The property is listed with another real estate company and I am a licensed broker (and also a licensed contractor). I am planning to submit an offer to purchase it above market price, do an extensive remodel ($50K) and sell it for market value. It seems like have have read somewhere that an agent can't collect a commission if he/she is the buyer, is this the case? I would be the buyer's agent representing myself as the buyer.
The property is serviced by Bank of America.
Good question. My current short sale listing is going pending with a buyer/realtor. I was not asked to do anything different and at this point planning on paying him. We close EOM so I will let you know as HUD1 will be out soon enough.
I have a friend who does same thing and there are times it works just fine. However, several times the short sale lender noticed his name as both buyer and buyer agent and refused to pay a buyer side commission.
Rather than risk it, I would suggest...have your co-worker act as buyer agent on purchase contract and get very large referral on their next transaction. Also, do a separate addendum to disclose to seller that you are a licensed agent...and remind listing agent/negotiator that Not all addendums need to goto short sale lender :)
Pete has your back! Good answer.
It depends on the lender but one of my short sales several months back was purchased by an agent with another office that did the same thing - rehab and flip. The agent in that case was given commission but again it will vary on a case by case basis.
The issue is simple at best. The code of ethics needs to be adhered to along with your license law. Best practice is to disclose in the contract that the buyer is a licensed agent in the state of ______, license number, expiration date. Have your broker, if you are not the broker, represent you as a referral. All sales ultimately belong to the broker anyway. The sale does not matter with whom the lender is. This was tested recently with one of my teammates. No issues.
I do it all the time. I have an agent on my team write the contract and I purchase under a corp anyway.
Also keep in mind the definition of an Agent is of some one representing some one else other than him self, so technically you will be violating code of ethics; In the other hand does it happens?..... all of the time, just be careful, if and when the lender's finds out that you violated the arms length affidavit you will not be standing on a solid ground, in my opinion.
Mike (above) is ok collecting a commission as he is representing a corporation and a corporation is a separate entity, as long as he discloses to the lender that he is one of the principals, at that moment the lender will have the opportunity to pay or not pay him commission.
Maybe the better way is to have an Agent friend to represent you and get paid later on another transaction......
You can absolutely receive a commission. We just closed a sale on Friday where the Buyer's Agent and Buyer were the same. We were the listing agent. I'm sure there will be investors that will try to not pay it but it never even came up. If it had, I would have argued heatedly that they would have to pay it to anyone else. We each were paid 3%. The servicing companies were Seterus and Bank of America since there were 2 loans on the file.
I'm in California-our only requirement is to disclose in the original offer that the buyer is an agent.
It also helps if the loans are Fannie Mae- they can't dispute a 6% commission in that case.
Check the short sale affavadit "Arm's length" as well as the short sale approval letter to be sure there are no problems with this. Another way to deal with it is to have another agent in your office act as the buyer's rep.
I was representing a seller on a transaction and the buyer was represented by his brother. IndyMac said "no way". Even though it wasn't in the Arm's length addendum regarding the agent/buyer relationship, the negotiatior pointed out that it was in the approval letter that the parties could not be related.
Good luck! I wish I was out there buying up some real estate too :-)
I've only seen an independent bank that owns the loan allowing a commission to be paid. In my experience, a realtor that is a party to the contract can't collect a commission, they can't even get a referral fee if they sell their own house through another agent if the loan is serviced by a major lender.
I'm always amazed by Q+A assuming that a particular practice, in this case payment of a commission to an agent representing him or herself, is not "allowable." The first question to ask oneself is "Why not?" Is this simply a business practice of the lender, or is there some good reason for it? The real estate commission is a significant component percentage-wise in a real estate transaction.
From the lender's point of view, it's a cost, which they want to minimize wherever they can. As a practice, for someone representing themselves...they take the position "Oh we don't allow that." Yet they pay the commission if someone else is representing you, nominally or in reality.
From your point of view, if you are purchasing, particularly for investment, the commission, if you can get it, reduces your cost by say 3%. And you need every bit of margin you can get for crying out loud.
DUH! You're required to disclose by law that you are a licensee. But you are not required to play their stoopid game. (Forgive me!) Have your Broker represent you, or a member of your Team, or as observed elsewhere form an entity such as a LLC or Corporation for handling these matters - Real Estate is a business, after all.
As a side comment - it is also common practice where you are DUAL in a transaction not for your own account, that the lenders will only pay one side of the commission. The comments above go DITTO for that situation!