It is very common for family to help family buy a home, especially when FHA loans are involved. Assistance is usually in the form of a gift towards down payment. But sometimes real estate agents represent a family member or themselves as a buyers agent. If you’re a realtor buying your own home, check out another article “Can a Realtor use commission as down payment on a purchase?“. When the purchase involves close relatives, a Realtor commission gift comes in handy.
So when a real estate agent represents family on a purchase, the buyers agent commission may actually be used as a gift. Although the commission is not received until after closing and recording, it may be gifted! There are two interesting FHA guidelines that even though the agent’s commission is not paid until after the transaction has closed, lender has funded the loan, and the attorney has recorded the deed and mortgage, the commission paid to the realtor can be used as his/her own funds or a family member’s funds for down payment on an FHA loan.
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FHA Realtor Commission Gift Guidelines
A Family Member entitled to the commission may provide it as a gift, in compliance with standard gift requirements. The Mortgagee must verify and document that the Borrower, or Family Member giving the commission as a gift, is a licensed real estate agent, and is entitled to a real estate commission from the sale of the property being purchased.
Example of a Realtor gifting their commission to a family member:
Buyer’s mother, a licensed Realtor, represents a buyer in a purchase. The agent represents she will gift part or all of her commission to the buyer. So the Realtor commission gift may be used towards down payment or closing costs. Lets say the commission to the realtor is $6000 and the borrower is supposed to bring $7000 total to closing. Then the buyer only needs $1000 more for closing. To learn more about using gifted funds for down payment, read “When is a Gift a Gift According to FHA
As an FYI, Fannie Mae conventional guidelines do not allow the donor to be the real estate agent. So FHA has an advantage in these cases.
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