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Location: Southern California. I'm in the market for a new home and looking for ways to sweeten the deal. I noticed many builders offer co-op commission out of their marketing budget if a real estate agent brings a buyer to the property. I have a friend who is an agent. Is there anything illegal if I ask him to represent me when I buy the house, he gets the co-op commission from the builder and we split the co-op commission at a predetermined rate (kickback to the buyer)? Thanks!
Last edited by venicebeachcalifornia; 01-06-2013 at 09:50 PM..
Location: Southern California. I'm in the market for a new home and looking for ways to sweeten the deal. I noticed many builders offer co-op commission out of their marketing budget if a real estate agent brings a buyer to the property. I have a friend who is an agent. Is there anything illegal if I ask him to represent me when I buy the house, he gets the co-op commission from the builder and we split the co-op commission at a predetermined rate (kickback to the buyer)? Thanks!
You have a "friend", and you want your friend to give you half of his pay?
Have you asked your real estate agent friend about this ? As noted, any fee he gets, is going to go on the settlement statement. It then becomes part of his earned income. He has to pay taxes on that.
Meanwhile you expect him to give you half of that fee, while you walk happily away with your share and he gets stuck paying Uncle Same for all of it. Really ?
Or maybe you're thinking the builder will do this under the table. No, this is a legitimate business deduction for the builder. He's not going to hide it, he wants to be able to write it off. .
Have you asked your real estate agent friend about this ? As noted, any fee he gets, is going to go on the settlement statement. It then becomes part of his earned income. He has to pay taxes on that.
Meanwhile you expect him to give you half of that fee, while you walk happily away with your share and he gets stuck paying Uncle Same for all of it. Really ?
Or maybe you're thinking the builder will do this under the table. No, this is a legitimate business deduction for the builder. He's not going to hide it, he wants to be able to write it off. .
I believe that to be inaccurate tax information, and would suggest the OP discuss it with a tax pro.
It would be a pretax rebate when/if the agent plays along, methinks.
It could easily be a closing costs concession to the client and non-taxable.
First, you don't ever want to use the word "kickback" in any real estate transaction.
Second, yes, rebates to the buyer are legal and done quite often. I agree that it's not fair to your friend to ask him to give up his pay, but I've also been on the end where a friend did much of the legwork, and because of being a friend of 20+ years, I offered her something. She did not ask me for anything.
As for what was said above about the taxes, that's not correct. The agent would only pay the full amount for taxes if the rebate was given outside of closing, which means it won't be on the HUD1, it would be under the table. If the rebate was given on the HUD-1 which means the agent's commission was already reduced, the agent only pays taxes on the amount he walked away with.
You have a "friend", and you want your friend to give you half of his pay?
Seriously - do you parrot this same line to everyone? Its completely reasonable to ask this question. Get off your high horse - the "friend" will probably be happy, no ecstatic, to collect a guaranteed check for almost no work at all.
The buyer is obviously going ahead with this deal, agent or no agent, so the question is SIMPLE - can I cut my friend in on the deal and get half back for me?
The answer is a resounding YES you can since rebates are legal in California (according to the previous poster). If you put it on the HUD properly its not income to the agent either. I have done this multiple times - the last of which was just a couple of months ago.
Be sure and put your agreement in writing and not just a handshake. My next door neighbor did this with a "Friend" and the friend ended up saying "Up yours".
You will probably get a 1099 and need to pay taxes on any income.
You have a "friend", and you want your friend to give you half of his pay?
His "friend" didn't earn the pay. OP was clear about the arrangement. Why should his friend get the entire co-op when his friend didn't find the house or do anything to even start the process. Furthermore, he can buy the house without his friend so in fact, his friend is the one getting something he didn't have in the first place.
Pay is money earned for doing something. If his friend doesn't have to do as much why should he get the entire co-op amount?
More commission greed and why the reputation is earned. A perfect example of why the perception is valid. Here we have someone bring a commission to a REA and wanting a spit. And why not? No wonder...
His "friend" didn't earn the pay. OP was clear about the arrangement. Why should his friend get the entire co-op when his friend didn't find the house or do anything to even start the process. Furthermore, he can buy the house without his friend so in fact, his friend is the one getting something he didn't have in the first place.
More greed and why the reputation is earned.
TS did not state they found a home, just that multiple builders offer compensation. If they end up across multiple communities and finally negotiate a contract, I'd say the friend is earning their compensation.
regardless of your obvious stance on real estate agents, I agree that the TS is more than welcome to buy it without representation.
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