Home Buying in Long Beach>Question Details

Particlemn, Other/Just Looking in 90814

Can a buyer pay the realtor fees at closing instead of the seller?

Asked by Particlemn, 90814 Wed Sep 15, 2010

If I was to purchase a 600k house could I offer 564K to purchase and offer to pay the 36K in realtor fees at closing? Would this then have the base purchase price for property taxes lowered to the 564k base. I am looking to put about 300k down payment so I am not worried about a 80% loan to value ratio.

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Answers

19
Your property tax rate is based on the sales price.

Kawain Payne, Realtor
0 votes Thank Flag Link Thu May 8, 2014
So based on the response you've received from other agents, the answer is YES you can pay the Commissions. We have mixed views here. I understand that you are trying to save on the property taxes due every year based on a lower sales price. Most investors choose to leverage their money and keep as much cash in their bank as possible so the choice is up to you. Rather than go back and forth, I think all avenues have been covered her in this forum. Keep us informed on what choice you've made and how that works out for you.

Ps. Cal me directly if you need help locating a property in the Long Beach area.

All the best,

Alex Montelongo/Broker
Coldwell Banker Star Realty
562-810-7387 Cell
BRE Lic #01456982
0 votes Thank Flag Link Thu May 8, 2014
I get it and this answers my question about our land and buyer pays Realtor closing cost. I'm just the secondary on deed , so I am helping my mom with all our questions for selling our little land. Thank you. I'm so glad I joined trulia.com!
0 votes Thank Flag Link Thu May 1, 2014
Yes you could and because of California's unusual way of assessing property values, this would seem to make good sense.
0 votes Thank Flag Link Fri Sep 17, 2010
Yes, the buyer can pay the realtors fees, however make sure you are not overpaying for the home. It would make sense you are getting a discount on the home and that is why it makes sense for you to pay for our services.
0 votes Thank Flag Link Fri Sep 17, 2010
Particlemn

I wanted to chime in and simply give you some praise for being an educated buyer, looking at the long term details of a purchase and not expecting a
0 votes Thank Flag Link Wed Sep 15, 2010
Hi...I did understand your question and it still makes no sense to me to pay the commissions, 6% of the original agreed to sales price, which in this case equals $36,000 just to save roughly $450 per year.

So in order for you to recoupe your initial $36,000 cash pay out, it would take almost 80 years at $450 per year divided into $36,000.

Now if you were to take that $36,000 and buy a condo for lets say $70,000...You could generate a positive cash flow between $350-$400 per month which equals to $4,200 per year($350 x 12), plus you would be able to depreciate the property and write off the interest on the loan (in Long Beach we have such properties on the market, in your area I am not sure).

I hope this helps you out on seeing a different perspective, but always remember you are in control and make the final decision. Good luck and have a fun weekend which is just around the corner.
0 votes Thank Flag Link Wed Sep 15, 2010
It sounds to me that you are trying to save on property taxes, and are not really concerned about the savings or lack there of on any of the other factors. Maybe it would be useful to know that LA County tax rate is 1.25%, so you would be saving about $450 a year in taxes, which would take 80 years to make up. I say keep the cash and pay the tax. It can only go up 1% a year.
0 votes Thank Flag Link Wed Sep 15, 2010
If you plan on owning this house for more than 6.5-8yrs, paying the real estate commission can make sense with the tax write off as it is a "closing cost' for your sale. Talk to you accountant to get the exact amount of savings with the write off against your income.

I had buyers opt to do this on a short sale I closed not that long ago. I had to explain in the MLS that the buyer paid the commission, had they not paid commission then the MLS sale price would have been $810K.

If you end up paying the commission & this is a public sale in the MLS, please make sure the listing agent notes in the MLS that you did this, it will help appraisers determine the correct values when comparing to 99% of the other sold listings where the seller paid the Realtor commission.


EmilyKnell1@yahoo.com
562-430-3053cell
0 votes Thank Flag Link Wed Sep 15, 2010
I am not a tax account, but seems to me the Realtor's commission you will be paying can be part of your expense for purchase, which is a bonus.

