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Getting a referral fee would be stupid. You’re essentially paying yourself and creating taxable income. You really should just list yourself and have your broker help you with the transaction. If your broker can’t support you through a transaction, you should be finding a new broker. It’s kinda hard to convince other people that they should believe you’re qualified to represent them in the sale of their house when you don’t even feel qualified enough to represent yourself. If you really wanna use another agent, you should be negotiating a reduction in their commission as opposed to a referral fee. The net to you is the same but without the tax liability.
The home we are buying is a new construction and they recommended instead of listing myself as buyer agent they would instead reduce sale price by 3%. This way I don’t pay income tax & it doesn’t go through my broker so I get essentially 100% of the commission.
I do know it could be beneficial to get more sales under my information for future career purposes but not a big factor for me personally and we are likely paying all cash so closing costs also aren’t a huge concern.
Would it still be better to get the commission as a buyers closing credit in a case like that?
As for listing the house myself, I was debating between doing a co-agent listing or trying to get referral fee as I actually don’t work in the town I live but instead a city about 60 miles away. So wanted someone with more knowledge/ connections of local area.
So basically they are reducing the markup by 3% and making you feel like its a deal. Markup is already built into the price, in addition the commission amount drops when you drop the home price. You have to remember that behind that new construction project is a team of realtors that are looking to make money and most likely work exclusively through the developer. If you want to take a percentage of your own money thats up to you but local or non local you can sell your house easily from anywhere in the state. Showami can show non represented buyers, buying agents show your home, the only time you need to be there is during inspection, appraisal or remediation of 4-pt failures. If it was me I would try to get the very last penny I can on my own home.
Just make sure you have anyone looking to see your home without a realtor that you setup through showami, to sign a showing agreement for your home and your home only. That way you can represent the buyer and yourself as a transaction broker.
Yeah as for the markup it’s an odd situation. So with this builder specifically base price+ structural options is ~680k and that’s what commission would be paid on then design center options like flooring, paints, doors. Etc is made after and commission is not paid on that added price.
How they worded it to me was instead of giving me a commission and running it through my broker or reducing the sale price to not impact comps they would give us a ~20k design center comp. This way we get the full 3%, comps aren’t effected, no hassle with my managing broker / comp split (probably wouldn’t have one as it’s personal transaction just extra steps). & we already 100% know we were planning to spend more then $20k at design center so it wasn’t a situation of like free upgrades or anything.
No, that isn't a 1031 Exchange. You have to exchange like/kind investment properties and OP isn't selling or buying an investment property but a primary residence according to her post. Look up the criteria on [https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips](https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips)
To OP: Are you planning to be a Realtor full time and this is your beginning steps? Or are you planning to be a part time agent that only handles your own purchases and sales or something else?
I think its smart to consider your skills and work with an agent as a co-agent if you plan to enter the business or to collect a referral fee if you aren't planning to actually work as an agent.
Yup license is already hung and in good standing. Was mainly looking to get opinions on if the bit of extra commission from co-agent was worth the hassle & if I was even allowed to get a referral fee for personal property
Ask your broker which experienced agent in your office you should co-list with. Do it on a 50/50 split. It will be a great learning experience and you'll likely sell for a higher price, and have a better transaction, then doing it on your own.
you understand how the commissions and fees work right?
seems like you're suggesting: the SELLER (you) pays the the listing agent you hire, then you ask for some of what you're paying to be given to your broker, who'll take a bit of it, and then distribute what's left to you. then you'll pay income taxes on the money that you gave the agent who then gave it back to you minus broker fees?
convoluted solution to a simple problem.
just pay the agent 25% less to begin with.
good call hiring a pro to help you sell.
Honestly after reading this feel a bit dumb haha, I guess I was so used to people saying that I could get a referral fee now that I have my license that this was my go-to solution.
Wasn’t thinking about the fact that literally anyone can just have a lower commission % negotiated up front
**This is a professional forum for professionals, so please keep your comments professional** - Harrassment, hate speech, trolling, or anti-Realtor comments will not be tolerated and will result in an immediate ban without warning. (... and don't feed the trolls, you have better things to do with your time) - Recruiting, self-promotion, or seeking referrals is strictly forbidden, including in DMs. - Only advise within your scope of knowledge and area of expertise. [The code of ethics applies here too](https://www.nar.realtor/about-nar/governing-documents/the-code-of-ethics). If you are not a broker, lawyer, or tax professional don't act like one. - [Follow the rules](https://www.reddit.com/r/realtors/about/rules/) and please report those that don't. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/realtors) if you have any questions or concerns.*
That makes no sense, pay income tax on a referral fee that is coming out of your home equity.
