I'm selling a property and had it listed on the MLS, we have already opened escrow, completed home inspections and appraisal , and past due diligence period
The buyer's agent put in a purchase price of $150k, however under additional terms she put in "Buyer will pay $3k to seller at close of escrow. $3k to not be in the loan amount financed."
When i read that offer, I saw it as total purchase price of $153K. The appraisal came in at $145, so now the buyer wants me to drop the $3K.
The buyer agreed that purchase price is not contingent on appraisal, and the EMD is non-refundable, but wondering if his whole contract will be void because of the $3k outside of escrow.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Because you have a line of potential buyers and you have $2,500 EM and there's no financing contingency, I'd play hard ball. Respond "no". You have a valid contract where the seller agreed to pay the price regardless of the appraisal. Now they don't like the appraisal and want a break. Too late. If they don't want to close, they lose their $2,500. Otherwise they need to stick to the deal they already agreed to.
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
13y
Are you using a sellers Agent? Wouldn't they have explained to you the convoluted mess that you are in? And if they didn't explain to you that the problem with your addendum? This all seems above my head, and overly convoluted. I would have simply restated the price, and as K. Marie Poe suggested stood firm, and not try to complicate the issue
As much as I would love to change the purchase price and make it easy, the problem is that the buyer doesn't have the $3k and needs to get it from the buyer's agent, which is great since she is even willing to give that up.
Maybe I could do something like.
Purchase price to be $153k, buyer's agent to pay $3k towards buyers closing cost with buyer's agent commission.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
It is actually even easier than what you have stated. Simply have escrow create amended real estate commissions showing $3k less to buyers agent and have all parties sign it.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Will, you're correct, but it's not that easy.
Gone through this many times, my parents were Realtors.
Commissions are dictated under the listing agreement. Money flows from the seller to the listing broker who then sends the so-broker fee to the selling broker and pays his/her listing agent. The selling broker pays the selling agent.
Before the selling agent can have any direction over the commission it must be earned, so the selling agent has income and will be paying income tax on the earnings.
To avoid that the seller and the listing agent amend the listing agreement by 3K as a selling agent's concession, the broker should have a form for the selling agent and broker to sign.
Local policy will govern with the MLS under the co-brokerage agreements adopted by the Board of Realtors, they can give you guidance on how they want this accomplished.
The seller then doesn't pay the 3K, same as getting 3k extra at settlement.
Any amounts paid to a seller that are not applied to settlement costs is consideration in the sales transaction raising the sale price, the money must be applied to the sale somewhere, either to the expenses or it increases the sale price. You can't just have a slush fund for the seller with funds POC!
So far, the way that agent has written the 3K payment, it is a kickback of commissions to the seller as an incentive to transact the sale. That is taxable money received (due, but technically received before they can pay it) from the selling agent to the seller...not good!
The HUD-1 simply shows total commissions paid by the seller, half to the listing agent the remainder to the selling broker.
So, the seller needs to present the contract to the listing broker (not the agent, but the agent can facilitate the change) to have the commissions amended to reflect the intent.
This is such a PITA that I simply paid commissions to my parents, they paid the taxes on it and, well, sometimes if I was good, Santa was nicer to me! LOL But if the amounts are going to the seller, then go through the broker to have the listing amended between the brokers to reflect any agent's concessions. :)
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
As far as CA goes, I will have to disagree with you Bill, it is just that easy. I just did it last month so I should know.
While I agree that the commissions are dictated under the listing agreement, that does not mean they can not be easily amended in escrow if all parties agree. Ultimately, if the buyers agent is willing to eat $3k in commissions on behalf of their buyer, they can do that and simply sign an amended commission instructions in escrow. That's it, that simple.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Bruce L. You need a contract purchase price of $153k, period. How the buyer gets his money from his agent is not your problem, OR under your control. Your listing agreement with your agent remains as is....OR your listing agreement gets reduced by $3,000, and the sale price is $150k, to avoid any "income tax on commissions given away" issues. The whole things is screwy, with an agent giving up $3,000 of a total $4,500 to her broker, and a buyer who "doesn't have the $3,000 extra he agreed to pay".
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
It's certainly okay to disagree, that's what makes BP fun sometimes, but just because you did it doesn't make it right. Lots of things are done improperly at closings.
In all states, it's the listing broker who commands any listing agreement, not agents. A broker may allow an agent to do something, but an agent only has so much leeway.
Don't know how many brokers we have with opinions in this thread but I've been through this more than once as I mentioned. :)