The first transaction we do with the flat fee as a matter of policy will probably come together tomorrow or Monday, but, as I had mentioned, Cathy has been playing with the idea. She has a contract in play right now, so I had to write language for the Buyer-Broker Agreement:
Buyer’s Broker is to be compensated as follows: Up to $6,000 from Seller or Seller’s Broker, with any additional compensation paid by Seller or Seller’s Broker to be disbursed to Buyer at Close of Escrow to defray Buyer’s non-recurring closing costs, to pay Buyer’s down payment, to buy down Buyer’s loan rate, to reduce Purchase Price, or for any purpose mutually-acceptable to Buyer and Buyer’s lender, if any.
Except in an all-cash sale, I don’t believe any of this money can be rebated directly to the buyer, so that’s why I’m specifying a number of possible destinations. Given that it’s “free money” from the Buyer’s point-of-view, an unexpected windfall, buying down the interest rate might be the best long-term benefit — particularly if we’re also taking closing costs from the seller’s side of the HUD-1.
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Tim says:
Greg-
Superbly written paragraph, particularly if you tweak the language slightly for a scenario when closing cost contributions are made (by a seller).
When we make suggestions to Realtors in our market, we walk on egg shells because we don’t want to come across as condescending (sometimes hard to do). Some, not all, don’t take suggestions well. I honestly cannot count how many times agents have cost their clients money because of poorly written addenda regarding contributions towards “closing costs,” among other things. Too many times, after the fact, we hear, “but that’s not what the contract says!” At that point, we start to explain the error (s) which usually lead directly to some embarassment.
Your paragraph, although geared for agency situations, is a wonderful way to cover most of the bases for seller contributions. The later two-thirds of the paragraph could be utilized solely for seller paid contributions and eliminate the tremendous awkwardness when escrow explains to a borrower that only $6000 or some other sum could be used for closing costs, although the P & S indicates seller allocating a higher amount–which can really anger a buyer, PARTICULARLY if they jacked up the purchase price in lieu of this arrangement.
October 7, 2006 — 11:11 pm
Greg Swann says:
Thanks, Tim. If you want certain language in an amendment or whatever, it might help to talk to the lender. Agents might not want to listen to you — the fools — but id the loan won’t fund, that’s a call to action! For what it’s worth, I want to hear what everyone has to say. I want to do what’s best for my clients — and I don’t want to get sued, lose my license or go to prison!
October 8, 2006 — 7:39 am
John K says:
I am not sure I understand why this has to be covered in the HUD statement.
Can’t you just leave the HUD statement (and purchase & sale contract) showing the 2.5% or whatever going to the buyer’s agent, then write a separate contract with the buyer as to who gets what, when?
I have a deal right now where the buyer is getting $5,000 back from me, at closing, and I wrote up a separate contract, saying it was due from me to him, only if he closed on the purchase.
I didn’t figure it was the seller’s business.
Are you doing this for tax purposes, as well? I realize if I get the entire 2.5%, and then kick back $5,000 to my buyer, I’ll have to explain it all on my taxes, but it seemed easier, that way.
Please explain more!
October 9, 2006 — 7:52 pm
Greg Swann says:
> Please explain more!
Talk to your broker at once. Every penny associated with a real estate transaction has to be accounted for on the HUD-1. Paying anyone directly out of your pocket is a RESPA violation. Plus which, as you note, you incur a tax laibility for funds you did not actually receive.
October 9, 2006 — 7:56 pm
John K says:
Haha, I am the broker!
October 9, 2006 — 8:33 pm
Greg Swann says:
> Haha, I am the broker!
Then talk to your attorney. The difference between a rebate and a kickback is the HUD-1 statement.
October 9, 2006 — 8:36 pm