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Transaction coordinators see this ALL the time. In the middle of some tough negotiation, the agent offers to pay for something for his or her client. For example, the agent may credit some of his or her commission for closing costs or for the purchase of a home warranty.

Have you ever done that? Are you currently paying for something for your client? Well, aren’t you nice!

Here’s the problem: Most agents add the fact that they are paying for something to the purchase agreement, the counter offer, or an addendum to the purchase agreement.

You cannot do this. Repeat. You cannot do this.

Here’s why: The purchase agreement is an agreement between the buyer and the seller. If you want to give something to your client, you are giving a gift or making an arrangement between your brokerage and your client.

To put it in simpler terms…

Let’s say that our mutual friend owes me a thousand dollars. You and I make a formal agreement (which we sign) that our mutual friend will pay me back on Tuesday. That’s not fair to the mutual friend, is it? How can we independently agree about something that doesn’t have anything to do with both of us?

How to you correctly document your desire to pay for something for your client? Well, first off, you need to check with your broker. Remember that commission is technically the commission of the broker and the broker has to agree in writing to the payment (even though it comes from your portion of the commission).

Once you’ve got that squared away, the best thing to do is to put something in writing to your client (such as an email). Then, contact or have your transaction coordinator contact escrow and ask the escrow officer to draw up an amendment to the commission instructions whereby it clearly states that your broker will be make that credit to the client. The broker will then sign and you are done.

Next time you offer up your commission, follow these easy steps. Just don’t write it into the Residential Purchase Agreement!