Proper document for disclosing commission rebate?

Asked by Alan Shu, Los Angeles, CA Thu Jun 30, 2011

My buyer's agent is offering me a commission rebate toward my closing cost. It is stated in a addendum form and signed by the seller and me. I felt strange because the agent signature is not required on that form. So I'm wondering if I should ask his broker or the escrow company to give me something in writing, and what is the proper name for this document?

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Muriel Levin, Agent, Beverly Hills, CA
Thu Jun 30, 2011
BEST ANSWER
Your agent commission, as the selling commission is dictated by what is stated in the mls by the listing agent. Let's say it was 3% to cooperating broker ( that's your agent) . Now your agent is willing to give up, let's say 0.5% and give it to you. SO he will get paid 2.5% which is good these days. Now why is he giving it to you? maybe he felt he had to to make the deal happen. Maybe he is your good friend or family. Maybe both. It does not matter. You are getting some money towards your costs. If he is giving you some of the money owed to him, you are fight to have an addendum to the contract. make sure your contract mention somewhere the existence of this addendum.
If the agreement to give you the rebate occurred after the acceptance of the contract, you need to have it mentioned in the escrow instructions. either in the main body or in an amendment to escrow instructions.
Now since he is the one forgoing something due to him, he should also sign that paper. It is good enough for him to write his name , date and sign the amendment or the addendum.
Basically it makes sense that if he gives you something,he has to authorize it.
Regarding what the lender will say, it 's another story but it also largely depends on how much of a rebate you are talking about here. I have no idea of the purchase price or rebate amount.
So Bob good luck to you and I hope you enjoy your new home.

Muriel Levin, real estate Agent in Los Angeles and Beverly Hills, CA
Realtor with Coldwell Banker Hancock Park North
HAFA certified, CN, Short sale and Foreclosure Resource Specialist by DRE
Agent Immobilier a Los Angeles USA pour tout achat -vente-location de maison ou apartement.
(323) 363 91 40
Muriel Levin @ Coldwell Banker . com
Web Reference:  http://www.muriellevin.com
1 vote
Ron Escobar -…, Agent, Beverly Hills, CA
Thu Jun 30, 2011
I would be more concerned with the lender on your transaction not approving your loan because of the rebate... in these days banks are very picky and they require a minimum amount of funds coming directly from the buyer,,, they really look at the source of funds.

that said, you could ask for anything you want, if it makes you feel better to have his signature then go for it... if you are requiring this because you don't trust him, then you should not be doing business with them and vice versa...

Best of luck!
3 votes
Deborah Brem…, Agent, Los Angeles, CA
Fri Jul 1, 2011
PS Bob;
The buyer agent should not sign any part of escrow instructions or amendments, as the escrow is between you and the seller, and the agents ARE NOT A PARTY TO IT. (see Muriel's incorrect answer)
In addition, this only serves as a red flag to the lender.
Instead of a cash rebate, the seller can allow a reduction in purchase price to cover the amount of the fee reduction, and all parties' closing costs will be lower.
Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
(C) 310-422-4288
http://www.thebremnergroup.com
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.
1 vote
Deborah Brem…, Agent, Los Angeles, CA
Fri Jul 1, 2011
Hi Bob;
There is no CAR form appropriate to your situation, because:
1. Compensation is an agreement between the SELLER and the LISTING AGENT. It is contractually provided for in the Listing Agreement. The LISTING AGENT then makes an offer of compensation to the COOPERATING (BUYER) AGENT. This is done via the MLS. Compensation is not a part of the purchase agreement, and cannot be negotiated as such.
2. Since your agent agreed to a fee rebate, this must be DISCLOSED to the seller, in writing, since in fact they are paying the fee, and therefor the rebate is coming from them, for all intents and purposes.
3. If you still want something in writing from your agent, you could ask them to give you a CAR FORM CBC, which will reflect the reduced compensation. Remember, however, it is signed by the Listing Agent, who made the offer of compensation, and the Buyer Agent, who receives the offer of compensation. You are not a party to the Listing Agreement, nor to the MLS sub-offer, and as such cannot sign to any fee reduction or modification.
4. Using Form CBC should give you some measure of comfort, since it creates a paper trail and shows intent. This document is used outside of escrow, and as such is not given to the lender.
Best,
Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
(C) 310-422-4288
http://www.thebremnergroup.com
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.
1 vote
Zaza Pasori, Agent, Washington, DC
Fri Jul 15, 2011
Bob,
You need the broker sign the document, not the sales agent.This rebate MUST reflect on your HUD1 and your lender has to approve the rebate.

Best of Luck,

Zaza Pasori
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Fri Jul 15, 2011
Hi Bob,

They did it right....the addendum is to instruct the escrow officer of how to disburse funds. In this case, some of what the buyer's agent would be getting is going to be used for your closing costs. This is fine, you will see this reflected on the final escrow instructions or amendment and closing statement.....before the close, so you don't need anything else, it will be clearly displayed before you close on the property.

