Buyer Agent Commission Rebate In Tennessee

Key Takeaways

• Felix Homes offers a Buyer Savings Program In Tennessee – the exact savings amount varies depending on the commission offered by the seller to the buyer’s agent.
• The buyer’s agent commission is traditionally 2.5% - 3% of the sales price.
• Home buyer rebates are not legal in Tennessee and 9 other states. Felix Homes has found a legal way to offer buyers a way to save by reducing the buyer’s agent commission we receive and asking for a reduction in the sales price to reflect this savings.
• Technology has significantly reduced the workload of buyer’s agents, making the traditional commission structure appear outdated and paving the way for rebates and lower commissions.
• Despite the technological advances, using a buyer's agent is still valuable for the expertise and negotiation skills they bring to the table.

TL;DR

At Felix Homes, we proudly offer what we like to call our Buyer Savings Program. This solution provides significant savings to home buyers, challenging the traditional 6% commission structure. We leverage technology to offer lower commission fees, and make the case that the traditional 3% buyer’s agent commission is outdated. While we acknowledge the value of professional guidance in the home buying process, we encourage homebuyers to negotiate commission rates and take advantage of rebates, where legal, to save on the largest investment most people will make.

Does Felix Homes Offer A Buyer Rebate In Tennessee?

We believe the Tennessee law making it illegal to give a commission rebate is absolutely crazy! Let’s face it, buying a home is expensive, and many folks save up for years just to have enough money to afford a home. Not only that, commission rebates are legal in 40 out of 50 states.

In Tennessee, instead of offering a cash-back style rebate, our process looks a little different but most importantly – the savings our clients receive are the same! 

Instead of requiring the seller to pay a full 3% commission fee when we represent a buyer, we ask for just 2%. Since we are reducing our commission, we include language in all of our offers stating that this difference, typically 1%, must be paid by the seller towards the buyer's closing costs.

In practice, this achieves the same thing as a traditional commission rebate. If you plan on purchasing a home for $700,000, you could end up saving $7,000 off your closing costs. I don't know about you, but that's meaningful savings. This is a loophole in the law that is completely legal and we're the only brokerage in Tennessee that does it!

What Is A Buyer Agent Commission?

A buyer’s agent commission is the amount of compensation an agent receives for representing the buyer in a transaction. This amount has historically been 3% of the sales price. In most cases, the buyer’s agent is only entitled to a commission if the transaction closes.

In Tennessee, the buyer agent commission is typically 2.5% - 3% of the sales price. Considering how the internet has allowed homebuyers to do much of the home searching themselves, the 3% commission seems drastically inflated, right?

Who Pays The Buyer Agent Commission?

Any rational person would suggest that the seller would pay for the listing agent commission, and the buyer pays the buyer agent commission. This is a big misconception. Historically, the home seller is responsible for paying the agent commission for both the buyer and seller!

On average, this is a total of 6% of the purchase price in commission fees the seller ends up paying. The buyer's agent gets a 3% fee, and the listing agent would get a 3% fee. On a $700,000 home, that is $42,000 in realtor commission fees. That's a lot of money by any standards.

Just because the buyer does not have to pay out of pocket to use the services of a buyer's agent doesn't mean it is free. A simple economics course would teach you that the buyer's agent commission is factored into the sales price. This is why so many buyers attempt to bypass the services of an agent to get a better price. Luckily, with a home buyer rebate, buyers can have their cake and eat it too by both saving money thanks to the commission rebate and also benefitting from the experience of a licensed agent.

What Is A Home Buyer Rebate?

A home buyer rebate is when a buyer's agent gives their client back a portion of their commission they receive from the seller. Think of a commission rebate like cash back on a credit card. For instance, if a buyer's agent collected a 3% commission, or $21,000, they may elect to keep $14,000 of that commission and give their client a commission rebate of $7,000.

A Realtor may decide to do this as a token of appreciation, a simple thank you, or as a way to get more clients! Commission rebates allow agents to compete for a buyer's business, not just on the level of service they provide but also the price they charge for that service. It's a win-win!

The concept of a buyer's commission rebate has become increasingly popular in recent years as buyers understand that they take on more of the legwork in the home search process. Buyers also understand that as home prices continue to appreciate, a 3% commission on a $100,000 home in 1980 is a lot less than a 3% commission on a $700,000 home today.

What Value Does A Buyer Agent Offer?

As unconventional as this may sound, the reality is, when it comes to being a real estate agent, a buyer's agent's job has drastically changed since the adoption of the internet.

What Did A Buyer's Agent Do Before The Internet?

Rewind the clock 15 or 20 years, and yes, these agents had their hands full discovering new inventory and manually coordinating when to physically tour homes. They would literally carry around a big binder filled with properties listed for sale. Nothing was online so if a home buyer wanted to see what inventory was available, they would first call their Realtor who would manually look through their binder and pick a few properties that met the buyer's needs.

