S
sw rodent
Guest
We are first time home buyers in
Silicon Valley, CA.
We've been working with a traditional realtor (she's with Coldwell Banker), and have a good relationship with her.
However, we recently came across an Internet based service, ExploreRealty.com, which employs salaried agents who don't get commissions. The way their service works is as follows: After our offer is accepted, they charge the seller the standard 3% commision. They keep $3,500 of this as a flat fee, and rebate the remainder to us, the buyers.
For example, if we buy a $400,000 property they would charge the seller $12,000, keep $3,500, and give us $8,500.
The rebate ($8500 in this example) is payable to us at close of escrow. They can make this rebate in one of two ways:
1. They simply don't charge the seller the $8500 (ie they bill him only $3500), and the seller reduces the property sale price by the corresponding $8500.
2. They bill the seller the full $12,000, and cut us a check for $8500 at the closing table.
We are interested in pursuing option 2, because we want to use the rebate towards our closing costs. (Or, to cover costs immediately after closing since we'll be cash-poor to pull together our downpayment).
Our question regards tax complications to this strategy. Is the rebate in any way taxable? Would the IRS consider it income, and declarable as such? If not the IRS, would the state (California) consider it taxable?
Are there any other gotchas that make this rebate not as attractive as it appears at first blush?
Any advice on these questions is much appreciated.
Silicon Valley, CA.
We've been working with a traditional realtor (she's with Coldwell Banker), and have a good relationship with her.
However, we recently came across an Internet based service, ExploreRealty.com, which employs salaried agents who don't get commissions. The way their service works is as follows: After our offer is accepted, they charge the seller the standard 3% commision. They keep $3,500 of this as a flat fee, and rebate the remainder to us, the buyers.
For example, if we buy a $400,000 property they would charge the seller $12,000, keep $3,500, and give us $8,500.
The rebate ($8500 in this example) is payable to us at close of escrow. They can make this rebate in one of two ways:
1. They simply don't charge the seller the $8500 (ie they bill him only $3500), and the seller reduces the property sale price by the corresponding $8500.
2. They bill the seller the full $12,000, and cut us a check for $8500 at the closing table.
We are interested in pursuing option 2, because we want to use the rebate towards our closing costs. (Or, to cover costs immediately after closing since we'll be cash-poor to pull together our downpayment).
Our question regards tax complications to this strategy. Is the rebate in any way taxable? Would the IRS consider it income, and declarable as such? If not the IRS, would the state (California) consider it taxable?
Are there any other gotchas that make this rebate not as attractive as it appears at first blush?
Any advice on these questions is much appreciated.