Getting a referral fee would be stupid. You’re essentially paying yourself and creating taxable income. You really should just list yourself and have your broker help you with the transaction. If your broker can’t support you through a transaction, you should be finding a new broker. It’s kinda hard to convince other people that they should believe you’re qualified to represent them in the sale of their house when you don’t even feel qualified enough to represent yourself. If you really wanna use another agent, you should be negotiating a reduction in their commission as opposed to a referral fee. The net to you is the same but without the tax liability.
You should list the home yourself and buy your next home yourself. Use the commission you would have paid out to increase your closing credits.
The home we are buying is a new construction and they recommended instead of listing myself as buyer agent they would instead reduce sale price by 3%. This way I don’t pay income tax & it doesn’t go through my broker so I get essentially 100% of the commission. I do know it could be beneficial to get more sales under my information for future career purposes but not a big factor for me personally and we are likely paying all cash so closing costs also aren’t a huge concern. Would it still be better to get the commission as a buyers closing credit in a case like that? As for listing the house myself, I was debating between doing a co-agent listing or trying to get referral fee as I actually don’t work in the town I live but instead a city about 60 miles away. So wanted someone with more knowledge/ connections of local area.
So basically they are reducing the markup by 3% and making you feel like its a deal. Markup is already built into the price, in addition the commission amount drops when you drop the home price. You have to remember that behind that new construction project is a team of realtors that are looking to make money and most likely work exclusively through the developer. If you want to take a percentage of your own money thats up to you but local or non local you can sell your house easily from anywhere in the state. Showami can show non represented buyers, buying agents show your home, the only time you need to be there is during inspection, appraisal or remediation of 4-pt failures. If it was me I would try to get the very last penny I can on my own home. Just make sure you have anyone looking to see your home without a realtor that you setup through showami, to sign a showing agreement for your home and your home only. That way you can represent the buyer and yourself as a transaction broker.
Yeah as for the markup it’s an odd situation. So with this builder specifically base price+ structural options is ~680k and that’s what commission would be paid on then design center options like flooring, paints, doors. Etc is made after and commission is not paid on that added price. How they worded it to me was instead of giving me a commission and running it through my broker or reducing the sale price to not impact comps they would give us a ~20k design center comp. This way we get the full 3%, comps aren’t effected, no hassle with my managing broker / comp split (probably wouldn’t have one as it’s personal transaction just extra steps). & we already 100% know we were planning to spend more then $20k at design center so it wasn’t a situation of like free upgrades or anything.
You wouldnt pay income tax anyway because your investing the money into another home, this is considered a 1031 exchange.
No, that isn't a 1031 Exchange. You have to exchange like/kind investment properties and OP isn't selling or buying an investment property but a primary residence according to her post. Look up the criteria on [https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips](https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips) To OP: Are you planning to be a Realtor full time and this is your beginning steps? Or are you planning to be a part time agent that only handles your own purchases and sales or something else? I think its smart to consider your skills and work with an agent as a co-agent if you plan to enter the business or to collect a referral fee if you aren't planning to actually work as an agent.
Not planning to work as an agent and more so got this for handling my own transactions. This is for a primary residence so 1031 doesn’t apply.
Then strongly consider a referral fee rather than co-listing. I am assuming you already have your license hung with a broker so you can participate.
Yup license is already hung and in good standing. Was mainly looking to get opinions on if the bit of extra commission from co-agent was worth the hassle & if I was even allowed to get a referral fee for personal property
Ask your broker which experienced agent in your office you should co-list with. Do it on a 50/50 split. It will be a great learning experience and you'll likely sell for a higher price, and have a better transaction, then doing it on your own.
you understand how the commissions and fees work right? seems like you're suggesting: the SELLER (you) pays the the listing agent you hire, then you ask for some of what you're paying to be given to your broker, who'll take a bit of it, and then distribute what's left to you. then you'll pay income taxes on the money that you gave the agent who then gave it back to you minus broker fees? convoluted solution to a simple problem. just pay the agent 25% less to begin with. good call hiring a pro to help you sell.
Honestly after reading this feel a bit dumb haha, I guess I was so used to people saying that I could get a referral fee now that I have my license that this was my go-to solution. Wasn’t thinking about the fact that literally anyone can just have a lower commission % negotiated up front