If the buyer was then interested in making an offer on the property, doing a comparable market analysis wasn't as easy as it is today. Their agent would have to seek out all of the recent comps in their binder to manually compute their opinion of the home's value. These old-school agents didn't even have electronic signature software so every time a document needed to be signed by their client, they had to hop in their car and drive over to their client. All this time-consuming work meant that buyer agent commission rebates were never brought up until the advent of technology caused a huge shift in the industry.

How Did Technology Make The Job Of A Buyer Agent More Efficient?

In today's technological age, so much of these manual buyer agent tasks can be accomplished with the click of a mouse, or simply by scrolling on your phone. The internet and apps allow the home buyer to do most of the legwork! Buyers are able to preselect their 'requirements', and the home-search website will automatically show them homes in their desired area that meet these requirements.

If you want 4 bedrooms, there's a filter for that. If you need a two-car garage, there is a filter for that too. All you need to do is ask your Realtor to unlock the front door so you can see if the pictures live up to the hype! If you're interested in making an offer on a home, your agent can easily do a comparable market analysis to determine what a fair price for the home should be. There is no longer the need to manually compute these critical numbers! No wonder buyers are increasingly asking their agent for a rebate.

Should You Use A Buyer Agent Or Represent Yourself?

Using a buyer’s agent is a valuable asset and we encourage you to work with one. After all, purchasing a home may be the largest investment you make.

It's a good idea to have a professional in your corner to help answer any of the questions you may have and help you negotiate the purchase.

But the reality is, in today's technology-driven world, buyer's agents are just not worth 3% of the final sales price. This is why many folks are starting to ask for a home buyer rebate from real estate agents.

Is It Legal For Real Estate Agents To Give Part Of Their Commission To Buyers In Tennessee?

Tennessee is one of 10 states that makes it illegal for an agent to give a buyer rebate. As crazy as this sounds, it's the absolute truth. According to the Tennessee Real Estate Commission (TREC) and the Tennessee Association of Realtors, an agent is not allowed to give a commission rebate to their client nor are they allowed to directly pay for their client's closing costs. At Felix Homes, we are actively working on fighting for a change to this outdated law by starting a petition that we encourage you to sign.

What States Do Not Allow A Buyer Agent Rebate?

As crazy as this sounds, there are still 10 states where it is illegal for an agent to give their client a commission rebate.

• Alaska
• Alabama
• Iowa
• Kansas
• Louisiana
• Missouri
• Mississippi
• Oklahoma
• Oregon
• Tennessee

Although it's not legal for an agent to give part of their commission to the buyer in Tennessee, the commission rate can still be negotiated. There is no law mandating that the buyer's agent must take 3% of the purchase price as their commission.

As a buyer, you should certainly ask your agent to take a lower commission which can make your offer look more appealing to a home seller. While it's not exactly the same as getting cash back on your home purchase, asking your buyer's agent to reduce their commission is in effect the same as a commission rebate.

How Can Felix Homes Help?

Felix Homes is a low-commission real estate brokerage. We work with both buyers and sellers and help keep more profit in your pocket on each real estate transaction.

Not only do we charge a lower commission on the buy side, we charge a flat 1.5% commission fee when we sell a home for our clients. On average, we help our clients save $12,375 when they choose to list their home with Felix. Our clients are able to save on commissions and use that cash for other important expenses such as a home renovation, family vacation, or downpayment on their dream home!

How Do We Charge Lower Commission Fees?

This is such a common question, and we love answering it! The fact of the matter is, we believe technology changed the real estate industry, but traditional Realtors are holding onto a higher commission fee for obvious reasons. Many years ago, paying a 6% commission fee may have been appropriate, but in today's world with all the real estate apps, online photos, home search websites, and virtual tours, that fee is no longer needed.

In addition, the average home price has skyrocketed. Commissions on a $700,000 are a lot more than what they would be on a $100,000 home. The 6% commission rate has stayed relatively unchanged, but all the variables that make up the rate (effort and price) have changed!

Our Final Thoughts On Buyer Rebates

In wrapping up our discussion on buyer agent commission rebates, it's clear that the landscape of real estate transactions is evolving, with technology at the forefront of this change. Felix Homes stands committed to adapting to these changes, offering buyer rebates as a testament to our belief in fair and transparent pricing.

We understand the significance of purchasing a home and strive to make this process as beneficial as possible for our clients. Our approach is rooted in the value we see in every home buyer's journey — empowering them with savings that extend beyond the transaction. In a market where every dollar counts, Felix Homes is proud to lead the charge in offering a financially savvy pathway to home ownership, ensuring our clients don't just find their dream home but also retain more of their hard-earned money in the process.