Scenario - Landlord is selling our house (we are renters) from underneath us. We are about to start building a home in Spring 2018 and do not want to move elsewhere before finishing new home in 2019.

Information - we are realtors. landlord will be using my wife as the realtor.


Question - if wife sells house to me (us/whatever) ... how can we use the commission to our favor? Is there a way for us to wrap that commission into the down payment? Or is my only option to say "take 6% off list"


I remember JMAZZ saying he takes the 3% as cash. In the past I have taken off 3% from the price.

If I take the commission and wrap back into down payment, do I pay taxes on it?

you could have the seller apply the commission towards the actual closing costs on the loan. Assuming you escrow, that could get you close to 3%. There would be no income tax hit in that situation.

If you take it as cash, it's taxable income. I'd consider that strongly.

Thank you guys.


The final question is this. Wife/I take total 6% broker cut. We apply to closing rather than any direct payment. Do we owe taxes on the 6%?

Lender here. Closing costs run around 6K on most loans so any sales price over then 200K it gets hard to absorb 3% much less then 6%. There are some options such as buying out PMI or paying points to buy down the rate but I have no idea what those options are for you. You should use seller concessions to protect the income as best you can.

Also you typically cannot use the funds to buy down the loan. Bottom line is people's down payment are after tax income unless its a gift. The owner cannot gift though. Gifts are limited to family. As always there are exceptions to everything so a unique file would be needed to find out the best option.

Apply what is needed to closing costs, and apply the rest to price reduction.

that will work as long as they have the money for the down payment as well

Your wife is representing both sides of the deal and it seems like she has a significant conflict of interest. Is taking the full 6% actually legal/ethical/whatever the word is that the licensing people use?

Good question for the realtors on the forum. They could limit the issue with a impartial appraisal I would guess

I really don't understand the scenario with the update. Is this two different transactions you're trying to tie together?

Sorry diggity- I asked about entire 6% bc someone else had mentioned only half in another post.

If we buy the home it will be negotiated before and all will be transparent. The thread is about [what is best for me] and not [how do I convince my landlord to take a one sided deal]


She was going through a divorce. Leased to me at 2400/month. Her payments are 2400/month and she approached me about buying her out or helping sell it before my lease is over in 8 months. Either way she need out of house soon.


Stats

Value 325,000

6% is 19,500

Can I sign the listing agreement and then buy at 325,000 and apply 19,500 to closing cost/escrow/whatever tax free? Or would I be better off saying I want to buy your house as an individual before lift for 325,000 minus 6%.

It is really only a 2-3k question in dollar terms. But as far as down payment I'd much rather put up less money and buy the house at higher rate.

You can only have the seller contribute towards actual closing costs so you won't approach that $19K number. I would figure out what your estimated closing costs would be (with escrow), round down a bit to be safe, then take the additional amount off the price.

I'm surprised she would agree to do a 6% commission if it's an off market sale but I guess that's her own ignorance. 3% would be more reasonable.

Diggity said:

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I'm surprised she would agree to do a 6% commission if it's an off market sale but I guess that's her own ignorance. 3% would be more reasonable.

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If only she was paying a realtor that had a fiduciary duty to educate her on financial issues that she is ignorant of.

Surely this can't be the right way to go about this kind of sale, right? Are all the "I hate realtors" threads going to cite this in the future?

Why would I give her 3%? With me buying she closes immediately. If I sell the house to another buyer ... She'll be paying my 6% and then half will go to buying agent.

As for gig em - we've spoken about what to list house at in the past. This was before she wanted to sell home without honoring our lease. She has already gotten help from me and trusted my opinion before now. So in short - you can make assumptions all you want, but reality is that I don't want to buy her house. She is selling it before my lease is up and I may buy it bc I don't want to move again before finishing my new home.


