Rebate on New home purchases - Discuss

[usctrojancpa]

Hi all,

I need your help. I'm buying a new construction. Our broker agent has agreed to give us 50% of the rebate. How does this work? Would this be a credit on the final price or can we use it towards the down payment? Is it just cash? Ideally, is like it used towards the down payment.

Thanks in advance.

Typically builders will not allow the agent to credit any portion of the rebate towards the buyer's closing costs or down payment (the lender won't allow for this as well).  I do my rebate via a check right at the close of escrow.  So it doesn't matter what the rebate goes towards because effectively it reduces the buyers total cash investment in the house (downpayment plus closing costs).  These rebates are tax free to the buyers and just reduce the cost basis in the home.  Don't let your agent/broker stick you with a 1099 for the rebate.

While it impacts the cost basis, does the discount impact the property tax basis?  Or is the property tax based upon the full amount? 

Sorry, I should have been more clear...the rebate adjusts the cost basis in terms of gain/loss when selling the home, not the property tax cost basis (this is based upon the recorded sales price). 

 

[Rizdak]

Looking for a realtor to go to Great Park. Please PM me if interested. TY.

 

[Jaime]

I apologize in advance if this has already been discussed.  If I am interested in a property such as Morro at Orchard Hills, but had previously signed in at a sister property (i.e. Cressa) by the New Home without a broker, will I still be disqualified from any rebate?

Also, is everyone POSITIVE that by signing up to be on an interest list online, that this does NOT disqualify you from the rebate?  (Sounded like people weren't 100% sure about this -- I just want to confirm).

Thank you!

 

[Jaime]

Oops, meant to say Morro at Eastwood

 

[usctrojancpa]

Good questions Jaime. If you didn't sign in with an agent at Cressa, you can still sign in at Morro with an agent...each sales office is separate even if it's the same builder.  Also, you can talk to the sales office or email with them and get pre-approved and still register with your agent at the sales office.  The rule is that on your FIRST PHYSICAL visit to the sales office has to be with your agent to be able to register them.  Signing up ONLINE does not disqualify you from registering with your agent.  Let me know if you have any other questions.

 

[Jaime]

Got it, thank you for the info!

 

[Borg5000]

Typically builders will not allow the agent to credit any portion of the rebate towards the buyer's closing costs or down payment (the lender won't allow for this as well).  I do my rebate via a check right at the close of escrow.  So it doesn't matter what the rebate goes towards because effectively it reduces the buyers total cash investment in the house (downpayment plus closing costs).  These rebates are tax free to the buyers and just reduce the cost basis in the home.  Don't let your agent/broker stick you with a 1099 for the rebate.

My agent said he would be violating RESPA and that either he has to give me a gift after he pays taxes on it or pay my company.  I have a corp so it worked fine for him to pay that corp.  Can you clarify on the process?  I can refund that invoice payment and then ask for a check directly to me instead. 

 

[usctrojancpa]

Typically builders will not allow the agent to credit any portion of the rebate towards the buyer's closing costs or down payment (the lender won't allow for this as well).  I do my rebate via a check right at the close of escrow.  So it doesn't matter what the rebate goes towards because effectively it reduces the buyers total cash investment in the house (downpayment plus closing costs).  These rebates are tax free to the buyers and just reduce the cost basis in the home.  Don't let your agent/broker stick you with a 1099 for the rebate.

My agent said he would be violating RESPA and that either he has to give me a gift after he pays taxes on it or pay my company.  I have a corp so it worked fine for him to pay that corp.  Can you clarify on the process?  I can refund that invoice payment and then ask for a check directly to me instead. 

That to me is just an excuse.  If he paid your company that means he's most likely going to issue your company a 1099 and your company will be paying taxes on that rebate.  I've been doing commission rebates for years to my new home buyers.  Let most agents take that stance and I'll keep taking away more of their business.  Most all realtors don't understand the definition of what "earned income" is...remember the buyer has not provided any goods or services to the agent to constitute the rebate being a taxable income to the receiver of that rebate.  I'm a CPA so I kinda know what I'm doing.

 

[Borg5000]

You are right.  It is income to my company. 

For our purchase at Silverleaf, it was 12000 that he got.  My options were take 9000 as income to my company (he won't 1099 as my company is s-corp) or take 6000 as a gift and he pays taxes first.  I chose income as I have expenses to bring the taxable income down and figured I could end up with more than 6000.  I was hoping to have it as a cost basis reduction but he said while IRS is fine, it is a RESPA violation and was very nervous.  He was so nervous that I read up a lot on RESPA and feel like I know way too much real estate law for an IT person!

