All Forum Posts by: Dan Marl

 The only agent that might do that is because their broker has not given them permission to do a commission rebate.  The commission does not belong to the agent to do with as they please, the commission belongs to their broker.

It's also important to keep in mind maximum allowable credits per Fannie Mae.  3% owner occupied conventional, 2% investor. This includes total credits from all sources. So say you were getting a 1% rebate from the buyers agent, then you could only get 2% from the seller in an owner occupied situation. If you were getting 3% from the seller, you could not get any commission rebate from the buyers agent. 

@Scott M. Thanks for your reply. It makes sense that one whole month at move in no matter when they moved in is so the PM can collect their fee.  I do prorate up to about the 15th and anything after that is all paid at once (ie if the move in on the 25th they pay 5 days + a full month) .  and All my rents are due on the 1st.   I would go crazy trying to keep track otherwise lol! 

One thing I try to recommend to all new folks is to take classes at their local Rental Owners association. This is where I learned most of my "best practices" and I think it can really set folks up to know what is working in their specific locale and type of property. 

If you only have a couple rentals, why not just run the lease from the move-in date each month. IE if they give you full month's rent + deposit on the 25th, their rent is due next month on the 25th. For folks with 5+ units, that'd be a nightmare to track, but if you just have one or 2 rentals it wouldn't be too inconvenient.

My policy has always been that absolute minimum I need is a full month rent + deposit up-front. If they want to pay, say in the example above, the extra 5 days, they can tack that on top of the full month and not owe anything until the "3rd" month.

Also beware of anyone moving mid-month. While its true that some people will want to have somewhere lined up and will pay the extra days they need to ensure that can happen (and that's responsible), if they say they need to move-in asap its likely because something else is going on like an eminent eviction.

 It is mortgage fraud. Both the agent and the buyer would be guilty of it. All funds related to the transaction must be reflected on the Alta/hud1. Additionally for the agent its a violation of license law.

Just keep in mind that your agent splits with their broker, they do not get the whole commission that you are reducing. So if they are on a 50-50 split, they are only getting half, or less with how much sneaky pulls brokerages take off the top. Putting aside the notion of the rebates altogether, taking 1 percent off seems fair. It doesn't sound like you did much work to find something from a builder and you need to guidance on the way through the transaction.

I don't really follow the logic of the tax part, everything else makes sense as you laid it out.  Meaning, if he has 10K of income and has expenses of 1K to the broker and 3K to you to offset that income he would be paying tax on only the 6K he is keeping.  

That said, this should all be part of a contract that you and he signed and regardless if it makes sense now you did sign a contract (I think/hope) to follow the math as you laid it out...right>?

Taxes shouldn't be playing a part here as whatever he is giving you needs to be done as a credit within the transaction. If he is paying you outside of the transaction, that is illegal. 

I would have to see your written agreement (I hope you have one). I would expect the 1% to come from the total commission. You're calculating it after the Broker keeps his portion. And you also shouldn't be paying taxes on your rebate because it's not a payment to you; it's a reduction in your purchase price (you are basically paying less for the home).

Purchase price is $300,000

3% commission = $9,000

1% commission = $3,000

Broker keeps 2%, $6,000. They give you 1%, $3,000. You've bought the house for $297,000 (in the eye of the IRS).

Think of it this way. You hand me three dollars and I hand you one dollar back. You haven't been paid anything; I just gave you a discount and that $1 is still your money.

As everyone else has said - whatever your contract with the agent says - holds. On the face of it - 1% of the purchase price is just that - makes no difference what his splits with the brokerage are - the amount you should be rebated is $3,000. And as @Russell Brazil has stated, if this is a legitimate rebate, it's got to happen inside the transaction. 

There's no way to actually analyze this agent from your comments, but your "1 hour assessment" of the agent's work sounds fishy to me. Do you know how much time he may have spent looking for properties? Has he prepared your offer for this transaction? Will he guide you through negotiations, inspections, and appraisal? Again, we don't know.... just asking.....