When realtors buy their own home, how does commission work?

Buying & Selling Real Estate

7yFollow

When realtors buy their own home, how does commission work?

Darius Kellar

Real Estate Coach · Member since 2018 · 245 posts · 216 votes

My wife is a about to be a licensed realtor. How does commission work when it is time to buy or sell?

0 Reply

169 views

Most Popular Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

Originally posted by @Darius Kellar:

My wife is a about to be a licensed realtor. How does commission work when it is time to buy or sell?

Something I have seen and been told, but can't confirm because I'm not a tax professional:

If she just collects the commission as is normal, that's taxable income.

By contrast if she has the seller sign an addendum specifying that there is to be no commission paid to the buyer's agent's broker, and there will instead be a 2.5% or 3% credit from the seller towards buyer's closing costs, there's nothing taxable as income but that $ was still put to work.

She will need consent of her broker to do this, more than likely. And maybe her broker still wants their cut, in which case you reduce the commission to be enough to cover broker's cut, and take the rest in form of seller credit.

7 Reply

See this reply in the discussion

22 Replies

Jump to latestLatest

Sort by

Trevon Hippolyte
Rental Property Investor · Washington, DC · Member since 2019 · 15 posts · 10 votes
7y
@Darius Kellar She’ll know better then anyone else. I’m sure she’ll be fine with explaining the process.
4 Reply
Darius Kellar
OP
Real Estate Coach · Member since 2018 · 245 posts · 216 votes
7y
@Trevon Hippolyte Shes not a realtor yet. I said she is about to be one.
0 Reply
Trevon Hippolyte
Rental Property Investor · Washington, DC · Member since 2019 · 15 posts · 10 votes
7y
@Darius Kellar I apologize, I read over that. Here’s an article that should give you some insight.
https://www.investopedia.com/financial-edge/0611/understanding-real-estate-commissions-who-pays.aspx
1 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
7y
She gets the the buyer commission, split with their broker by whatever agreement they have, just the same as if she were representing a client.
5 Reply
Darius Kellar
OP
Real Estate Coach · Member since 2018 · 245 posts · 216 votes
7y
@Wayne Brooks
Thank you
0 Reply
Paul S.
Real Estate Agent · Allentown, NJ · Member since 2014 · 39 posts · 44 votes
7y
She will get paid whatever the owner of a particular property is offering a buy-side commission, minus what cut her company takes, and then, the best part, minus about 50% for taxes! (This is in NJ, your state might be different).
2 Reply
Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
7y
No difference is she were representing a client or for herself. She would just need to disclose it during the transaction however. She gets the buyer's commission portion.
[email protected]
The Elle Group5154 Reviews
Website View Page
3 Reply
Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Darius Kellar:

My wife is a about to be a licensed realtor. How does commission work when it is time to buy or sell?
Something I have seen and been told, but can't confirm because I'm not a tax professional:
If she just collects the commission as is normal, that's taxable income.
By contrast if she has the seller sign an addendum specifying that there is to be no commission paid to the buyer's agent's broker, and there will instead be a 2.5% or 3% credit from the seller towards buyer's closing costs, there's nothing taxable as income but that $ was still put to work.
She will need consent of her broker to do this, more than likely. And maybe her broker still wants their cut, in which case you reduce the commission to be enough to cover broker's cut, and take the rest in form of seller credit.
7 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
7y
Find a broker that allows her to get maximum commission split.

