Realtor Rebates - Posted by Sandy


#1

Posted by Redline on March 02, 1999 at 12:49:34:

You know what - I believe you could.

My personal opinion is that these agents are as dumb as the day is long. Greed turns people stupid.

RL


#2

Realtor Rebates - Posted by Sandy

Posted by Sandy on February 27, 1999 at 09:49:06:

If I buy a FSBO and bring a realtor into the deal; rolling the real estate fee into the loan amount, and make a deal with the realtor that they ‘rebate’ 6% of the 7% back to me at closing. I get cash back at closing and the realtor earns one percent just for showing up at closing. Am I violating any law in the state of Georgia?


#3

Whoops - a flaw in an otherwise good idea. - Posted by Andrew Smith (Phila)

Posted by Andrew Smith (Phila) on February 28, 1999 at 05:51:36:

While contemplating implementing the idea you put forward I thought of a serious drawback. Taxes. If the Realtor earned a $15,000 commission and gave you back $14,000 under the table - the agent would have to pay taxes on the entire $15,000. If you created a reason for the transfer such as some amount of imaginative work then while the agent could deduct the $14,000 - you would then have to report the $14,000 as income and have to pay taxes on it. A rather high price to pay for doing something that is probably illegal anyway. Still, keep up the good work. Creative thought and action is what pays off. By the way as to the moral issue raised by the other posters - I assume everyone of them gets a permit for every single item that their local municipalities requires permits for and that they never jaywalk. My partners trust me implicitiy and I have earned their trust by never diverting so much as a nickle of partnership funds to my own use. We all break laws every day. The degree to which we break them and the risk that we take in doing so are our own choices assuming we are prepared to pay the consequenses.


#4

Re: Realtor Rebates - Posted by Charles - DFW

Posted by Charles - DFW on February 28, 1999 at 24:09:31:

Beside the legal/ethical issue, which I think is clear(both illegal and unethical[just my .02$]). Why if you have an agreement would an owner allow you to bring in an agent to take 6-7% out of his pocket?
I just sold my house FSBO, and it was always clear as to whether an agent was involved or not. If the buyer had an agent there was alot less room for negoatiating on price.

Besides, your integrity is worth more than 7%!

Good Luck,
Charles


#5

Re: Realtor Rebates- Better idea - Posted by Bill

Posted by Bill on February 27, 1999 at 16:58:20:

Rather than commiting fraud, why not do it the easy way? What you’re trying to do is reduce your out of pocket cash, I think.

You are counting on 5% of the price back as a rebate from the agent. Why not just make it the same price, agree with the seller that he/she will pay 5% of your closing costs, prepaids and allowable loan fees and/or any other costs that are allowable under the loan parameters.

Agent tells seller that he will reduce his fee to one percent to finance the expense. If there is still money left for a credit to the buyer after seller has paid the allowable items, try haveing seller 3 months of mortgage payments, etc. Or seller agrees to rent back the property for 3 months, prepaying in the escrow… explore ways that will not violate fed regulations…

You will no doubt be pinned with a “shady” reputation with sellers, lenders, and brokers if you try to play “fast and loose” with clear regulations. It’s simply not worth all the effort, and it’s certain to damage your reputation. Ethics are not situational.


#6

Re: Realtor Rebates - Posted by Joe Dahlin

Posted by Joe Dahlin on February 27, 1999 at 16:18:02:

I’m a realtor and ALL deals etc between any of parties of the transaction including Realtors are to be disclosed to everybody. I like your creative thinking and having a real estate license sometimes prevents me from trying to do some of the things that my mind creates but-----.Joe from MN


#7

I like the way you think. You are creative. - Posted by Andrew Smith (Phila)

Posted by Andrew Smith (Phila) on February 27, 1999 at 15:22:44:

Even if this is illegal - it is creative so you deserve a pat on the back. Actually, forgetting for the moment that it is probably illegal - I think it is a great idea and it could easily work if you work with an agent that doesn’t have to split the commission with their broker. ReMax pioneered a broker/agent system where the agent keeps the entire commission but other agencies have followed suit and made it an option (the kicker is to keep the whole commission the agent rents space from the broker so the agent then has regular overhead that an agent who splits the commission does not have). Your idea would work easily and would be virtually undetectable however you would need to have a very good working relationship with the agent and there would need to be a lot of trust both ways. Still, I think it is a great idea.


