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Old Today, 11:34 AM
 
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Hi,
as a realtor, how do you typically handle your own property purchases?
obviously, you want the 3% commission, but you'd probably prefer it be applied to the home's price as opposed to come out as 'income'.
What's the protocol?

thank you.

State: Virginia
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Old Today, 11:45 AM
 
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Quote:
Originally Posted by Thinking-man View Post
Hi,
as a realtor, how do you typically handle your own property purchases?
obviously, you want the 3% commission, but you'd probably prefer it be applied to the home's price as opposed to come out as 'income'.
What's the protocol?

thank you.

State: Virginia
A lot of the decision will depend on your managing brokers policy on selling your own home. Will the broker take its regular split or just a paperwork charge? That cost determines part of the answer.
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Old Today, 11:46 AM
 
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Quote:
Originally Posted by Spokaneinvestor View Post
A lot of the decision will depend on your managing brokers policy on selling your own home. Will the broker take its regular split or just a paperwork charge? That cost determines part of the answer.
I've negotiated a 100% commission on personal property. they will only charge me a 395 fee per transaction.
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Old Today, 11:59 AM
 
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I would do what I could to make sure the commission got the best tax treatment which would likely be rolling it into the gain on the home thus deferring taxes. The only caveat on that is if you have a reason to need additional income on your 1040 - then you might want to take the commission on your 1099.
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Old Today, 12:12 PM
 
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Quote:
Originally Posted by Spokaneinvestor View Post
I would do what I could to make sure the commission got the best tax treatment which would likely be rolling it into the gain on the home thus deferring taxes. The only caveat on that is if you have a reason to need additional income on your 1040 - then you might want to take the commission on your 1099.
I definitely don't need more income in 2019.
can you please explain what you mean by "rolling it into the gain on the home..."?
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Old Today, 12:24 PM
 
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Quote:
Originally Posted by Thinking-man View Post
I definitely don't need more income in 2019.
can you please explain what you mean by "rolling it into the gain on the home..."?
It means price your house at market value and instead of the escrow company taking the commission out and paying it to your managing broker who would in turn pay you your commission less the $395 flat rate you negotiated, just show the $395 flat rate as the listing agent commission. This means your gain is bumped up by the unpaid listing agent commission. I am assuming you are talking listing agent side not buyer side. In the case where you the buyer side too, just show the buyer agent commission as 0%, the seller at $395 and you are good to go. All you are trying to do is to have the commission not paid as a line item which results in the commission treated as earned income subject to earned income tax rates versus either part of a gain that you can defer tax on or you pay long term gains on if you don’t buy within the window.

As a caveat, I would never endorse an agent representing a buyer when the agent is selling their own home. Recipe for litigation.
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Old Today, 12:36 PM
 
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Quote:
Originally Posted by Spokaneinvestor View Post
It means price your house at market value and instead of the escrow company taking the commission out and paying it to your managing broker who would in turn pay you your commission less the $395 flat rate you negotiated, just show the $395 flat rate as the listing agent commission. This means your gain is bumped up by the unpaid listing agent commission. I am assuming you are talking listing agent side not buyer side. In the case where you the buyer side too, just show the buyer agent commission as 0%, the seller at $395 and you are good to go. All you are trying to do is to have the commission not paid as a line item which results in the commission treated as earned income subject to earned income tax rates versus either part of a gain that you can defer tax on or you pay long term gains on if you donít buy within the window.

As a caveat, I would never endorse an agent representing a buyer when the agent is selling their own home. Recipe for litigation.
So, i'm the buyer. i understand the concept of what you suggested. I guess ideally, the buyers would just agree to reduce the price by 3%....but i'm guessing they won't likely do that as the transaction is technically between the brokers and just dropping the price would essentially leave my broker out completely. I might bring it up nonetheless to see if i'm missing something.

So, assuming we go the way you mentioned as far as differed gains, who do i tell/contact? the settlement company? the listing agent?

lastly, i read the last sentence (in bold) at least 5 times, but i'm still not sure what you meant. hehe
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Old Today, 12:42 PM
 
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As a broker, if I take a commission on a purchase I have the commission amount credited to the purchase price.

Quote:
Originally Posted by Thinking-man View Post
I've negotiated a 100% commission on personal property. they will only charge me a 395 fee per transaction.
That sounds like a pretty good deal.
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Old Today, 12:45 PM
 
116 posts, read 19,906 times
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Quote:
Originally Posted by Thinking-man View Post
So, i'm the buyer. i understand the concept of what you suggested. I guess ideally, the buyers would just agree to reduce the price by 3%....but i'm guessing they won't likely do that as the transaction is technically between the brokers and just dropping the price would essentially leave my broker out completely. I might bring it up nonetheless to see if i'm missing something.

So, assuming we go the way you mentioned as far as differed gains, who do i tell/contact? the settlement company? the listing agent?

lastly, i read the last sentence (in bold) at least 5 times, but i'm still not sure what you meant. hehe
So you are buyer .. sorry the way I read it was you were listing your own property to sell - how did I miss that lol?. In that case, if you have negotiated the sale price and are in contract on the deal, then you need to get with the seller and your broker and figure out how to handle it but I suspect, unless you negotiated this prior to having a signed PSA, that you will be receiving the commission thru your managing broker who will then pay you less the $395 flat rate. If you havenít purchased yet, negotiate the reduction in commission as part of the deal.

What I meant in the bolded sentence is that an agent who is selling their own home should not represent the buyer (ie double ending the deal) unless they want problems. Best to have another agent handle the buyer.

Finally - where is your managing broker in all this? They should be able to answer all the questions right away for you.
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Old Today, 12:47 PM
 
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Quote:
Originally Posted by jackmichigan View Post
As a broker, if I take a commission on a purchase I have the commission amount credited to the purchase price.



That sounds like a pretty good deal.
That is a good deal. My managing broker charges $179 on personal transactions.
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