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Can a buyer be their own buyer's agent (if they are a licensed real estate agent) & collect a commission in the purchase?
I see it all the time. The commission belongs to the broker and the broker pays the agent. We require a letter from the broker, on letterhead, authorizing the exact dollar amount to be diverted on the HUD. Typically, the broker gives up any commission on a Realtor's purchase of a primary residence so the agent gets the full commission (minus processing fee) and 3% covers more than closing costs. We have allowed the remaining commission to be applied to down payment as long as we don't exceed the max amount in the broker's letter.
Note: 90% of our loans are portfolio and if we package the other 10% as a loan for delivery to Fannie and Fannie rejects it, it's not a big deal to us. So, what I am saying is you should not have any issues using commission for closing costs and prepaids, but using it for down payment will vary from lender to lender.
Yes they can on both. A couple of things taught in any good real estate law class.
1: Buyer must reveal they are buying a property in their own account, acting as a principal not an agent.
2: Agent act only as a principal and not as an agent, to prevent potential future suit for taking a commission paid by the agent, and acting against the sellers best interest especially if they bought below asking price, etc. and buyer claims the buyer as an agent, was working against the sellers interest and only working for their own self interest.
Over all the years I was in the business, I saw a few examples of agents getting into trouble over this. As my old law professor said, it may be legal but is a foolish thing to do. It is best to negotiate a price that will cover any and all commission the agent would have owned if they had taken a commission.
I have done many millions of dollars where I bought property in my own name acting as a principal and not an agent, and the contract specifically said this as advised by the law professors.
I did this especially when dealing out of state and even out of country. I was not licensed to act as an agent in the other jurisdictions, but there was no law against acting as a principal.
Example: An agent brought a 40 acre farm to my attention. It was a long 10 acres with buildings and an alkali pond with about 8 acres decent but unattractive land. The back 30 acres was square, sloping into a nice housing track with streets and utilities already stubbed into the acreage. I bought the farm with the bad 10 acres to be released to me on closing. Owner to carry financing, with my being able to have 5 acres
to be released with a certain payment. Annual payments. Before closing I exchanged the 10 acre parcel to a couple that wanted that type of property at a reasonable price for their single family home. They financed the 10 acre farm, and I got the home on closing. I leased the home to a large electronic company for 2 years for housing for a family they were bringing to the U.S. from Germany for a 2 year training program. I sold the leased home as an investment to one their IT engineers. We closed everything the same day. All I ever put up was a $1,000 personal note as a deposit.
I then sold the 30 acres to a developer for $100,000 profit. If I had taken a commission I would have opened myself up for withholding information from the seller to make a big profit, while taking part of the commission he was paying.
Don't think this can not happen. I know of at least 2 situations where it did happen, and the agents that took part of the commission had serious financial and legal problems over it. On the other hand operating only as a principal and receiving no commission and stating so in the contract to acquire the farm, I was as untouchable as any other buyer. The law professors also gave examples of agents getting into trouble taking commissions on their purchases.
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