1 Reply
Ahmed Afifi
Investor · Evansville Indiana · Member since 2019 · 9 posts · 4 votes
7y
@Darius Kellar
I am pretty sure that all depends on the Principle Broker (PB) she will be working for and what type of deal they have for their agents. This is not a complicated question. Almost all legitimate PBs already have their policy on this.
On a side note, try FSBO first. That way she can have the experience of a FSBO transaction/marketing. She can use that as a story as she is building her real estate business and contacting FSBOs
2 Reply
Deep Shrestha
Realtor · Mililani, HI · Member since 2017 · 33 posts · 19 votes
7y
@Darius Kellar She gets the buyer agent comission. Most brokerages waive or reduce their portion of the split, when an agent is buying the property for personal use. She should be able to keep most,if not all of her comission.
3 Reply
Ryan McKelvey
Jacksonville, NC · Member since 2018 · 67 posts · 58 votes
7y
@Darius Kellar
Depends on the firm and what the independent contractor agreement states. Typically you can get paid just like you would on a normal transaction, or you can negotiate a lower price and/or combine with seller concessions and waive your commission.
1 Reply
Rob Hoffman
Oakland, CA · Member since 2016 · 104 posts · 47 votes
7y
@Darius Kellar definitely depends on her contract or agreement with her broker. She should ask about this when interviewing brokers.
I bought a house with my fiance a year ago. Only my fiance is on Title. My broker pretty much only charged me for Errors and Ommissions.
I credited the rest of my commission to my buyer.
1 Reply
Jeff Brower
Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
7y
At my brokerage we are allowed 1 transaction per year with no commission split if it is for personal use. Investments they need their normal cut.
Even though the event may be taxable and the brokerage may take their piece, inflating the purchase price by 3% and then getting that $ back in the form of cash at close is wise as the total will be rolled into a 30 year note at historic low interest rates. This is vs taking no commission and having the purchase price be 3% lower. I think about this a lot and it makes sense to me to always pay yourself vs taking the money off of the purchase price total. I also advocate for asking for the seller to pay some closing costs and inflating the purchase price by that amount if allowed. The less cash out of pocket the better, at least in my current situation.
1 Reply
Steve C.
Las Vegas, NV · Member since 2017 · 89 posts · 52 votes
7y
@Darius Kellar we just did this last year& had the broker sign a document stating they would allow all the buyer’s commission to be credited toward downpayment. They we charged ourselves a broker fee equal to the split they would have been given. Be sure both your broker & escrow company is fully aware & able to do this for you.
1 Reply
Darius Kellar
OP
Real Estate Coach · Member since 2018 · 245 posts · 216 votes
7y
@Steve C. THX
0 Reply
Scott Anderson
Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes
7y
I prefer to take zero commission and deduct from purchase price or down payment.
You don’t pay taxes on commission if you don’t get one. Also no broker or office split.
Works out to 50% bigger commission for me.
4 Reply
Steve C.
Las Vegas, NV · Member since 2017 · 89 posts · 52 votes
7y
The method used by @Scott Anderson may work in certain areas, but be sure you understand your local laws; for us in Nevada my understanding is it's illegal to write offers negotiating how much commission is paid. Real estate & it's applicable laws can vary quite a bit from location to location, but if this is doable where you are, it would accomplish the same goal. Either way it looks like you have a few options @Darius Kellar, have her speak with her broker & find the best one for your situation there.
0 Reply
Scott Anderson
Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes
7y
Originally posted by @Steve C.:

The method used by @Scott Anderson may work in certain areas, but be sure you understand your local laws; for us in Nevada my understanding is it's illegal to write offers negotiating how much commission is paid. Real estate & it's applicable laws can vary quite a bit from location to location, but if this is doable where you are, it would accomplish the same goal. Either way it looks like you have a few options @Darius Kellar, have her speak with her broker & find the best one for your situation there.
It's definitely not negotiated when writing a contract. Contract has nothing to do with commissions in AZ, it is between buyer and seller ONLY.
This is handled on the backend through brokerages and the sellers ok. As it's pretty much the same for the seller they should sign off on it and everybody is happy.
0 Reply
Brandon L.
Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
7y
@Darius Kellar when i bought my place I got paid. I don't think i can put this in a simpler form haha
2 Reply
Sheara Jemison
Member since 2021 · 1 post · 0 votes
3y
Quote from @Steve C.:

@Darius Kellar we just did this last year& had the broker sign a document stating they would allow all the buyer’s commission to be credited toward downpayment. They we charged ourselves a broker fee equal to the split they would have been given. Be sure both your broker & escrow company is fully aware & able to do this for you.

@Steve - do you recall the agreement name or addendum title you used? I am interested in this for my own situation
0 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
She makes it.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.