It's the Rule - May 2006

by: President & CEO Terese (Terry) Penza, CAE, RCE, e-Pro

Giving Up Your Commission.
As the listing agent you are beginning to see more and more prospective purchasers coming to you saying they do not want to bring a real estate agent and they do not want to be represented but they want the selling side of the commission. In Illinois you can give a commission to a seller or buyer of that one transaction but not for giving you a referral for a different transaction.

Perhaps your company may want to put together a form to be signed by the non licensed person asking for part of the commission in the transaction explaining what their responsibility is to bring the deal to closing. Example: If you want the full part of the selling commission these are the following things you must do by closing to get this fee or for X amount the listing office will do the following things to get to the closing. The concept would be that you have an agreement in writing outlining the responsibilities of the person seeking the funds and your responsibility. Just an idea. Remember, if you do put together such a form it should be discussed and developed through your company and you should not consult with other companies about it.

Paying the buyer or seller
If you are giving back some commission to the seller then you can just reduce the commission and then there is no reporting to the IRS as income. To the buyer you can reduce the commission and again there is no reporting but if the money is given after the transaction then you have to report as income. See http://www.nsbar.org/library/taxcommissions.asp for a detailed report written by NSBAR CPA.

Can you afford to give the money away?
Sometimes an agent can become too aggressive and give all their money away. A solid business plan and financial budget are needed. Here is an example of a web site that will assist you in developing a plan http://www.createaplan.com/