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Can a realtor's commission be applied as closing cost if he is buying a home for a family member?

Can a realtor's commission be applied as closing cost if he is buying a home for a family member?
  • January 26 2011 - US
  • 0Yes

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Answers (5)

Yes a realtor can use his commission or a portion of it to credit a buyer for closing costs. The dollar amount being credited needs to be disclosed on the purchase contract.
  • January 31 2011
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The Seller is obligated to pay the comission to the Buyer's Agent as stated in the Listing Agreement Contract.  The Buyer's Agent has an agreement with their broker on how that commission is split between the Agent and the Broker.  If the Agent has complete control over the commission, ie does not have to give a percentage to his/her broker,  then it becomes a matter of what is allowable by law in regards to lending practices.  I would consult my mortgage officer who can answer this  question.  The Va and FHA are more rigid in allowances for closing costs.  As far as taxes go...if the agent does not receive the commission,  it is not income and he doesn't pay tax.  And if the amount is below $10,000 (may be higher now) the  receiver pays no tax either. 
  • January 27 2011
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If I understand your questions correctly, the answer is that the Realtor's commission can be used towards the buyer (family members) closing cost. It will appear on the HUD1 as an expense in the Sellers column and as a credit in the Buyers' column. If the Realtor does not receive, the money there is no tax implication for the Realtor. They may be a tax implication for the Buyer as they are the one receiving the benefit of the money, though depending on the amount and the relationship between the Buyer and Realtor it may be able to be given as a "tax exempt gift", this is a question I would ask my accountant. Unless the Realtor is the owner of the company, you would also need to get written permission from your company to handle the commission in this manner.

  • January 27 2011
  • 0Yes

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Profile picture for vijay99
Can the buyer ask the seller to applying commission in closing cost verses paying him as a check of 3%. Will there be any tax applied if the commission is paid as a closing cost?
  • January 26 2011
  • 0Yes

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Profile picture for Connie Klemme
the realtor's commission is a closing cost.  The seller pays it based on the listing agreement.  it's a cost for the seller.  not sure I am understanding your question.
  • January 26 2011
  • 0Yes

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