If you truly dont have that concern then I will refer you to my cousin who is also looking to buy.  Would your model also be about 75% rebated back?  How soon do you give the check after closing?

 

[potsticker]

Yep! Bullllllllsh*t!

We used an Agent to purchase a new construction home. The Agent promised verbally that they'd give 50% back on any commission he earned. We thought it was fairly clear and since he was a friend of a friend, there would be no disagreements.

As we approached escrow, he started changing his tune. "I have to pay taxes on the whole chunk", "My broker takes a large cut", etc. I challenged him and said a rebate is not taxable to you and a simple phone call told me that the broker is a flat fee shop, and they take what amounts to less than 1% of his total commission. He ended up giving us what amounted to about 35% of his total commission, 6 weeks after COE. He claimed that IP delayed payment - but it was that he didn't have a complete file with his broker.

I told him that since he decided to change his story and play games, that we would never use him again and would not recommend. There are several quality Agents (such as USC) who are honest and know how this works.

 

[usctrojancpa]

Yep! Bullllllllsh*t!

We used an Agent to purchase a new construction home. The Agent promised verbally that they'd give 50% back on any commission he earned. We thought it was fairly clear and since he was a friend of a friend, there would be no disagreements.

As we approached escrow, he started changing his tune. "I have to pay taxes on the whole chunk", "My broker takes a large cut", etc. I challenged him and said a rebate is not taxable to you and a simple phone call told me that the broker is a flat fee shop, and they take what amounts to less than 1% of his total commission. He ended up giving us what amounted to about 35% of his total commission, 6 weeks after COE. He claimed that IP delayed payment - but it was that he didn't have a complete file with his broker.

I told him that since he decided to change his story and play games, that we would never use him again and would not recommend. There are several quality Agents (such as USC) who are honest and know how this works.

Oh man, sorry to hear that...it's so annoying when agents like that make excuses.  I try to give all of my new home buyers their rebates within a week, if not days after they close even if I don't get paid out by my broker.  The escrow companies usually send me the checks within 2-3 business days after closing (I've only had delayed by a week because they sent the package with the check to the wrong address and it got returned) and my broker takes 24-48 hours to review my file and ACH me the commission. 

 

[usctrojancpa]

You are right.  It is income to my company. 

For our purchase at Silverleaf, it was 12000 that he got.  My options were take 9000 as income to my company (he won't 1099 as my company is s-corp) or take 6000 as a gift and he pays taxes first.  I chose income as I have expenses to bring the taxable income down and figured I could end up with more than 6000.  I was hoping to have it as a cost basis reduction but he said while IRS is fine, it is a RESPA violation and was very nervous.  He was so nervous that I read up a lot on RESPA and feel like I know way too much real estate law for an IT person!

If you truly dont have that concern then I will refer you to my cousin who is also looking to buy.  Would your model also be about 75% rebated back?  How soon do you give the check after closing?

You are right.  It is income to my company. 

For our purchase at Silverleaf, it was 12000 that he got.  My options were take 9000 as income to my company (he won't 1099 as my company is s-corp) or take 6000 as a gift and he pays taxes first.  I chose income as I have expenses to bring the taxable income down and figured I could end up with more than 6000.  I was hoping to have it as a cost basis reduction but he said while IRS is fine, it is a RESPA violation and was very nervous.  He was so nervous that I read up a lot on RESPA and feel like I know way too much real estate law for an IT person!

If you truly dont have that concern then I will refer you to my cousin who is also looking to buy.  Would your model also be about 75% rebated back?  How soon do you give the check after closing?

My rebates are given to my new home buyers within days after closing.  Check your PM.

 

[potsticker]

Yep! Bullllllllsh*t!

We used an Agent to purchase a new construction home. The Agent promised verbally that they'd give 50% back on any commission he earned. We thought it was fairly clear and since he was a friend of a friend, there would be no disagreements.

As we approached escrow, he started changing his tune. "I have to pay taxes on the whole chunk", "My broker takes a large cut", etc. I challenged him and said a rebate is not taxable to you and a simple phone call told me that the broker is a flat fee shop, and they take what amounts to less than 1% of his total commission. He ended up giving us what amounted to about 35% of his total commission, 6 weeks after COE. He claimed that IP delayed payment - but it was that he didn't have a complete file with his broker.

I told him that since he decided to change his story and play games, that we would never use him again and would not recommend. There are several quality Agents (such as USC) who are honest and know how this works.

