How does Redfin refund work? (agent, insurance, closing, rebate)

[BigV]

From Redfin's website, they always keep $5500 from every transaction at the minimum.


but what does it mean when they say that the refund is subject to the lender's approval? In what cases can a lender not be okay with a refund?

[FalconheadWest]

Not every state allows an agent to give money to a principal in the contract. Also, if the buyer has asked for closing costs from the seller, they might be capped at how much they're allowed to get. Some lenders only allow 3% while some are 6%. Also, some lenders only allow actual closing costs to be paid and not prepaid items like home owner's insurance or interest or anything else for the escrow account.

There are many things that limit the amount of money a buyer can have as they can't walk away from the table with more than their earnest money deposit.

[Rakin]

Great post above that pretty well nails it. Now that the mortgage business is in turmoil i wouldn't be surprised if these requirements continue to become more strict. The lender wants you the buyer to have a money investment in the home so you have something to lose if you walk on the house.

Great concept unless the Govt interferes.

[FranklyRE]

Originally Posted by BigV

but what does it mean when they say that the refund is subject to the lender's approval? In what cases can a lender not be okay with a refund?

Redfin only works in areas that allow rebates, so you don't have to worry about that. Also if you use their lender, they will be versed in the process and make sure everything works out ok. And no, they dont get kickbacks from their lenders.

But if you use another lender and forget to tell them about the rebate, and then you get some sort of 0% down loan and the deal calls for you walking away with $6k, then it could be a problem in the end.


Also you might not be able to ask for as much cash back from the seller. For example if the home is $500k and you get is for $475k with $15k back from the seller ($460k net), an offer with Redfin might instead look like $465k with $5k back ($460k net) because the lender limitations.


So just make sure to give your lender a heads up from the beginning.

Hope that helps!

Frank