Commission Rebates: What NYC Buyers Need to Know in 2019

Imagine buying your dream apartment in New York City. You worked hard to save up for it. You searched online and were assisted by an expert real estate broker to find the perfect place. You complete your purchase. Then, SURPRISE, you get a large commission rebate check from your real estate broker!

It may sound too good to be true. However, a commission rebate is the single most important topic that traditional real estate brokers aren’t telling you. Buyers can get cash back when buying a property in NYC.


Commission Rebate NYC


The Half-Truth of Traditional Real Estate Brokers

There is a half-truth perpetuated by traditional real estate brokers and the real estate industry that it is “free” for home buyers to be represented when they buy a home or apartment. Since the buyer’s broker is paid for by the seller, agents suggest that their services are “free”.

This statement is very misleading. The word “free” is intended to distract buyers from the fact of how much money traditional buyer’s brokers receive for each transaction. Buyers are not charged an itemized cost for a buyer’s broker on the closing documents, yet the fee is being paid for with the buyer’s money.

If an intermediary like a real estate broker is being paid a fee during your property transaction, it affects your price as a buyer. It begs the question – If your buyer’s broker is getting paid so much money, what if you could receive a commission rebate from your broker?

First, traditional brokers do not properly educate home buyers on how the economics of real estate commissions work during a transaction. Most home buyers don’t realize how much their buyer’s broker receives for the transaction. In most cases, buyers don’t learn how much agents make when they work with a buyer until they are sitting at the closing table. 

Second, it is simplistic to say that a buyer’s broker commission is paid for by the seller, but the very existence of this commission affects how a seller sets the price of their property. This ultimately results in a higher property price for buyers. 

The Antiquated Approach of Traditional NYC Broker Commission Rates 

To better understand the economics of real estate broker commissions in New York City, it is best to look at an example.

When a traditional listing agent negotiates full-service real estate commissions, they’re doing so with the seller. The seller typically pays 6% of the sale price in NYC. If a buyer’s broker is involved in the transaction, half of the total commission (3%) goes to the seller’s broker, and the other half (3%) is paid to the buyer’s broker.

Then, each allotment of 3% is divided between the real estate brokerage and the licensed real estate agent.

If this sounds like too many hands involved in a transaction, you are correct! Sellers are paying exorbitant percentages in brokerage fees, and all of these traditional real estate brokerages and agents are receiving large sums of money. Buyers receive no additional financial benefit for all the money they are spending when purchasing a home or apartment.

Commission Rebates in NYC – A Smart, New-Fashioned Approach

Thankfully, there is a smarter, fairer approach called a buyer's broker commission rebate, also referred to as a buyer agent rebate. This new approach enables buyers to get more financially when they buy a home or apartment in New York City.

The concept is simple. The buyer’s broker gives a portion of that commission back to the homebuyer in the form of a rebate or refund. In NYC, the concept of offering rebates has not been widely adopted yet.

Traditional real estate brokers are stuck in the old way of doing things. They do not pass savings to homebuyers. The few firms which do provide rebates only give back a measly 0.5% to 1%.

Prevu Smart Buyer Rebate – Up to 2% Cash Back

Prevu is a smart online real estate brokerage in NYC. Their Smart Buyer™ Rebate offers an industry-leading buyer commission rebate of up to 2% of your purchase price.

The Smart Buyer™ Rebate is straight-forward. Prevu rebates a set two-thirds of the commission it receives for acting as your real estate broker. The amount of the commission rebate is transparently disclosed prior to making an offer.

Prevu has created a team of expert real estate agents that are more efficient with a focus on an enhanced customer experience for buyers. The combination of technology and salaried agents allows the company to pass on significant savings to New York City home buyers.

Once a NYC buyer has decided on a property, Prevu provides expert advice from offer preparation all the way through closing. A Prevu agent performs comparable analysis to identify optimal purchase price and negotiation strategy. Prepares and submits the formal offer after reviewing it with the buyer. Manages the negotiation process to achieve an accepted offer. Compiles the condo or co-op board package applications with you, if applicable for your purchase. Plus, your agent provides trusted referrals along the way for any additional services you’ll need.

If a home buyer purchases a NYC real estate with Prevu that is a 6% commission paid for by the seller (split evenly between the seller’s listing broker and buyer’s broker), the home buyer receives a Smart Buyer™ Rebate of 2% of the purchase price from Prevu. That’s a lot better than the $0 a buyer receives from a traditional real estate broker or agent at closing.

Commission Rebate NYC (Based on $2,125,000 apartment)

  • Purchase Price: $2,125,000
  • Seller's Agent Commission (3% of Purchase Price): $63,750
  • Buyer's Agent Commission (3% of Purchase Price): $63,750
  • Commission Rebate (2% of Purchase Price) :$42,500 

Are Commission Rebates Legal in NYC?

The concept of a buyer commission rebate, referred to as a commission refund in some states, is a positive for consumers and are legal in New York State and NYC. It has been encouraged by the Department of Justice and is currently legal in 40 US states. The states that have not yet adopted the concept are Alaska, Oregon, Iowa, Kansas, Oklahoma, Missouri, Mississippi, Louisiana, Alabama, and Tennessee. 

The Financial Benefit of Commission Rebates - Good for New York Consumers

In 2015, the Attorney General of the State of New York weighed in on the matter in a letter to the real estate industry.The letter highlighted the consumer benefits of commission rebates.

“Rebating by real estate brokers can greatly reduce the costs of buying and selling property and even facilitate new and innovative business models,” said Attorney General Schneiderman. “I urge the real estate community to embrace this opportunity to be more competitive, and improve the choices available to New York homeowners. I also encourage buyers and sellers alike to take advantage of your right to bargain with your broker for a lower commission.” 

Are Real Estate Commission Rebates Taxable As Income?

Two of the most common questions Prevu receives from buyers are: 1) Are commission rebates taxable as income? 2) Will I receive a 1099? 

Prevu is not allowed to provide specific accounting advice. Our team encourages all buyers to speak to their accountant or tax professional as their individual tax situations may vary. That said, the Internal Revenue Service ruled on the matter of commission rebates and explained that such a rebate is not taxable as income to the buyer and the rebate is generally treated as a reduction in the cost basis for accounting purposes. Additionally, there is no 1099 required to be issued by the real estate broker to the buyer.

For example and to keep the math easy, if you purchased an apartment in NYC for $2,000,000 and received a commission rebate of $40,000, your accountant would likely advise you to reduce your purchase price ($2,000,000) by the amount of the commission rebate ($40,000) to arrive at your adjusted cost basis ($1,960,000).

Read the entire IRS private letter ruling on commission rebates.


Some home buyers may choose to go the traditional route in selecting a buyer's agent. However, it’s important that homebuyers are aware that buyer commission rebates exist and that you can save money during your home buying process. Then, they can make an informed decision when selecting a real estate broker. Getting money back from your broker is even better than “free”.


Prevu is the real estate technology company on a mission to save people money when they buy a home with it's industry-leading Smart Buyer™ Rebate - providing homebuyers in NYC and Connecticut a rebate of up to 2% of their purchase price. Prevu is a licensed real estate broker in New York and Connecticut and a member of the Real Estate Board of New York (REBNY).



Categories: Buyer Prevu Rebates