Is it legal for Buyer to pay for Selllers real estate commission (makes it look like a lower sale) (RE agent, appraisal)

[aneftp]

There was this home I was going to buy for 600K in December. The buyers went with another 600K offer.

So I look into the county sales data place and I noticed the sale went through for only 570K. I immediately called my RE agent and asked why this home went for 30K than what we had offered. It turns out the buyer paid the sellers 30K RE commission. So technically the buyer still got the 600K asking price but on paper it looks like the buyer purchased the home for 30K less than they really purchased it for (since that does not go on the county property sales record).

I know the reason the buyers did this is because they saved on the State sales/stamps taxes by making it look like the sales price was lower. So is this a legal way of doing RE business. If more and more people did this, it will drive RE prices even further said it looks like the selling price of a home was even lower than it really was plus they "cheat" the State out of a few thousand dollars on the sales/transfer/stamps taxes that the State could have collected.

I know it works the other way too, making the purchase price look higher since the buyer rolled the closing costs into the selling price of a home.

So does this tax maneuver depend on state laws? This State in question is the state that lead the nation in fraud.....Florida.

[Mike Peterson]

Seems perfectly legal to me.
All part of the negotiations.
I also don't think the state was cheated at all, the sale price was $570K and that is what taxes were paid on. The $30K was not paid to the homeowner.

I also don't think this is a widespread happening because in most cases the buyer would probably have to pay the commission out of pocket.

As far as pushing prices lower, I know in my MLS we do notate if there were concessions and the $30,000 would be notated and worked into the comps.
I am sure it would not be noticed all the time but with the infrequency of it happening I do not see it affecting the comps all that much.

[aneftp]

Originally Posted by Mike Peterson

Seems perfectly legal to me.
All part of the negotiations.
I also don't think the state was cheated at all, the sale price was $570K and that is what taxes were paid on. The $30K was not paid to the homeowner.

I also don't think this is a widespread happening because in most cases the buyer would probably have to pay the commission out of pocket.

As far as pushing prices lower, I know in my MLS we do notate if there were concessions and the $30,000 would be notated and worked into the comps.
I am sure it would not be noticed all the time but with the infrequency of it happening I do not see it affecting the comps all that much.

Yeah, I just talked to my RE agent and she said that it was not notated on the MLS but that the RE agent who did the deal was both buyer and seller agent and "neglected to put it in the MLS like she should have" Not sure if she will make that notation.

As it appears right now, (In Seminole County, FL) county appraisal public webpage, the home (to most common people) looks like it "sold for 570K instead of 600K. I think that creates a more downward pressure on other homes. Granted the neighborhood I am buying into is a upscale neighborhood and has retained their prices better than most of the other Orlando area (because of the school district with very little investor/distressed homeowner than most of the Orlando area but there is still a lot of downward pressure on home prices. Prices up in the neighborhood have probably fallen 15-20% from peak, compared to some other parts of Orlando that have fallen 25-35% (like Osceola County)

[GregTraub]

100% legal. It is not cheating the tax system here in FL, the county is the one that places the taxable value on the property, though they heavily weight the taxable value based on last sales price, they still have the right to tax at whatever they deem is a homes "value".

As far as doc stamps are concerned, it is an arms length transaction and the deed was transfered at a certain $ amount. Be it 6% lower than other comparable sales doesn't matter, if the whole market changed gears and buyers started paying the real estate commission taxable values would likely fall....but the technical value of the house would stay the same or likely rise ( if a buyer is willing to put an additional 5-6% down in addition to their mortgage downpayment they likely value the house higher)

If you have the cash to pay the commissons outside of the purchase price, it makes sense for a buyer because they would likely see a slightly lower tax bill, and it helps the seller even more since the seller is the one that usually pays the doc stamps on the deed. It would be the same legally as your agent selling you a FSBO and you paying your agent whatever your brokerage agreement stated in cash at closing.

As far as the notation goes. In the Mid Florida Regional MLS for some reason there is not a post-closing section where concesions are listed. Agents have to do the footwork of calling the agents invovled if they suspect concessions. Realtor and public Remarks will sometimes mention if the seller is offering closing cost assistance...but are rarely if ever changed after closing...so if the seller wasn't offering it upfront there likely won't be any indication of concessions after the fact.

I wish our MLS had a concessions field and enforced agents inputting the data...but for now, it requires additional footwork.