In the case you describe....rebate is the wrong word to use. "Credit" is more accurate. A rebate would take place after the close...this is being done in escrow.

Karen
0 votes
Kathleen Bec…, Agent, Santa Monica, CA
Sat Jul 9, 2011
Hi Bob:

Deborah says it all below!

Good luck and congratulations on you purchase!

All the best,

Kat
0 votes
Marilyn Jenne, Agent, Los Angeles, CA
Fri Jul 1, 2011
Little clarification: You (as a principal) are not in jeopardy of violating any DRE regulation. Here is the language: "Payment of a portion of a commission by a licensee to a principal in the transaction does not constitute a violation of Section 10137, but if there is a commission rebate to the buyer in the transaction that fact must be disclosed by the agent to the seller who has paid the commission. (Business
and Professions Code Sections 10138, 10139, and 10139.5)." Your bases are covered if the seller knows, signed the Addendum approving its payment, and it is reflected in escrow docs. (I also agree that your lender needs to know.)
0 votes
Van Agakanian, Agent, Tarzana, CA
Fri Jul 1, 2011
Escrow instructions and amendments to a real estate purchase agreement are merely signed by the principals in the transaction and NEVER by brokers/agents representing them! Brokers/agents acting as sales agents are never a party to real estate transactions. Moreover, cash rebates (or checks) are not allowed, either. In fact, seller credit toward buyer closing costs, where the lender is made aware, in case of financed properties, would be the proper way to write such an offer.

Since sellers pay the commission to listing brokers, and they in turn make offer of compensation to cooperating brokers (buyer agents), through a separate agreement, this "discounted" amount can be accepted to match the amount credited toward buyer closing costs. If the lender is not in possession of your accepted (executed) offer then, simply, another offer can be executed with a discounted new purchase price.
0 votes
Justin Ruzic…, Agent, Greenville, SC
Fri Jul 1, 2011
If it is on the HUD, that is disclosure enough for all parties. Congrats on your upcoming purchase!


http://blog.house-guy.com/2011/02/buying-home-of-your-dreams.html

Thank you
0 votes
Ron Escobar -…, Agent, Beverly Hills, CA
Fri Jul 1, 2011
If you are getting a rebate you should disclose it to the lender. legally there is no such a thing as "outside of escrow" ... just FYI
0 votes
Jonathan Chi, Agent, Rancho Cucamonga, CA
Fri Jul 1, 2011
If you are credited through escrow, it should be reflected on the escrow commission statement. Both the selling and listing broker and the SELLer need to sign it. The buyer might need to sign the original addendum that you have with the selling agent.

I agree with the agents below indicating that you might have trouble from your lender because of this kick--back if your purchase is financed. From my understanding, neither real estate agents nor lenders contribute to buyer's closing costs, only the SELLER can do that. You might want to double check with escrow and make sure the whole rebate is structured correctly.
0 votes
Steven Ornel…, Agent, Fremont, CA
Fri Jul 1, 2011
Hi Bob,

You should definitely have something in writing with your, the Agent's, AND their Broker's signature. I suggest the Broker's signature if you want extra protection (your Agent's independent contractor agreement may stipulate a minimum commission to be charged).

In my opinion, the document should obviously state the percentage/amount being credited to you, but most importantly, it should also state something like "This agreement shall serve as a mutual Escrow instruction." This will protect you if credit is missed in the Broker's Demand required by escrow, which Buyers/Sellers rarely see.

Even better: For a second opinion email your escrow officer and ask how they would do it. Your HUD-1 will definitely need to reflect this credit and you DO need to speak with your lender about this credit.

This credit needs to be done properly or it may violate DRE regulations and could be considered a payment from your Agent/Broker to a non-licensed salesperson (you).

Best, Steve
0 votes
Lance King, Agent, San Francisco, CA
Fri Jul 1, 2011
Bob,

If you are getting a rebate and it is being handled through escrow - as opposed to outside of escrow, like a check direct to you - you will likely need the lender's permission. Assuming you get that, it is not unreasonable to request something in writing from the firm representing you stating the terms of the rebate. You might want to also add that if the lender doesn't give permission they will write you a check directly after closing so you're covered in any event.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes
Sinead McAll…, Agent, Oceanside, CA
Thu Jun 30, 2011
You can ask the brokerage to give you something in writing confirming the credit. Yes you need to make sure that the lender will allow this credit. Once you get closer to closing, make sure the credit is reflected on the estimated closing statement. If you don't see it, let the escrow officer know asap.
0 votes
, ,
Thu Jun 30, 2011
It could just be done a purchase contract addendum, back when I did real estate that is how we'd document it for escrow & the mortgage lender... and if I was a mortgage lender on your transaction, we'd be looking to get a purchase contract addendum specifying the "real estate agent commission credit" amount (represented as either a $ amount or % of the sales price).
0 votes
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