The supposed incentive of 'rebates' – aka: cash back certificates at a real estate closing

The use of ‘rebates’ is nothing new in the real estate industry – in fact, rebates have been used for years, all around the country.

The idea is somewhat ‘new’ to the North Idaho area (in it’s current form) and a local real estate company is now offering ‘rebates’ (cash back certificates) as an incentive to get buyers and sellers to use their real estate services. Each seller client can receive up to $5,000 for each transaction (doubled up to $10,000 if they don’t sell your home within a specified time period). Each buyer client can receive up to $10,000.

Wow, it sounds like there is a potential for a client selling their home and buying another one could possible receive up to$20,000 cash! Let’s do it!!

Thud.

That’s the sound of reality.

Here is how the program works from the client’s perspective:

  1. Client uses the agent or brokerage offering the incentive – to either buy or sell (or both for that matter).
  2. At the closing table, client receives a ‘cash back certificate’ for up to $5,000 or up to $10,000.
  3. Client must ‘register’ their certificate within 7 days of closing and ‘redeem’ their certificate 36 months after closing. No earlier.

Here is how the program works from the agent/brokerages perspective:

  1. They offer the client a cash certificate incentive based upon a sliding scale (essentially, the value of the transaction to the broker).
  2. Client closes and records the transaction, broker hands over a certificate to the client. At the same time, broker puts cash into an annuity – usually less than 1/2 of the value of the cash certificate.
  3. Broker is done with their portion – it’s handled by an outside company from here on out.

Here is the fine print (aka the reality):

  1. 47% of all Cash Rewards Certificate recipients do not even make their initial claim within the first 7 days, as required!
  2. A huge number of people given Cash Rewards Certificates will never make their claim, or they will not follow the rules, or will forget, or will lose their certificate or the documentation, will die, inherit money, etc.
  3. The Certificate is redeemable 36 months after the closing of the transaction.
  4. The Certificate is forfeited if you die and is non-transferable.
  5. If you miss a requirement by day 1, your Certificate is voided.
  6. If you lose or destroy your Certificate it cannot be replaced and you will not be eligible to make a claim.
  7. There are strict timelines within which documents must be sent. All documents must be sent certified mail.
  8. You do not have the use of, nor obtain interest on, the money while it is in the annuity during your 36 month ‘holding’ period.

Fine print here. [Updated: the rebates in this article are no longer available, as the agents/brokerage went out of business.]

Sound like fun? Sound easy? Does it sound worth itProbably not.

How about not going through all of these loopholes and receiving more than $5,000 immediately upon closing, without strings attached?

The North Idaho Dream Team sells clients homes for 3.4% more than the Coeur d’Alene Multiple Listing Service average. That means that when you list a home with us, our average sales price is 99.6% of the listing price and no, we don’t undercut market value. The MLS average (meaning, other agents in Kootenai County) sell their homes for 96.2% or less of the listing price.

Let’s use the same numbers this ‘rebate team’ uses.

Their example is a $290,000 house. On a $290,000 house, you would receive a $5,000 certificate if you sold your house using the rebate team. As shown above, you can potentially receive that $5,000 3 years after you have sold your home and moved on. How does that look…

$290,000 listing price means a likely sales price of $278,980 (96.2% of listing price). That’s $11,020 lower than your listing price. Of course, if you follow all of the loopholes and don’t lose your certificate, you’ll receive $5,000 in 3 years.

What does it look like when you use the North Idaho Dream Team to sell? You’re nearly $10,000 richer…

$290,000 listing price means a likely sales price of $288,840. That means you have $9,860 more in your pocket, without loop holes, without time periods, right at the closing table.

This doesn’t even address the interest you lose via the ‘rebate team’ because your $5,000 is sitting there in a certificate that isn’t redeemable for 3 years.

Now that you know the facts – you make the decision. $10,000 now or $5,000 in 3 years?

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