Question for all the licensed brokers and salespeople: Have you used your license to buy investment property for yourself? And has the Seller's Agent split their commission with you? It seems like a great way to make back some of the purchase price that you're paying.
Etna Green, IN 路 Member since 2015 路 207 posts 路 157 votes
5y
@Jon Fletcher im under contract for a house where i put in the contract no buyers agent commission to be paid. I dont see the point in paying earned income tax on what is already my own money.
Etna Green, IN 路 Member since 2015 路 207 posts 路 157 votes
5y
@Jon Fletcher im under contract for a house where i put in the contract no buyers agent commission to be paid. I dont see the point in paying earned income tax on what is already my own money.
@Waylon Zook but isn't it better to split the Seller Agent's commission and earn 3% on your purchase price, rather than 0%? I'd rather pay earned income tax on a commission than not earn anything at all.
@Waylon Zook in that scenario, did the Seller have a listing agent? If so, do you not feel that you missed out on an opportunity to earn half of their commission, regardless of the final sale price?
Real Estate Agent 路 Oswego, NY 路 Member since 2017 路 11 posts 路 8 votes
5y
I think a lot of variables come in to play with it and would have to handle it on a case by case basis as I would think it strongly depends on what you are looking to accomplish, how your broker handles splits, as well as tax strategies as more comes in to play than just your income tax on the 1099.
Lender 路 Orlando, FL 路 Member since 2016 路 340 posts 路 115 votes
5y
@Jon Fletcher
State dependent and some lenders will discount this in their underwriting. A reasonable market commission is fine in most scenarios and is fully deserved and common practice. Good luck 馃崁
Real Estate Agent 路 Albany, NY 路 Member since 2018 路 12 posts 路 16 votes
5y
@Jon Fletcher Collecting a commission would be better than not collecting anything. Discounting the sales price by what your commission would have been might be a better alternative from a tax prospective - unless you need the commission income.
Thanks @Victor Steffen, I was starting to think I was crazy! In those instances, did you disclose to the Seller's agent that you were buying for yourself, and did they take issue with splitting the commission with you given that you were also the Buyer?
@Jon Fletcher each to his own but i would rather have the discounted salesprice.
That only makes sense if the Seller then pays the Seller's agent only half the commission, rather than the full commission. Maybe I'm not understanding your situation. A discounted sales price and having the Seller's Agent split their commission with you are not mutually exclusive.
Professional 路 Millbrae, CA 路 Member since 2016 路 26 posts 路 16 votes
5y
@Jon Fletcher Add an addendum that indicates you are an agent and reduces the $100K sales price to $97, indicates listing agent is entitled to $3K, and that there will be no sales agent commission. (Addendum more complex if you are not a broker and would owe broker.)
Or, identify as a buyer's agent, take the commission and, for taxes, reduce your basis by the commission amount. Include the commission in income on schedule C and include a schedule C expense entitled something like Commissions received as principal. Of course, you need to adjust down your basis in the property you acquired.
It鈥檚 not as if the listing agent has the authority to decide whether or not to split the commission with the agent representing the buyer.
This goes back to my original question: If you're the Buyer and the Buyer's agent, is that something you disclose upfront? Has anyone experienced the Seller's Agent reacting badly? (Even if it's not within their right to.)
@Jon Fletcher Add an addendum that indicates you are an agent and reduces the $100K sales price to $97, indicates listing agent is entitled to $3K, and that there will be no sales agent commission. (Addendum more complex if you are not a broker and would owe broker.)
Or, identify as a buyer's agent, take the commission and, for taxes, reduce your basis by the commission amount. Include the commission in income on schedule C and include a schedule C expense entitled something like Commissions received as principal. Of course, you need to adjust down your basis in the property you acquired.
It鈥檚 not as if the listing agent has the authority to decide whether or not to split the commission with the agent representing the buyer.
This goes back to my original question: If you're the Buyer and the Buyer's agent, is that something you disclose upfront? Has anyone experienced the Seller's Agent reacting badly? (Even if it's not within their right to.)
In my state we are required to disclose if we are a licensed real estate agent. The PA actually have a line dedicated to the subject. And if you are writing the offer yourself it doesnt take a rocket scientist to determine that the buyers agent and buyers name are one and the same.
Btw why would a sellers agent react badly to a offer on their listing?
@Jon Fletcher each to his own but i would rather have the discounted salesprice.
That only makes sense if the Seller then pays the Seller's agent only half the commission, rather than the full commission. Maybe I'm not understanding your situation. A discounted sales price and having the Seller's Agent split their commission with you are not mutually exclusive.
If you could choose a $65,000 purchase price with $1,500 commission or a $61,000 purchase price and no commission which would you choose?
In my situation I wrote a cash offer with no inspections and a two week close.
This year I sold a spec home where just before closing I had the title company do the closing statement where the commission on the list side was reduced to the amount the brokerage would keep. I then did not receive my split from my broker and instead I netted a higher amount on the sale. That is then taxed as capitol gains instead of earned income.
In my mind the only reason it would make sense to take a commission if you wanted to finance the property so you would get some cash back so to speak. For me I would under normal circumstances rather take the lower mortgage.
@Jon Fletcher Collecting a commission would be better than not collecting anything. Discounting the sales price by what your commission would have been might be a better alternative from a tax prospective - unless you need the commission income.