Home Buying in Hayward>Question Details

Vg, Home Buyer in Alameda County, CA

Help w/ structuring a home deal

Asked by Vg, Alameda County, CA Mon Nov 5, 2007

Hi all,
We are purchasing a home in Alameda County, CA. The negotiated price is 545K. We have agreed that the seller pays 5K towards closing. My agent has *verbally* agreed to putting 0.5% of price of the home towards closing as well. The agent says she will put this 0.5% payment to me in writing as part of an addendum. Is she playing me?? I thought addendums were only agreements between the buyer and seller. How do I make sure she is committed to paying me the 0.5% at closing?
The concern that I have is that my closing cost might not exceed 6.0 K (5000 0.5%*550K). Do I stand to lose money by structuring the deal this way?
How do I structure the deal so that I don't end up paying unneccesary taxes or lose money in the transaction?

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6
In the state of CA, it's illegal to to "pay" a commission to an unlicensed person. What I would do in this situation if I were the agent would be to aplly the commission to closings costs. As Brett stated, do this through escrow. This must be disclosed to the lender. It's a great time to buy! Good luck!
Web Reference: http://www.cindihagley.com
1 vote Thank Flag Link Mon Nov 5, 2007
Cindi Hagley, Real Estate Pro in Pleasanton, CA
MVP'08
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The addendum is a written promise to the contract regardless of whether it is buyer/seller or from the Real Estate professional stating that she is promising to pay the 0.5% from her fee towards your closing costs. All agreements or promises should be in writing and it is very common to have an addendum or Exhibit attachment for additional changes to a contract. A real estate professional may gift back professional fees towards the principals costs (buyer or seller), providing it is on the HUD-1 @ closing required by law. The signed addendum is a document that the Title Co or Attorney will use to facilitate this agreed approval of funds use. As far as any tax consequences, you should always seek the advise of a professional.
0 votes Thank Flag Link Fri May 9, 2008
Talk with your CPA to determing what is best for you and how it will work. Commissions can only be payed to a licensed (real estate) individual. good luck.
Web Reference: http://pamwinterbauer.com
0 votes Thank Flag Link Sat Nov 10, 2007
Pam Winterba…, Real Estate Pro in San Ramon, CA
MVP'08
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Your questions are best answered by a CPA. Hopefully your Agent has one in her "team" of experts that she can refer you to.

There are great ways you can benefit from loopholes. Did you ask your agent advice you about the possibility of your paying the seller's commission and crediting the costs against your total price thus reducing the price of the house and reducing your tax base?

Good luck!
0 votes Thank Flag Link Mon Nov 5, 2007
Vg:

If escrow is already open under the bilateral agreed purchase contract then an addendum initiated by escrow stating the buyer’s agent is giving $2,725 (or .5% of sale price) towards closing costs is OK. If escrow is asked to create an addendum it is in the names of the buyer and the seller only, as you had stated an addendum is to be.

In this type of revelation, the lender is made aware, through escrow, of where the monies are coming from for the closing costs. Additionally, this gives disclosure to the lender so as not to suggest any fraud.
0 votes Thank Flag Link Mon Nov 5, 2007
You are correct, Addendums do not deal with commission issues. That should be a written agreement outside of the contract. Your agent may not be aware of that rather than trying to undermine you. You should have a written estimated closing costs, which does not mean that they won't be more or less, but you should have a pretty good idea..generally closing costs will be over stated rather than under. Ask your agent to supply you with the offer of paying some of his/her commission to you in writing. I think it's generous of her. Also rather than paying you directly, she should be crediting you the half percent through escrow to be applied toward closing costs. Good luck.
0 votes Thank Flag Link Mon Nov 5, 2007
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