Re: Buyer paying for seller’s agent - Posted by Bill K. - FL
Posted by Bill K. - FL on February 25, 2000 at 08:20:56:
To answer your question. When the seller lists a property for sale with a RE Broker he agrees to pay that broker a % of the selling price or a flat fee as a commission when that broker or another cooperating broker brings the seller a ready, willing and able buyer to purchase at the seller’s price or a price agreeable to both. The seller knows he will have to pay the commission and usually it is paid from he proceeds of the sale. So in one sense you are bringing cash to the deal and part of that cash is going to the broker , part of it is going to pay for the sellers other closing costs, to pay any liens and the rest if any into the sellers pocket. There have been instances where the seller has had to come to the closing with additional cash to meet all these financial obligations to transfer the title and get the property sold. Since the Seller was the one who contracted with the Broker it is his resposibility to pay that broker, not you, even though he is using your money to do so. The Seller will include the commission paid in his selling expenses and subtract them from the selling price to figure his gain, if any, on the sale. Now, lets take this one step further since we are on this subject of RE comm. Some buyers today will engage the services of a Buyer’s Broker and will agree to pay them a commission when that broker finds them a suitable property for a particular price or less and with maybe some specific financing terms. In this case, unlike the proceeding one, the Buyer agrees to pay the broker not the seller. If the broker were to find a suitable FSBO property where the seller has not engaged a broker and refuses to pay any commission, then the buyer would be the one who pays a commission in this case. Unfortunately, there would be no immediate tax deduction for the buyer. The commission would just be added to the purchase price along with some other buyer’s closing costs to arrive at a cost basis for the property. When the property is resold this cost basis would be used to figure any taxable gain on the property. Does that clear it up? First of all let me state I am not an accountant and would recommend anyone wheeling and dealing in RE to get a competent, knowledgeable accountant.