Understanding Rebates in New Property Purchases

When purchasing new properties in Hong Kong, rebates are often a key consideration for many buyers. These rebates not only impact the overall cost of purchasing a property but also highlight the importance of choosing a reputable agent. This article provides a clear explanation of how rebates work, the typical rebate amounts, and offers guidance on how to avoid common pitfalls, empowering you to make informed decisions throughout the property buying process.

Q1: What is a commission rebate?

A commission rebate refers to the practice where a buyer of a new property receives a portion of the commission paid by the developer to the real estate agent. Typically, developers offer agents a commission of at least 2%, and the agent, in turn, may rebate part of this commission to the buyer to incentivize the sale. This is commonly known as a "commission rebate." In some cases, when sales are slow and developers do not want to openly reduce prices, they may raise the commission offered to agents, who then return part of it to the buyers, effectively lowering the price without publicly advertising a discount.

Q2: How much is the typical commission rebate?

The amount of the commission rebate is not fixed and depends on agreements between developers and agents, as well as market conditions. Generally, the rebate ranges from 1% to 6% of the property price. For example, in the case of popular new developments, developers may provide agents with a commission of 2% to 4%, and the agent may then rebate 1% to 2% to the buyer.

However, due to intense competition among agents, some may use unusually high rebate offers to attract buyers, claiming to rebate as much as 80% to 90% of the commission. Whether these promises are genuine and whether buyers can actually receive the full rebate remains uncertain and should be approached with caution.

Q3: Can buyers avoid paying commission by bypassing the agent and purchasing directly from the developer?

If a buyer chooses to purchase a new property directly from the developer without going through an agent, they will not be eligible for a commission rebate. Although new properties typically have open price lists, making it easy to see unit details, if a buyer purchases directly from the developer, the price will not reflect any savings from commission rebates. In fact, the buyer may end up incurring additional responsibilities, such as handling registration and subscription procedures independently, and ultimately may not save anything.

Q4: How can a buyer ensure they receive the commission rebate?

To avoid future disputes, buyers should request a written agreement with the agent once the rebate is verbally agreed upon. This agreement should be in the form of a "Commission Rebate Confirmation" (or rebate document) that clearly outlines the rebate details. The document should be signed by a senior agent or manager to validate the agreement and ensure transparency.

However, it’s important to note that having a signed rebate document does not guarantee the buyer will receive the full rebate. Some unscrupulous agents may, after attracting buyers, find excuses to back out or claim the agreement was not approved by senior management. Therefore, buyers should be cautious and select trustworthy agents.

Q5: How can buyers avoid losses related to commission rebates?

While commission rebates may seem appealing, buyers should not make their decisions solely based on the potential rebate amount. Purchasing a property is a significant investment, and it is far more important to select a reputable and responsible agent than to chase uncertain rebates. It is advisable to establish a clear budget for the property purchase and choose an agent known for their integrity, ensuring a smoother and more reliable process.

Conclusion:

Commission rebates are a promotional tool where developers offer agents a commission, part of which is passed back to the buyer. While this may appear to provide a benefit to the buyer, the situation can be more complicated than it seems. Buyers should be cautious, insist on written confirmation of the rebate details, and choose a trustworthy agent. Ultimately, making an informed decision based on a solid budget and reliable advice is far more important than chasing uncertain commission rebates.