Realtor's commission..Pros please read - Posted by Rob FL

Posted by FJW on May 17, 1999 at 18:32:47:

They bring buyers and sellers together to form a “meeting of the minds”. Please tell me it wasn’t included in the closing.

Don’t do that anymore. It’ll come back and haunt you. Get an option and get in the deal as a principal. Otherwise, get a license.

FJW

Realtor’s commission…Pros please read - Posted by Rob FL

Posted by Rob FL on May 16, 1999 at 18:57:59:

I am applying for a conventional bank loan on a home I plan to reside in. Being a realtor, I can get 1/2 of the commission kicked back to me at closing. However, there is this stinking federal law that won’t allow me to get a check back at closing. We are talking roughly $4000 here.

My thoughts are to have the seller pay all my closing costs (not the down payment) up to the amount of my portion of the commission, and I would in turn allow the seller to not have to pay my portion of the commission. I would pay all the down payment of course. This would all be in the contract and not some secret side deal. Does this some legal?

Also, if legal what could I do with any money if say the closing costs are only $3000 and I would still have $1000 of the commission left. How could I keep any of this for myself?

Any ideas are greatly appreciated. Thanks.

Re: Realtor’s commission…Pros please read - Posted by MC (CA)

Posted by MC (CA) on May 17, 1999 at 14:26:01:

One deal that I did with my sister was to have the seller pay me a “finder’s fee” in closing. I just gave the check to my sister to help with the closing costs.

Re: Realtor’s commission…Pros please read - Posted by JPiper

Posted by JPiper on May 17, 1999 at 09:08:02:

The only problem I’m aware of in receiving a commission is the income taxes?.as Irwin states below.

Personally, if I had a choice I’d rather reduce the price than receive the commission. A price reduction creates no taxable income, whereas the commission does. In fact, self employment tax would be due on the commission as well. Reducing the price would result in a higher price upon resale, but this additional gain would be taxed at long term capital gain rates (assuming you held for 12 months) as opposed to ordinary income rates plus self-employment tax.

I thought your idea of the seller paying the closing costs was a good idea too?..serving to lower the cost basis as opposed to taxable income.

JPiper

Re: Realtor’s commission…Pros please read - Posted by Gene B.

Posted by Gene B. on May 16, 1999 at 20:06:45:

There is no federal law prohibiting you, as a real estate agent, from receiving payment of your commission at closing eventhough you’re also the buyer in the deal.
In fact you can have the commission credited to pay some or all of the down payment and not have to use other funds. What am I missing here?

Re: Realtor’s commission…Pros please read - Posted by JPiper

Posted by JPiper on May 17, 1999 at 16:18:21:

This is what is typically illegal, and what Rob is concerned about.

JPiper

Re: Realtor’s commission…Pros please read - Posted by Carmen

Posted by Carmen on May 17, 1999 at 08:10:40:

I’ve never heard of such a law! Brokers get their checks at closing every day. Of course, the commission at close does belong to the broker, so as a realtor who works for the broker, you would have to get get the broker’s go-ahead and have him “assign” your portion of the commission to you at close. Other than this, I can’t see what kind of federal law there is. I have seen certain clauses on some foreclosed or bank-owned properties that say “no commission to realtors buying for their own account”, but I don’t think that’s what you are talking about here.

Re: Realtor’s commission…Pros please read - Posted by Irwin

Posted by Irwin on May 17, 1999 at 06:53:59:

I’m also a broker. When I buy a listed property I have the selling broker agree to reduce his commission to 3 1/2 (out of 7%). The seller then agrees to reduce the purchase price by the exact amoung of my portion of the commission. Otherwise, I’d have to pay income tax on my own money (or on borrowed money if it comes from loan proceeds). At least that’s the way I look at it.

Re: Realtor’s commission…Pros please read - Posted by Rob FL

Posted by Rob FL on May 16, 1999 at 20:12:09:

I want to make sure this would not be considered a side deal with the seller, a kickback, or not putting down the amount of money that I say I am. Just trying to be careful. I don’t want to be doing any type of loan fraud. ?

Re: Realtor’s commission…Pros please read - Posted by MC(CA)

Posted by MC(CA) on May 17, 1999 at 18:00:34:

I don’t understand why this would be illegal. In this particular case, there were no realtors involved. I brought the buyer and seller together and earned a finder’s fee. Please explain why that would be illegal?
I had no idea that it is, and wouldn’t have done it if I had known that.

Re: Realtor’s commission…Pros please read - Posted by JPiper

Posted by JPiper on May 17, 1999 at 18:43:19:

In your original post you said “One deal that I did with my sister was to have the seller pay me a “finder’s fee” in closing. I just gave the check to my sister to help with the closing costs.” I took this to mean first that you and your sister were the buyers?..in which case accepting money directly from the seller would have been illegal under most loan programs I’m aware of.

It appears now that you weren’t one of the buyers?.but rather were a “finder”. “Giving” the money to your sister?.unless it was covered by a formal gift letter and the lender was given a copy of the gift letter?.would be illegal as well. Some loan programs will permit gifts, and others won’t?.but if they do permit them they have to formal in nature. There have also been cases where “gift money” was verified?so that gifting money which you got from the seller wouldn’t be permissible either.

Understand that a “finder’s fee” is not the same as a real estate commission. The commission is formally recognized in the law, and is enforceable by licensees. The finder’s fee is not enforceable by the recipient?and may be illegal to receive under the conditions that you received it in the sense that you were performing an activity that requires a real estate license to perform.

By the way, I’m not an attorney, and I don’t have all the details of the transaction?.so this is all just my opinion.

JPiper