Home Buying in 06830>Question Details

Chris, Both Buyer and Seller in New York, NY

Can an agent purchase a home and use the commission towards the down payment of the property?

Asked by Chris, New York, NY Sun Oct 2, 2011

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Hi Chris,

It really depends on the lender you're working with. It would probably be easier, though, to apply the commissions towards closing costs and prepaids.

Best wishes,
Elva Wormley
C2 Financial Corporation
0 votes Thank Flag Link Sun Oct 2, 2011
Hello Chris,
Again, I suggest that the agent consult with an attorney and his lender as the funds from the commission may not be available until after the closing. The title might have to be recorded first and a portion of the commission check probably has to be split to the agent's Brokerage firm before it can be utilized in the transaction.

Seek the advice from the parties involved as they can answer you best.

Good luck!

Laura Feghali
Prudential Connecticut Realty
0 votes Thank Flag Link Sun Oct 2, 2011
Would the situation change if the commission was used for closing costs at time of closing? Thanks everyone, your input is appreciated :)
0 votes Thank Flag Link Sun Oct 2, 2011
Hello Chris,
In Greenwich, the agent and his firm may not be paid the commission due to them at the closing table because funding may not be available until once the deed is recorded in Town Hall.

I suggest that the agent speak with both his lender and his attorney to determine the answer.

Laura Feghali
Prudential Connecticut Realty
0 votes Thank Flag Link Sun Oct 2, 2011
I don't see how that's possible despite the other comments posted. How would you get paid a comission before the property actually closed? Even if your broker expedited your commission it would be post closing.

The two possible ways I see it working would be if 1. the seller allowed you to deduct your commission from the sales price with your brokers permission which would not be part of your down payment but simply a reduced sales price. Or 2. if the seller gave you a sellers concession for the commission amount with your brokers permission. But could you use the sellers concession as your down payment?

Another question? Are you taking out a mortgage and will the bank allow you to use any of these strategies to count towards a down payment. Will the lender accept this money and approve it as a source of funds to close? I would speak with my broker and mortgage lender to get a answer.
0 votes Thank Flag Link Sun Oct 2, 2011
Part of the problem may be that the lender will want the down payment and closing costs to be sourced & seasoned in most cases. If the agent has adequate funds in their account already, then this won't be a problem. If they are relying on a simultaneous transfer, they need to clear this with the lender and make certain it will be approved. Get this cleared up front so you don't have a last minute surprise nobody wants.
0 votes Thank Flag Link Sun Oct 2, 2011
If you (Chris) are the real estate agent, then the commission that is made on the transaction is earned income, and can be used as your down payment.

If you (Chris) are not the real estate agent, then the real estate agent on your transaction cannot give you a portion/all of their commission to be used as the down payment (it can be used to pay your closing costs though).

If you are not using traditional bank financing, then those above guidelines may not apply.
0 votes Thank Flag Link Sun Oct 2, 2011
I can't see why not. The only problem I can see is when underwriting asks for a copy of the earnest deposit funds. Usually ,you would provide a copy of the cashed check. So, speak with your loan office and ask them how it should be written in a sales contract so it won't set off any red flags, and if it is even possible...Please let us know how you make out.

Good luck, and be well,

0 votes Thank Flag Link Sun Oct 2, 2011
I've seen some brokers allow this. It wouldn't work where I work because we don't get paid for a week or two after closing
0 votes Thank Flag Link Sun Oct 2, 2011
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