#8

Re: Realtor Rebates - Posted by Bill

Posted by Bill on February 27, 1999 at 12:20:01:

Another problem with an undisclosed rebate is the issue of fraud when a lender is lending money to the buyer. Both the realtor AND the borrower will squirm bigtime when trying to explain this “oversight” when they try to explain this. This is an easy fraud to prosecute.


#9

Re: Realtor Rebates - Posted by Paris

Posted by Paris on February 27, 1999 at 11:30:19:

Sandy I am a realtor,

Even it if were legal, the broker of the realtor would want his part not to mention the compensation for the realtor helping with the transaction. I would imagine the 1 % commission that is to be split between the broker and realtor each would not cover any possible problems that could arise after the closing. Believe me if the buyer or the seller feels they have been cheated the next words out there mouths is…Lawsuit.
Just not worth it for the broker.

My 2 cents


#10

Re: Realtor Rebates - Posted by JPiper

Posted by JPiper on February 27, 1999 at 10:53:09:

I can’t tell you the Georgia law?..but my suspicion is that it’s no different than the law in most states in this regard. In most states, it is illegal for a licensee to rebate the commission. Go to findlaw.com and check out the licensee law for Georgia.

JPiper


#11

Re: Realtor Rebates- Better idea - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on March 03, 1999 at 23:07:08:

I’m with Bill on this one. I have not been to the bank to get a loan in about 3-4 years, but both conventional and FHA (though FHA just changed the rules few months ago) loans used to have what was called an “allowable seller contribution towards Buyer’s costs”. This was maxed at 6% for both FNMA and FHA.
Besides the items Bill suggested as other ways to get cash, I recall having credits to Buyer for repairs written in the contracts. Frankly, if it’s in the contract in writing, the lender has a chance to see it and reject it. If they see and accept the terms of the contract and still fund the loan, there’s hardly a chance of anybody claiming a foul play.


#12

How do you figure? - Posted by Redline

Posted by Redline on March 01, 1999 at 13:49:26:

This makes no sense what-so-ever and is not creative in the least. It’s called fraud and it’s been done for as long as there’s been money.

Why on earth would ANY realtor/broker stick their neck out for a measley 1% of a commission?

Do you have ANY idea what kind of legal responsibilities a broker or salesperson takes when he/she closes a transation? I don’t think you do. And if they know what they’re doing they would not risk their license, their personal bank accounts, and their reputation for a grand total of 1%. Not to mention the fact that they’d have to LIE to get it!

I wouldn’t.

RL


#13

Re: I like the way you think. You are creative. - Posted by JPiper

Posted by JPiper on February 27, 1999 at 17:25:01:

Just so that we all know what we’re talking about, here is a portion of the Rules and Regulations governing licensees in one state that I deal in:

58-3062. PROHIBITED ACTS. (a) No licensee, whether acting as an agent or a principal, shall:

(4) Accept, give or charge any rebate or undisclosed commission.

As I look down through the remainder of “prohibited acts” I notice several others which would undoubtedly cover this “creative” idea as well. But the one mentioned above is clear, direct, and easily decipherable.

Another state that I deal in is equally clear on this matter. Right now I can’t locate my copy of the Rules and Regulations, so I can’t quote it.

By the way, the penalty for violation of the Act is a fine of up to $10,000 or a jail sentence of up to 1 year, or both.

Here’s your comment “Your idea would work easily and would be virtually undetectable however you would need to have a very good working relationship with the agent and there would need to be a lot of trust both ways. Still, I think it is a great idea.”

Sounds like you’re suggesting that “creativity” for it’s own sake is great, with no context concerning the laws required. The only key is whether you have a “good working relationship” and you can “trust” the other fellow.

Hopefully the word “creative” has not become a substitute for illegal acts as defined in the statutes.

JPiper


#14

You might be surprised at how I figure. - Posted by Andrew Smith (Phila)

Posted by Andrew Smith (Phila) on March 01, 1999 at 21:17:08:

My banker asked me if I would tell him something. I asked him if he wanted the truth or the best answer. He laughed and so did I. In my 11 years in real estate investing I would say that real estate agents have improved tremendously - but then that is not saying much given the enormous lack of professionalism in the field back then. While things have improved - they have a long way to go. If I were inclined to (and I might be if I could avoid the tax issue that I raised in my earlier post above)I am certain that I could find an agent that would rebate $14,000 of a $15 or $16,000 commission if I brought them into a done deal.