Broker Commission on Your Own Purchase
Member since 2021 路 174 posts 路 56 votes
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.
@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.
Hell yeah! I'm under contract to sell myself a listing that I decided to turn into an Airbnb. Six figure commission, plus it's an amazing investment opportunity.
This thread is a dumpster fire.
Lol
I reread the thread 3 times figuring I HAD to be wrong
Nope! Wasn鈥檛 wrong
What the what ?!?!
馃槀
@Shawn Long did i mention anywhere spreading the 4k over 30years?
The part that is not making sense here Waylon is that the seller has a signed agreement with the listing broker to sell the property with a 6% commission (or whatever it is) and that agreement usually doesn't change, regardless of whether or not you accept the commission split as the buyer's agent. The commission split is something that the listing broker is OFFERING to buyer's agents. The sellers simply don't care whether or not you are accepting part of the commission, because they are stuck paying the full 6% either way. The listing agent and listing broker will certainly be happy to collect all 6% instead of sharing the commission with you ... but unfortunately the listing agent & broker are no the ones who get to decide whether or not to accept your offer. This is why everybody is saying it's silly not to take the commission split. You are just giving money away to the listing broker for absolutely no reason ...
The part that is not making sense here Waylon is that the seller has a signed agreement with the listing broker to sell the property with a 6% commission (or whatever it is) and that agreement usually doesn't change, regardless of whether or not you accept the commission split as the buyer's agent. The commission split is something that the listing broker is OFFERING to buyer's agents. The sellers simply don't care whether or not you are accepting part of the commission, because they are stuck paying the full 6% either way. The listing agent and listing broker will certainly be happy to collect all 6% instead of sharing the commission with you ... but unfortunately the listing agent & broker are no the ones who get to decide whether or not to accept your offer. This is why everybody is saying it's silly not to take the commission split. You are just giving money away to the listing broker for absolutely no reason ...
It is not out of question for a commission be renegotiated to make a deal work.
In our listing contracts it is specified how much is paid to the buyers agent and if I was the seller I would most certainly not agree to pay both sides to the list broker if they did not represent both sides. I am still the buyers agent even tho I am not receiving compensation!
I believe if a list agent and broker want to do business with integrity they will present to seller with all facts and make the sellers aware of that buyers agent is not asking for commission. A little honesty goes a long way in repeat business!
Looks like this issue has been discussed before with differing opinions.... https://www.biggerpockets.com/...
The part that is not making sense here Waylon is that the seller has a signed agreement with the listing broker to sell the property with a 6% commission (or whatever it is) and that agreement usually doesn't change, regardless of whether or not you accept the commission split as the buyer's agent. The commission split is something that the listing broker is OFFERING to buyer's agents. The sellers simply don't care whether or not you are accepting part of the commission, because they are stuck paying the full 6% either way. The listing agent and listing broker will certainly be happy to collect all 6% instead of sharing the commission with you ... but unfortunately the listing agent & broker are no the ones who get to decide whether or not to accept your offer. This is why everybody is saying it's silly not to take the commission split. You are just giving money away to the listing broker for absolutely no reason ...
It is not out of question for a commission be renegotiated to make a deal work.
In our listing contracts it is specified how much is paid to the buyers agent and if I was the seller I would most certainly not agree to pay both sides to the list broker if they did not represent both sides. I am still the buyers agent even tho I am not receiving compensation!
I believe if a list agent and broker want to do business with integrity they will present to seller with all facts and make the sellers aware of that buyers agent is not asking for commission. A little honesty goes a long way in repeat business!
You're right, the seller's agent CAN do that. I never said it was "out of the question" but I don't understand why you as the buyer's agent would ever put in an offer that relies on somebody else being honest and doing extra work in order for your offer to be accepted ... all to avoid a small amount in taxes?? Making something complicated for the people on the other end of the transaction is a detriment to the offer, it's basically like adding an additional contingency. If you want your offer to stand out to the seller, the best thing you can do it put in this HIGHEST offer, and then collect the commission on the backend.
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 you're required to disclose that you are a licensed agent anytime you are personally involved in a real estate transaction. Not only if you are buying or selling a property, but even if you are acting as an agent and you are related in some way to a party to the transaction.
Anyway, yes I would DEFINITELY disclose upfront that you are a licensed agent and that you are representing yourself. I have only ever done this on the selling side, so I don't have any specific experience as to how a seller's agent would react, but I can't imagine why they would care. They signed an agreement with their client to list the property for a certain percentage and they are expecting to split that with the buyer's agent. They don't really care if the buyer and the buyer's agent are the same person, they're collecting the same amount of money they expected to from the beginning, so it really just doesn't affect them much.
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 you're required to disclose that you are a licensed agent anytime you are personally involved in a real estate transaction. Not only if you are buying or selling a property, but even if you are acting as an agent and you are related in some way to a party to the transaction.
Anyway, yes I would DEFINITELY disclose upfront that you are a licensed agent and that you are representing yourself. I have only ever done this on the selling side, so I don't have any specific experience as to how a seller's agent would react, but I can't imagine why they would care. They signed an agreement with their client to list the property for a certain percentage and they are expecting to split that with the buyer's agent. They don't really care if the buyer and the buyer's agent are the same person, they're collecting the same amount of money they expected to from the beginning, so it really just doesn't affect them much.
Thank you Leilah for the helpful insight and responses!
@Jon Fletcher happy to help!
It is important to remember that real estate agents get approved for loans using income largely verified by tax returns. While it may seem counter-intuitive to earn taxable income on your own purchase, the additional income helps some agents in the long run.
Just an update to how it worked out on my end for the house I closed on this week... Listing brokerage earned their side of the commission only plus an administrative brokerage fee. My brokerage and myself earned no commission on the sale so seller was able to save half of commission and was also able to save more than what I would have earned.
In the future I may word the contract a bit differently but it worked out great this time. Your results may vary depending on state or other conditions.
@Charles Beck If there is no buyers agent to be paid then the listing agent keeps both sides.
This is NOT accurate always. Many times, if the buyer comes in without representation or is licensed but would rather take a lower purchase price over getting the selling commission, they can certainly negotiate that. Bottom line, for investment properties that are flips, your flip income and your RE sales commissions are taxed the same, ordinary earned income. Since the broker likely takes a bite out, it makes sense many times to take no commission and lower the purchase price accordingly. In a long term buy and hold, upon sale, your income is taxed at capital gains rates so less tax, but the principles above remain, your broker still takes a bite (in most cases - some can get to 100% commissions via caps or contracts, etc.). Financially, dollar for dollar, it is often better to lower your purchase price by the commission saved to seller, seller nets the same. Of course as someone in this thread or another also mentioned, the commission can act as a chunk of cash for your rehab/repairs so in those cases, while dollar for dollar, you may pay more in tax and broker splits, you get much needed capital up front at purchase. This is the MAIN reason licensees who flip would work the deal this way over the other. In the end, there is no wrong answer as everyone's situation is different so pick what is right for YOU.