Oh man, sorry to hear that...it's so annoying when agents like that make excuses.  I try to give all of my new home buyers their rebates within a week, if not days after they close even if I don't get paid out by my broker.  The escrow companies usually send me the checks within 2-3 business days after closing (I've only had delayed by a week because they sent the package with the check to the wrong address and it got returned) and my broker takes 24-48 hours to review my file and ACH me the commission.

His loss. Being a successful agent has a heavy dependency on referral business. All he had to do was admit his mistake and make things right. He didn't want to...no business acumen in my opinion.

 

[usctrojancpa]

Yep! Bullllllllsh*t!

We used an Agent to purchase a new construction home. The Agent promised verbally that they'd give 50% back on any commission he earned. We thought it was fairly clear and since he was a friend of a friend, there would be no disagreements.

As we approached escrow, he started changing his tune. "I have to pay taxes on the whole chunk", "My broker takes a large cut", etc. I challenged him and said a rebate is not taxable to you and a simple phone call told me that the broker is a flat fee shop, and they take what amounts to less than 1% of his total commission. He ended up giving us what amounted to about 35% of his total commission, 6 weeks after COE. He claimed that IP delayed payment - but it was that he didn't have a complete file with his broker.

I told him that since he decided to change his story and play games, that we would never use him again and would not recommend. There are several quality Agents (such as USC) who are honest and know how this works.

Oh man, sorry to hear that...it's so annoying when agents like that make excuses.  I try to give all of my new home buyers their rebates within a week, if not days after they close even if I don't get paid out by my broker.  The escrow companies usually send me the checks within 2-3 business days after closing (I've only had delayed by a week because they sent the package with the check to the wrong address and it got returned) and my broker takes 24-48 hours to review my file and ACH me the commission.

His loss. Being a successful agent has a heavy dependency on referral business. All he had to do was admit his mistake and make things right. He didn't want to...no business acumen in my opinion.

You nailed it right there...most agents get so focused on what they'll make on the one transaction not realizing that the big money is made on repeat and referral business.  Heck, I have clients have had done 3-4 transactions with me and provided me 4-5 referrals in the past 8-10 years.  About 60% of my business today is repeat and referral business.

 

[IrvineBug22]

To get the broker co op, can I visit the models and not sign the form yhat sales folks ask ? Later if I like I can get a realtor to register us.

That's a little dangerous ESPECIALLY if they recognize you.  Some builders are VERY strict about the rule of the agent accompanying the buyers on the first PHYSICAL visit to the sale office.  Irvine Pacific sales folks are great at remembering who came in their sales offices even when they didn't provide a name.  Maybe roll in there with a hoodie and sunglasses looking like the unibomber.  Or some of my clients sent in their wifes to look at the homes and get pricing and then I registered just the husband alone.  haha

USC How does this work when you register just 1 of them?

 

[usctrojancpa]

To get the broker co op, can I visit the models and not sign the form yhat sales folks ask ? Later if I like I can get a realtor to register us.

That's a little dangerous ESPECIALLY if they recognize you.  Some builders are VERY strict about the rule of the agent accompanying the buyers on the first PHYSICAL visit to the sale office.  Irvine Pacific sales folks are great at remembering who came in their sales offices even when they didn't provide a name.  Maybe roll in there with a hoodie and sunglasses looking like the unibomber.  Or some of my clients sent in their wifes to look at the homes and get pricing and then I registered just the husband alone.  haha

USC How does this work when you register just 1 of them?

Well, I'd had a few situations where either the husband or the wife went to go see the models homes.  In those situations, I went in with the other spouse to register and let them know that the husband or wife were out of town on business or visiting family overseas.  The key is for the person who went in first without the agent to not have given them their name or email address and not chatted the sales people up.  Worked fine so far as it was weeks/months after registering with just the one spouse that they would actually select a lot and go into contract (at which time both had to go in to the sales office to sign the contract).  Hope that helps. 

 

[IrvineBug22]

Thanks yea the one spouse went and looked around didn't say anything to anyone and then on the way out stopped asked 1 question and left. They didn't give any info.

 

[usctrojancpa]

Thanks yea the one spouse went and looked around didn't say anything to anyone and then on the way out stopped asked 1 question and left. They didn't give any info.

Should be no problem then. 

 

[lynalucard]

The agent I fired registered me two months ago, can I register again with a new agent?

 

[usctrojancpa]

The agent I fired registered me two months ago, can I register again with a new agent?

You absolutely can...all you would need is to bring in your new agent to register and then have the old agent's broker provide sign a form to the builder that they are releasing themselves as your agent (I've done this before twice).