a 1099-MISC anyway, or your rebate is structured unusually, talk with a tax professional.

How to negotiate a rebate before you sign

The whole negotiation happens before the buyer-agency agreement is signed, because that document sets your agent’s compensation. After that, you’re asking a favor. Work these five items in order:

Ask at the interview, not at the offer: Raise compensation and rebates in the first agent conversation, alongside experience and market knowledge.
Name the formula, not the feeling: “A credit equal to 25% of your earned commission” is enforceable. “You’ll take care of me at closing” is not.
Get caps and conditions in writing: Dollar ceilings, minimum prices, tour limits, and clauses voiding the rebate if you skip the brokerage’s in-house title or lender all belong in the agreement.
Price the service you give up: An agent who negotiates $8,000 off a purchase price beats a $3,000 rebate from one who doesn’t.
Call your loan officer before you sign: Confirm the credit ceiling on your program and that the rebate can be applied as the agreement describes. Five minutes prevents a five-figure surprise.

Because Align is a broker, we can also compare which wholesale lender treats your full credit package, rebate, seller concessions, and lender credits, most favorably.

What Michigan buyers should know

Commission rebates are legal in Michigan, which makes the buyer-agency agreement the document that decides everything.

Rebates are permitted, referral fees are not: Michigan’s Occupational Code bars a licensee from sharing a commission with someone not licensed under the article, a ban on finder’s fees to third parties, not on crediting your own client. Structure it as a credit to you, the buyer, and disclose it.
Put the number in the agency agreement: Since August 17, 2024, you sign a written buyer agreement stating your agent’s compensation before you tour. Write the rebate formula, any dollar cap, and the delivery method into that same document.
Know which Michigan costs a credit can offset: Michigan’s transfer tax runs $3.75 per $500 of value at the state level plus $0.55 per $500 at the county level in counties under 2 million people, $8.60 per $1,000 combined, and state law puts it on the seller. Your credit generally goes to title fees, the appraisal, lender fees, and prepaid escrows instead.
Coordinate early on new construction: Metro Detroit builders commonly require agent registration at first visit. Walking a model alone on a Saturday can eliminate the buyer-agent commission, and the rebate with it.

Rebates are one of several levers Michigan buyers can pull; the full set lives in our Buying Strategies & Situations hub.

How Align fits your buying strategy

Local real estate agents bring Samantha in for a second opinion when their buyer arrives preapproved somewhere else. She regularly finds a lower rate or less cash to close, whichever helps the buyer more.

That comes from the broker model. One application goes to multiple wholesale lenders, so your offer is built on the loan that fits your situation, not the only one a single bank sells. A 2024 Polygon Research analysis of federal mortgage data found broker borrowers paid about $10,662 less over the life of a $400,000 loan than borrowers at nonbank retail lenders.

Build your homebuyer game plan

Sources: Polygon Research, Loan Costs Channel Study 2024 (2023 federal HMDA data, 30-year fixed purchase loans; commissioned by United Wholesale Mortgage and Willow Canyon Advisors).

FAQ: Home buyer rebates

Here are answers to common questions about home buyer rebates.

Are home buyer rebates legal?

Yes, in most states. Roughly 40 plus the District of Columbia permit them, and the Department of Justice has long supported rebates as pro-consumer competition. About ten states ban or restrict them. Michigan allows commission rebates. Where legal, the rebate must be disclosed to all parties and documented on your Closing Disclosure if you’re financing. Our guide to Real Estate Agent Commissions: How They Work explains the fee it comes out of.

How much can you get from a home buyer rebate?

Commonly 0.25% to 1% of the purchase price, or a negotiated share of the buyer’s agent’s commission on a $300,000 home, roughly $750 to $3,000. Nothing here is standardized, and some programs cap the rebate or shrink it based on how many homes you tour. If you’re buying on a single income, see Buying a Home as a Single Parent for how to stack a rebate with other help.

Is a home buyer rebate taxable income?

Generally no. The IRS has treated commission rebates as a reduction in the home’s purchase price rather than taxable income, so you typically won’t receive a 1099. The rebate does lower your cost basis. Confirm the treatment with a tax professional. Understanding How Much an Agent Makes from a Home Sale also shows what’s realistically available to rebate.

How did the NAR settlement affect buyer rebates?

The 2024 National Association of Realtors settlement decoupled buyer-agent compensation from listing agreements, so buyers now negotiate and sign compensation agreements directly. That transparency strengthens your negotiating power: since you agree on your agent’s fee in writing before touring homes, you can negotiate a rebate or reduced fee at the same time. Our Home Buying guide shows where that step falls.

The bottom line on home buyer rebates

A home buyer rebate returns part of your agent’s commission to you at closing, usually as a credit toward closing costs rather than cash in hand. The two formulas differ on the same house, 1% of a $400,000 price is $4,000, a 25% share of a $10,000 commission is $2,500, so get the formula, the cap, and the conditions in writing before you sign the buyer-agency agreement. Then check the ceiling: interested-party contributions are capped at 2% – 9% on conventional loans by occupancy and LTV, and at 6% on FHA financing.

If you’re ready to make every dollar count at closing, talk to Align Lending, we’ll tell you how much credit your loan program accepts, shop your scenario across our lender network, and show you the numbers side by side. Call 248-506-5727 or start online today.

Footnotes:

1. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Real estate commissions are negotiable and are not set by law. Your terms and credits depend on your application and your agreement with your agent. Return to text.

2. Align Lending is not acting on behalf of or at the direction of FHA or HUD. Program limits are set by the agency and by lenders in Align’s network, and are subject to change. Return to text.

3. This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Tax treatment depends on your circumstances and can change. Consult a qualified tax professional about your situation. Return to text.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Consult a qualified professional about your situation. Figures shown are illustrative and are not a rate quote or an offer of credit. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.