Penny Wise and Pound Foolish: Real Estate Rebates Costs Buyers Thousands

by Dan Lesniak

Many times at our Open Houses in Arlington, DC and elsewhere, we meet buyers working with real estate agents that rebate them money at closing. While this may sound great if you are not careful, that decision can costs you thousands of dollars on your home purchase, as well as making the process harder overall.

Cost is Only a Problem in the Absence of Value

When making the decision of which real estate agents to use, buyers need to look at the entire package of services and benefits and analyze their bottom line, rather than just looking at costs. In theory it makes sense that agents who value their own services so little that are not willing to negotiate on behalf of themselves, will either not be willing or not have the capacity to negotiate the best deal for their buyers. If an agent is not capable of consistently negotiating the effectively on behalf of their clients than they should offer lower rates in the form of a rebate.  Additionally, when working with discount or rebate type brokers, buyers typically do not get the same amount of benefits they would with a full service broker or agent. Because of their volume, top real estate agents and teams can invest more time and money into creating marketing and administration systems that benefit buyers.

The following are just a few of the benefits that top real estate teams offer that may not be available from discount agents:

  • Priority access to hard to find inventory before it goes on the MLS
  • Access to an entire team of local experts to guide you through each step of the process
  • Money saving advice on 3rd party providers including:  lenders, title attorneys, contractors, inspectors and more

A Case Study:  Buyers Lose with Discount Brokers

In 2013 there were just under 3,000 homes sold in Arlington, VA. The average sales price to list price was 97.6% A large discount broker that is nationally known, represented buyers in Arlington for 115 transactions. The typically rebate given out for for this company is 95 basis points, or 0.95%.

So how did buyers stack up compared to the average Arlington homebuyer?

Well they paid  98.71% compared to 97.6%, or 1.1% higher. Even after a typical 0.95% rebate, these buyers would have paid 15 basis points more. So buyers in Arlington on average would have saved more money in addition to receiving more time and money savings benefits by going with a top full service agent or team.

For more information on how we can save you money on your home purchase call us at 571-969-7653 or fill out the form below!

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