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Asked by Jo Ellen Racioppo, Short Hills, NJ Wed May 21, 2008

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9
Debra (Debbi…, Agent, Livingston, NJ
Fri May 23, 2008
BEST ANSWER
Hello Michael (and thanks for your comment about my good advice in a previous question!). I believe your question is asking, and correct me if I am wrong, whether having the buyer pay the 6% commission, thereby reducing the purchase price to a number below 1 million, might be a way to save the buyer from having to pay the NJ mansion tax (thank former Gov. McGreevey for that one - not to mention our huge increase in the realty transfer tax overall). It's an interesting question ,and since we are often warned not to give out "legal" advice, I don't really have an answer. How would it appear on the HUD statement? I know many mortgage companies don't want to see seller's concessions (ie credits given to the buyer because of home inspection issues, etc), but I don't think that applies to a buyer.. I have seen contracts with a sales price of $999,000, along with a separate agreement to purchase "personal property", but I would never get involved with writing that one up - I would leave that up to the attorney!! My opinion is, there better be a lot of "personal property" to justify that separate agreement. Anyway - in regard to the question you posed, and forgetting a way to circumvent the mansion tax, is it legal for the buyer to pay the commission??? - hmmm...I don't see why not. Tenants pay commissions all the time, why can't a buyer. Check back with me later on - after I call my favorite attorney and ask him this question!!! Have a great day!
1 vote
Eric Vazquez, Agent, Highland Mills, NY
Sat May 24, 2008
First, I'm not versed in the NJ market specifically and especially where state tax issues are concerned. However, to respond to Debbie Rose's question ..."is it legal for the buyer to pay the commission?", absolutely. Just keep in mind the rules of accounting and disclosure. As long as all parties are in agreement and there are no laws being violated, anyone can pay the commission.

On a side note though, you may wish to ensure that everything is documented on the HUD as to who is paying what. If any monies cross the table for any reason and not documented as per contracts and at least on the HUD statement, it has to conform to RESPA practices in most cases.
1 vote
Myke, Home Buyer, 89449
Wed May 21, 2008
Jody - I would imagine it has something to do with taxes. Haven't been in NJ in a few years - so I don't know what's going on out there currently. Jersey City especailly had some crazy stuff going on for a long time with the whole revitalization thing. Don't remember all the details - but i would put dollars to donuts it has to do with taxes, and property over 1mil.
1 vote
Myke, Home Buyer, 89449
Tue May 27, 2008
ha - no, not a professional - just saw a thread about my old home town and thought i'd chime in.

as for being insulted - have you been in the grove street path?!?!?!
lol
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Sat May 24, 2008
Hi Eric
Glad you jumped in on this question. Just to clairfy, I do know a buyer can pay (as long as it is properly docurmented) the commission. The specific example in the original quesiton really dealt with the legality, or ethics involved in having a buyer pay the commission as a way of CIRCUMVENTING the NJ Mansion tax , in which the buyer pays 1% of the purchase price for any sale of $1,000,000 and up. By showing a sale price of , say $999,999, and having the buyer pay the $60,000 commission, they could possibly "save" $10,000 for that tax, since the sale's contract would show a figure less than 1 million. In NJ (at least in my area, the northern part of the state) attorneys handle all closings from the moment a contract is signed, and prepare the HUD statements, so it would be on them to handle this situation. As agents, we basically turn up at the point of closing with a smile on our face, and our commission bill in hand, as the logistics of the actual closing are in the attorney's hands!! I would not , however, want to be party to any action that is an attempt to circumvent the law, so it was an interesting question that Michael posed. Yes, it's legal for a buyer to pay a commission, but what are the ramifications in this circumstance, is the bigger question. I couldn't get in touch with an attorney before this holiday weekend, but now I am on a quest to find out! I'll report in next week!
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Fri May 23, 2008
Michael - if I'm the Gold Medal winner - where's my prize?? haha Have a great holiday weekend!
0 votes
Myke, Home Buyer, 89449
Fri May 23, 2008
hey - i was close!
I knew it had something to do with taxes!

That whole state's crazy.....
0 votes
Jody Siegel, , Monmouth Junction, NJ
Wed May 21, 2008
This sounds to me like it's all about negotiation. Almost symantecs. If a buyer is going to pay the 6% on a reduced price what's the difference? An educated seller would do the math and in the end it means the same thing.... what's the bottom line.
0 votes
Myke, Home Buyer, 89449
Wed May 21, 2008
jeez - prices in JC really have gone up huh?
They must have FINALLY finished all those revitalization projects along the river.
Now if they'd just do something about the smell of urine in the grove st path.
0 votes
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