I agree with you! The sales price (which commission is based upon) is $100,000 NOT 103,000.

Parker,

Thanks so much for bringing this up. I agree with you. Ok, legally our listing agreement states % of contract price. But when we do the net estimate for sellers which I do when they first list, I explain to them there is the potential that the buyer may want some of their costs paid for them by seller, but I never factor that in, I just give them an estimate. I make it a point, (when I remember) to tell the closing agent the exact amount of commission in these circumstances. I also tell the buyers agent (if involved) that if you want seller to pay for some of your buyers costs then you need to understand my seller isn't getting exactly what the contract shows so we will adjust our commission based on actual price. I usually hear a long pause, followed by stuttering, but you know, I try to treat others like I wish to be treated and I feel this is only fair, it is not about the money....if we are working for the seller I believe we need to work FOR the seller.

This can be done either way. We use a form that specifies that commission paid on list price not sale price.  If the buyer costs are added to the top then the home has in fact sold for 103k not 100k. We are paid on actual sale price of the property. If the seller listed at 100k and sold at 103k the seller has already met their objective which is a full price offer.  They're  bottom line should still be intact.

I guess that depends on your listing agreement.  I would probably just have BOTH side comissions based on the price without seller contributions.  

But we're talking about $60-$100 per side here...some percentage of the extra $3000.  Probably not a big deal to the agent, but could be very meaningful to the seller.

When I take a listing in the addition comments I add "no commission paid on sellers concessions" I explain to my sellers from at the initial meeting what may happen, and then explain why I recommend including this statement on the listing agreement, and on the MLS listing.

This is a common occurence in my area.  If I'm representing the seller, and an offer comes in with concessions, I let the selling agent know that the commission will be based on the net to the seller.  I expect the same when I'm the selling agent.  It has never been a problem.

You are right Ron.  It is very meaningful to the seller as most times they feel it is a favor to the buyer.  Besides, title insurance and property transfer taxes are paid on the higher amount, so every little bit helps.

Happens all the time where I am at and usually commission is based on sales price less the seller contribution.

Most of the time the seller brings it up that they do not want to pay pay the commission on the seller contribution and I agree with that.

But if you got technical most listing agreements specify the commission as a percentage of the sales price not the sellers net.

It truly is a small amount to the agents sides.

I have had it go both ways and it always seems like no one knows what is going on.  When I think I am doing the nice thing, they want it the other way.  I just ask the other agent how they want to handle it and if the sellers and buyers are fine, we are all fine.  You never know what people are thinking, that is for sure!

I do the same thing. I've had a few agents question it but I've always been the listing agent. If the wanted to make a big deal out of a few hundred dollars so be it, makes me look even better in their clients eyes. When we work for the seller, we work for the seller!

Commissions are usually paid on the s-e-l-l-i-n-g price of the home; however, the manner in which the question was asked seems like mortage fraud not a question of seller's contribution.  Did I miss something in the translation?  Please let me see the HUD statement.... should be the next question.

Wow, I think adding legal costs to a mortgage would be considered fraud here in Ontario. I don't know how you do it, but if a purchase price of $100000 is agreed upon then you add another $3000 to it for legal fees without disclosing that you are crediting the purchaser the $3000 then it is fraud. Are you disclosing this to the mortgage company???

Parker,

Look at how many other things are usually tied to the "sales price" such as the cost of title insurance, the starting point (as a percentage) to determine down payments for buyer by lenders, the home's appraisal based upon (you guessed it) the "sales price" in calculating the "sold per square foot" used in comps and, in my humble opinion, the commission too.

Moral of the story:  Don't inflate the purchase price.  There are easier work-a-rounds..........

When it is all disclosed and approved by the lenders there is no mortgage fraud.  Not even a hint.  

I will go both ways, but lately, have been using a script I picked up, saying - "This way means extra work for me... so I usually calculate commission the same way it is calcuated for title insurance, transfer tax, and etc... on the gross".

I finish with... The seller gets some satisfaction out of the higher published selling price too....  

If they argue, I don't fight, but... fair is fair...

I don't really see it as a favor to the buyer ... I'd say the seller would possibly not have a buyer if they didn't agree to the closing credits ... it's a part of the deal as the deal wouldn't even exist without it ... as such, I believe the commission should be paid on the total amount.