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Chris Coughlan
  • Real Estate Investor
  • Massachusetts
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Commission Rebates

Chris Coughlan
  • Real Estate Investor
  • Massachusetts
Posted Nov 3 2013, 12:39

Hello,

I'm assisting my clients (friends) purchase their first home. I would like to give them a portion of my commission to help them out. I know I will need to contact my attorney and accountant but was wondering if anyone has experience offering commission rebates? It sounds like I have a couple of options.

http://www.justice.gov/atr/public/real_estate/rebates.html


My brokerage said that I can rebate a portion of my commission. They said that they will mail my client a check after the closing as long as I filled out a fee disbursement form detailing how much and who gets what. They said that I will not be taxed on the rebate portion.

"According to the DOJ and the Department of Housing and Urban Development (HUD), real estate agents may rebate a portion of the agent's commission under RESPA. The rebate must be listed as a credit on page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates do NOT violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business."

Does anything need to be filled out on the HUD if an actual check is being mailed to my clients rather than being a credit? Sounds like they won't be taxed if it's a credit, but what about if they receive a check?

I have also read that some people have, "Reduced the purchase price of the home by the commission rebate - The commission rebate is noted on an addendum that both buyer and seller will sign."

If I want to give my clients 3K, reducing the purchase price of the home by 3K affects the commission of the listing agent (who won't be happy). How does this work?

Thanks,

Chris

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