As far as how you want to use or invest any of your cash, I think that's really up to you; and from what I read, you are very aware of what your plan is investment wise.

The only real question you have is whether you can pay the realtor's fee at closing instead of the seller. The answer, as we can see below, is Yes, as long as you work that out with the seller and that it is done through Escrow and above board.

Good luck!

Best,
Sylvia Barry
0 votes Thank Flag Link Wed Sep 15, 2010
Sylvia Barry,…, Real Estate Pro in Marin County, CA
MVP'08
Contact
well if my full questions would have been looked at i wonder if the answers would have changed. i will be putting 50% down with a 300k down payment so loan to value vrs pmi is not very inportant. all i am trying to find out is if all things are equal and i am going to pay 300k down on a 600k house am i better off taking a 300 k loan with the price at 600k or am i better off asking for a price of 564k offering to pay the realtors 36k out of my pocket and then takeing a loan for 300k and suing 264k down payment and 36k to the realtors? see the laon amount will be the exact same. if it helps i plan on selling my current residence after i move and will be able to pay off the loan since i own my current residence outright.
im really trying to upgrade while limiting my tax liability.
0 votes Thank Flag Link Wed Sep 15, 2010
P.

You didn't mention a 6% seller concession. Therefore, it is impossible for anyone to presume otherwise. Although (listen to me), it makes no difference. I previously mention lender's criteria. What part didn't you understand about LTV? You certainly can do as you wish. I did my best to give you constructive advice. If it fell upon deaf ears (eyes), I'm not responsible for that. .... Best wishes in your decision making & Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Wed Sep 15, 2010
Glenn,
Im not sure if you understood that i would ask the seller to reduce the agreed price by 6% then use that 6% to pay the realtors from my pocket. then i save the prop tax and since i will be putting 50% down it makes no difference to the loan amount or rate. as for the investing the 36k i cant find a stable 4.5% anywhere that would offset the interest paid on a loan since my investments would be after tax it would offset any benefit i get from the interest paid
0 votes Thank Flag Link Wed Sep 15, 2010
Thanks for supporting my position Glenn. .... Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Wed Sep 15, 2010
Why would you? It really makes no dollar sense. The question here is how long will it take for you to recoup your $36,000 fee to your agent, based on the property tax savings you are trying to obtain? In this case it would be right around 86 years. You are better off having the seller pay your agent's fee for it is already in the contract, and invest your $36,000 somewhere else. Plus in the event your home were to loose value over the next few years, at least here in California you could request a reassesment of property tax fee to save money.
0 votes Thank Flag Link Wed Sep 15, 2010
Hi P. Yes. I have a buyer paying on a purchase this month. That's the way it was negotiated with the seller. Done deal.

GOOD LUCK!

Scott Miller, Realty Associates, Boca Raton, FL
0 votes Thank Flag Link Wed Sep 15, 2010
For what you are attempting to accomplish, this won't work.

Here's why. The lender is going to base their Loan-to-Value on the Purchase Price or the Appraised Value. Whichever is Lower.

$600,000 x 20% = $120,000
$564,000 x 20% = $112,800 + $36,000 = $148,800
$36,000 - $7,200 = $28,800
With the lower purchase price you'll save about $415 a year in property tax.
(Not computing your mortgage interest savings on the lower amount @ 4.375% on a 30 year fixed rate amortization)
$28,800/$415 = 69.4 years to break even? From this, deduct the interest and it still won't be beneficial, will it?
...... Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Wed Sep 15, 2010
Yes, you can pay the seller's agreed compensation fees to the agents as long as it's stated in the escrow instructions. The seller is going to net the same amount in the end anyway. This can be a win-win for both. You'll pay property taxation on the reduced sale price and the seller might benefit by paying lower capital gains. But of course, you should always consult your tax/fiancial advisor to confirm this information.
0 votes Thank Flag Link Wed Sep 15, 2010
Hi Particlemn, great question. As long as the Seller and Agents agree via a contract addendum I don't see any reason why not.

Best, Steve
0 votes Thank Flag Link Wed Sep 15, 2010
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