Thanks for the help everyone. If I'm forced to buy it I will try and take commission and directly apply to closing rather than negotiating a lower rate. Hopefully she just agrees to extend lease a bit longer.

gig em 02 said:

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Diggity said:

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I'm surprised she would agree to do a 6% commission if it's an off market sale but I guess that's her own ignorance. 3% would be more reasonable.

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If only she was paying a realtor that had a fiduciary duty to educate her on financial issues that she is ignorant of.

Surely this can't be the right way to go about this kind of sale, right? Are all the "I hate realtors" threads going to cite this in the future?

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This is just another example....

What state are you in?

Thanks for the hate. I have a license and only act as a realtor to people moving into our out of my rent houses. So by definition, I am part time at best. My wife is a little less part time than me so feel free to hate on her I guess.

I understand the "I hate realtor" stuff never goes away, but for sake of keeping up the argument. Is it not a zero sum game for her if she lists with someone else or if she discounts the full 6% to me? Serious question. Sure seems like the math is equal. (Never mind the fact the landlord has already agreed to it.)

By agreeing to 6% she also escapes another issue ... She is trying to sell a house leased to me before the lease is up.

texas. if there are any rules here I would be very happy to know them.

because she would be selling on the open market and would likely get a better price. People typically do private sales to save money on commissions.

honestly, the idea that you're going to buy the house "because you're forced to" is silly. If the numbers don't make sense, get an apartment or an extended stay lease. Unless you're buying significantly under market (which is possible because the seller sounds naive) you're going to get killed on closing costs in that short a period.

I have three kids under 4 years old. Moving is not a fun game I am willing to play. I'd rather pay a heavy premium than move for 3-6 months. I would hold the house for 2 years as I do with everything else I buy and bet on mid-term appreciation.


I came to ask about how do I find the most value in the commission...not how to take advantage of my landlord. I don't really have a reason temp having civil penalties brought against myself.

I'll let the math debate go b/c it is turning into an ethics debate.

Take the good with the bad my friend.

In Texas your lease transfers with the sale. She can't force you out or sell it from under you. List it, earn your commission and build your house.

Unless I'm missing something about your lease terms?

evestor1 said:

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Thanks for the hate. I have a license and only act as a realtor to people moving into our out of my rent houses. So by definition, I am part time at best. My wife is a little less part time than me so feel free to hate on her I guess.

I understand the "I hate realtor" stuff never goes away, but for sake of keeping up the argument. Is it not a zero sum game for her if she lists with someone else or if she discounts the full 6% to me? Serious question. Sure seems like the math is equal. (Never mind the fact the landlord has already agreed to it.)

By agreeing to 6% she also escapes another issue ... She is trying to sell a house leased to me before the lease is up.

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Wouldnt the market dictate the you pay a premium for not having to move?

Maybe the whole thing is above board, but a less than part time realtor and a leasing realtor determining true "market value" and then collecting a full 6% commission and benefitting from adding another rental property to their portfolio just doesn't seem right (which makes the full time realtors that are trying to make a living at the profession have to work that much harder to validate their salaries and worth)

I don't know the rules and I hope you aren't breaking them, but hopefully the guys that do this for a living can see situations like this and realize what it looks like to outsiders.

Good luck with your new rental property!

/internet fight!

This sounds like dual agency to me...

https://www.trec.texas.gov/may-broker-act-dual-agent

"A license holder may not represent both principals as a dual agent under the revisions to TRELA. Under the current law, a broker must agree to act as an intermediary in accordance with the statute if the broker agrees to represent more than one party in a transaction."

Not a lawyer

Updated just for fun!


I decided not to purchase the house as it looks like I'll be moving in faster to new home than expected...but will need a short term rental in the meantime. The landlord has selected my wife to list the home.


Good topics:
Landlord was completely fine with my offer minus the 6% if I would have purchased home. It was a very smooth conversation.


Bad topics:
Listing home while living in it and expectation of upkeep. Lots of stress on the kids b/c they can't have toys out all over the place. I'm not looking forward to moving in the next few weeks