How a commission credit works at closing in Florida
Florida lets your agent's brokerage share its commission with you as a credit at closing. What it depends on, where it shows, and how lenders cap it.
The short answer
Florida's real estate license law allows it. A licensee may share its commission with a party to the sale, such as you, with full disclosure to all interested parties1. With a mortgage on a home you'll live in, the credit is listed on your Closing Disclosure23, and Fannie Mae and FHA loans cap it at your closing costs and a share of the price79.
- The Florida rule that lets a licensee share its commission with a party to the sale, with full disclosure1
- 61J2-10.028
- Fannie Mae's lender cap on what the seller, the agents and other interested parties may contribute together, of the price or appraised value, whichever is lower7
- 2% to 9%
- FHA's lender cap on what the seller, the agents and other interested parties may contribute together, of the sales price9
- 6%
- The latest before closing your Closing Disclosure can reach you, with a mortgage on a home you'll live in, so you can check the credit4
- 3 business days
On this page
A commission credit is part of the commission paid to your agent's brokerage, given back to you at closing. People also call it commission back or a commission rebate.
Comped's model is built on this credit, so we have a stake in the topic. This guide sticks to what the rules say, each linked to its source.
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Is commission back legal in Florida?
Yes, under Florida's real estate license law. A licensee may share its compensation with a party to the sale, such as the buyer, as long as all interested parties are fully told1.
“The sharing of brokerage compensation by a licensee with a party to the real estate transaction with full disclosure to all interested parties is not considered a violation of Chapter 475, Part I, Florida Statutes.”
The rule doesn't say who the interested parties are or how they must be told1. Ask your brokerage how it discloses the credit, and to whom. Whether it works for you as a transaction broker or a single agent is a separate question.
Where does the credit come from?
From the commission paid to your agent's brokerage. The credit is a share of that payment, so it depends on four things:
- The commission. Often the seller pays it, under local custom98. It can also come from you, under your agreement with your brokerage.
- Your agreement with your brokerage. If your brokerage offers a credit, your agreement with it sets how much of the commission comes back to you. Read what it says if the commission turns out smaller than expected.
- Your lender. Fannie Mae and FHA loans cap what interested parties may put toward your purchase. Those are the people with a stake in the sale, such as the seller, the builder and the real estate agents, yours included79.
- Your closing costs. With a Fannie Mae or FHA loan, the credit can go toward closing costs and prepaid items, and not toward your down payment79. Prepaid items are amounts you pay at closing ahead of your first mortgage payment, such as homeowner's insurance and property taxes5.
Paying cash? There's no lender, so no lender limit.
How much can your lender allow?
It depends on the loan, so ask your lender which rules yours follows. Under Fannie Mae's and FHA's, the cap covers what all interested parties contribute together79.
- With less than 10% down$12,000Fannie Mae, main or second home: 3% cap
- With 10% to under 25% down$24,000Fannie Mae, main or second home: 6% cap
- With 25% or more down$36,000Fannie Mae, main or second home: 9% cap
- An investment property$8,000Fannie Mae, any down payment: 2% cap
- An FHA loan$24,000FHA: 6% of the sales price
Fannie Mae loans
Fannie Mae's cap is a share of the price or the appraised value, whichever is lower. It depends on how you'll use the home and on your loan-to-value, the loan as a share of that value7.
| Home | Loan-to-value | Roughly, a down payment of | Most they may contribute |
|---|---|---|---|
| Main home or second home | More than 90% | Less than 10% | 3% |
| Main home or second home | 75.01% to 90% | 10% to under 25% | 6% |
| Main home or second home | 75% or less | 25% or more | 9% |
| Investment property | Any | Any | 2% |
Loan-to-value counts every loan on the home, and the down payments assume one loan and an appraisal at or above the price. These are lender limits on contributions from all interested parties together7.
Besides your closing costs and prepaid items, contributions can pay up to 12 months of homeowners' association dues after closing7.
Above the cap, or above your closing costs, a contribution becomes a sales concession. For underwriting, the lender deducts it from the sales price, and the loan-to-value worked out on the lower figure must still be within Fannie Mae's limits7.
A rebate from an agent that isn't credited toward the purchase is a sales concession too, whether it's paid before, at or after closing. A contribution that isn't disclosed makes the loan ineligible for sale to Fannie Mae7.
Fees a seller pays under local custom don't count toward the caps, and neither does a legitimate prorated tax credit where taxes are paid in arrears7. For Florida's tax split, see how property taxes are prorated at closing.
Price, appraised at the same$400,000
Loan, with 5% down$380,000
Seller credit toward your costs$8,000
Credit from the buyer's agent$6,000
Contributions in all$14,000
The capYour costs
Set byFannie MaeAssumed
Share of the price3%3.25%
In dollars$12,000$13,000
What the contributions can cover, the lower of the two$12,000
Illustrative: the $8,000 seller credit and the $6,000 credit from the buyer's agent come to $14,000. With 5% down, Fannie Mae's cap is 3% of the price, $12,000, so $12,000 can go to closing costs. The other $2,000 is a sales concession: for underwriting, the lender treats the price as $398,000 and works out the loan-to-value on that7. The price in your contract stays $400,000.
Commission back depends on the commission the seller offers and on your lender allowing the credit. It's credited at closing and shown on your Closing Disclosure.
With 25% down, the cap is 9% of the price, $36,000, so your $13,000 of closing costs becomes the lower limit7. What happens to an amount over the limit in a real purchase is up to your lender and your agreements. Ask before you sign.
