About the Rebate
Real Estate rebates are 100% allowed in MN and 39 other states. Do a web search or Google "are real estate commission rebates legal" and the first non-advertised match is usually the United States Department of Justice link about how they promote rebates, this link... http://www.justice.gov/atr/public/real_estate/rebates.html There is some good information on that page explaining the benefits of offering rebates. Notice the "Learn more: Full Service Discount Brokers" toward the middle of the page... Get a Rebate Real Estate is considered a Full Service Discount Broker. We offer full service at discounted pricing!
Right above "How do rebates work" is a link "Department of Justice efforts to lift rebate bans" this is the link http://www.justice.gov/atr/public/real_estate/rebates-details.html#efforts and if you scroll to the top of that page and click on MN on the map, it will take you to this link... http://www.justice.gov/atr/public/real_estate/minnesota.html .
9 states totally ban rebates and Iowa limits rebates. If you have ever heard that rebates are "illegal", you may have been speaking to someone from one of those 10 states? It is 100% allowed in Minnesota and we strictly abide to the guidelines. For example, it is illegal to share part of the commission with a mortgage professional, title company, appraiser, etc... or to anyone that is not a party to the transaction (Buyer or Seller). You can visit MN Statute law at this link... https://www.revisor.mn.gov/statutes/?id=82&view=chapter#stat.82.70 It is noted under chapter 82. Real Estate Brokers and Salespersons. Scroll down to 82.7 Compensation, and Subd. 2. Commission-splitting, rebates, referral fee, and fees (1) says " between a licensed real estate broker or salesperson and the parties to the transaction" which is what Get a Rebate Real Estate abides to. Commission should only be paid to a real estate broker, the buyer or the seller. Once the real estate broker receives the commission, they can then share it with one of their agents, another broker (referral fee) or the buyer or seller. And that's it.
Any real estate attorney will also confirm that rebates are allowed, we have actually worked with several of them, and below is an attorney, tax expert and author who confirms that no tax consequences are involved with the rebate. Per the Department of Justice and the IRS, the rebate lowers the cost of the home, saving you money. To have to pay tax on that would be like trying to tax you on the amount you negotiated to a lower price of the home.
We welcome to answer any other questions about the rebate, feel free to contact us at anytime. It is true that some agents can not offer rebates, because their broker has decided to not allow them. This does not mean that companies like Edina Realty, Coldwell Banker, ReMax and others can't offer rebates, I know of several agents that do, it is just that they can not advertise they offer them. Which leaves those agents able to offer the $25 closing gift, and that's it. If you are looking for top service and lowest fees, Get a Rebate Real Estate is your choice. Thank you for considering us!
Below is an article from May, 2011. The article is written by Stephen Fishman who is a tax expert, attorney and author. Please note the highlighted sections pertaining to rebates.
Tax practices for real estate commissions, rebates
Real Estate Tax Talk
Stephen Fishman
Inman News™
Internal Revenue Service Form 1099-MISC is the tax form that must be filed to report annual payments over $600 that businesses make to independent contractors -- people who perform services but are not employees.
For example, real estate brokers must file 1099-MISC forms to report commission payments to real estate agents who are independent contractors.
No new reporting requirements for 2011, 2012
Under long-standing rules, there have been several important exceptions to the requirement to file a 1099 form. For example, 1099s need not be filed if an independent contractor is incorporated, with exceptions for legal and medical corporations.
Also, because the 1099 requirement applied only to businesses, it did not apply at all to landlords who were investors for tax purposes.
The massive federal health care law passed last year was scheduled to eliminate these important exceptions. Under the bill, starting in 2011, all landlords would have had to comply with the 1099 reporting rules, even those who are investors for other tax purposes.
In addition, starting in 2012, the exemption for corporations was scheduled to be lifted, with incorporated contractors and unincorporated contractors treated the same as for reporting purposes.
These changes were supposed to make it harder for independent contractors to underreport their income and thus help reduce the "tax gap" -- the difference between what taxpayers owe and what they actually pay the government each year.
However, these changes met extremely fierce opposition in the business community. They would have greatly increased the number of 1099 forms that had to be filed each year and made business' bookkeeping burdens worse than ever.
Fortunately, the government listened to these complaints. A law retroactively repealing the new 1099 filing requirements (the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011) was passed by Congress and signed by the president in April.
Thus, the old 1099 rules continue to apply. Investor landlords and incorporated independent contractors can rest easy.
Tax reporting for commission rebates
In today's difficult housing market it has become commonplace for brokers to offer buyers a cash rebate of a portion of their commission. A common question many brokers and buyers have is whether such rebates are taxable income that must be reported to the IRS on Form 1099-MISC. The answer is no.
The IRS says that a cash rebate paid to a buyer of property at or after closing is an adjustment in the price, and is therefore not taxable income to the buyer. Rather, the buyer should subtract the amount of the rebate from the home's basis. This will, of course, increase any potential profit when the home is sold.
Since they are not taxable income, such rebates need not be reported on Form 1099-MISC. Thus, brokers should not send 1099s to buyers reporting such rebates. Any buyer who has received a 1099 that reports such a payment in error should ask the broker to correct or withdraw it.
Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors." He welcomes your questions for this weekly column.
The seller or builder pays all commission on any MLS listed property and the rebate will never exceed 50% of the amount of commission received and will only be paid once Get a Rebate Real Estate is paid a commission. If lender allows, the rebate will be on the settlement statement at closing (the HUD-1), or, issued as a check within 2 weeks after closing.
Visit the United States Department of Justice's site http://www.justice.gov/atr/public/real_estate/rebates-details.html and click on MN to learn more. The Department of Justice says "Rebates make buying a home less expensive"! We couldn't agree more and look forward to working with you.
David@DavidProuty.com
612-860-1537
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