FHA loans
FHA's rules cover the same ground with one cap, 6% of the sales price9. The table sets them beside Fannie Mae's.
| Fannie Mae | FHA | |
|---|---|---|
| The cap | 2% to 9% of the price or appraised value, whichever is lower7 | 6% of the sales price9 |
| Closing costs and prepaid items | Yes7 | Yes, with origination fees and discount points9 |
| Interest rate buydowns | Yes, counted in the cap7 | Yes, counted in the cap9 |
| Your down payment | No, nor reserves or your minimum contribution7 | No: never the minimum required investment, and anything beyond your closing costs, prepaid items and discount points is an inducement to purchase9 |
| An amount over the cap or your costs | A sales concession, deducted from the price for underwriting7 | An inducement to purchase, taken off the price dollar for dollar9 |
| The seller paying the buyer's agent, by local custom | Not counted78 | Not counted9 |
Lender limits on contributions from all interested parties together79.
With any other loan, ask your lender what limit applies and how it treats a credit from your agent.
What to ask before you sign
Ask in the order the credit is set.
Hiring a brokerage
Your agreement
If your brokerage offers a credit, your agreement with it sets how much of the commission comes back to you.
Your offer
The purchase contract
With an FHA loan, the lender must document the contributions from interested parties on the sales contract or another binding document.
Loan approval (key date)
Your lender counts it
It checks every contribution against your loan's cap and your closing costs, and for a Fannie Mae loan tells the appraiser.
Before closing (key date)
Your Closing Disclosure
It reaches you at least three business days before closing. Check the credit against your agreement.
Closing
The credit is applied
It lowers the cash you bring.
- Your brokerage: how is the credit worked out, and what happens if the commission is smaller than expected?
- Your brokerage: how does it disclose the credit, and to whom?
- Your lender: does your loan allow a credit from your agent, what's the cap, and what happens to any amount over it?
- The closing agent: where will the credit show on your closing papers?
Have your own papers read
Your agent, the closing agent or a Florida real estate attorney can walk you through how your own agreement and contract handle the credit. This guide explains how a credit works in general and isn't a reading of either.
Where it shows on your Closing Disclosure
On page 3, in the Summaries of Transactions, under Paid Already by or on Behalf of Borrower at Closing62. Your lender must make sure you get the Closing Disclosure at least three business days before closing, counting every day but Sundays and federal holidays4.
“…if a real estate agent rebates a portion of the agent's commission to the consumer, the rebate should be listed as a credit along with a description of the rebate, which must include the name of the party giving the credit.”
| What | Page | Where on the page |
|---|---|---|
| A credit toward your costs in general | 3 | Summaries of Transactions, under Paid Already by or on Behalf of Borrower at Closing, naming who gives it2 |
| A credit that pays one specific cost | 2 | Closing Cost Details, in the Paid by Others column beside that cost2 |
| The commission paid to each brokerage | 2 | Closing Cost Details, under Other, in the column of whoever pays it2 |
| Your cash to close | 3 | Lower by the credit either way: a general credit counts in Paid Already, and a cost paid by others isn't in your total due2 |
Pages as on the CFPB's sample Closing Disclosure6.
A Closing Disclosure comes with a mortgage on a home you'll live in. A loan for a rental you won't live in counts as business credit, so it has none3, and neither does a cash purchase4. Then ask the closing agent where the credit shows on your settlement statement.
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Do you pay tax on the credit?
Ask a tax professional. The IRS guidance we found is a 2007 letter ruling to one brokerage, which said a payment or credit at closing to its buyers was an adjustment to the purchase price of the home and generally not income to them, so the brokerage didn't have to report it on a Form 109910.
A letter ruling applies only to the taxpayer that asked for it, and the tax code says it may not be used or cited as precedent10.
Questions buyers ask
Yes. Florida Administrative Code rule 61J2-10.028(2) says a licensee sharing its compensation with a party to the transaction, with full disclosure to all interested parties, doesn't violate Florida's real estate license law, Chapter 475, Part I. With a mortgage on a home you'll live in, the credit is listed on your Closing Disclosure, and Fannie Mae and FHA loans limit it.
On page 3, under Paid Already by or on Behalf of Borrower at Closing, as a credit with a description that names who gives it. If it pays for one specific cost, it shows instead in the Paid by Others column beside that cost on page 2. A cash purchase or a loan for a rental you won't live in has no Closing Disclosure.
Not with a Fannie Mae or FHA loan. Fannie Mae bars contributions from interested parties, your agent included, from the down payment, reserves and minimum contribution. FHA counts them only toward origination fees, other closing costs, prepaid items and discount points; anything beyond those is an inducement to purchase, taken off the price, and never part of the minimum required investment. Both let them go toward closing costs and prepaid items.
It depends on the loan. Fannie Mae caps what the seller, the agents and other interested parties may contribute together at 2% to 9% of the price or appraised value, whichever is lower, by down payment and how you'll use the home, and never more than your closing costs. FHA's cap is 6% of the sales price. These are lender limits, so ask your lender early what yours allows.
For a Fannie Mae loan, contributions beyond your closing costs or the cap are sales concessions, deducted from the sales price for underwriting. For an FHA loan they're an inducement to purchase, taken off the price dollar for dollar. What happens to the extra in your purchase depends on your lender and your agreements, so ask before you sign.
Ask a tax professional. In a letter ruling to one brokerage, the IRS treated a buyer's credit at closing from the brokerage as an adjustment to the purchase price, generally not income, and said the brokerage needn't report it on a Form 1099. A letter ruling applies only to the taxpayer that asked for it and can't be cited as precedent, so your case may differ.
Sources
Primary sources only: the statutes, rules and agency documents each figure comes from.
- 1.Fla. Admin. Code R. 61J2-10.028, Kickbacks or rebates
Florida Administrative Code · flrules.org · checked
- 2.12 CFR §1026.38, Content of disclosures for certain mortgage transactions (Closing Disclosure), with its official interpretation
Consumer Financial Protection Bureau · consumerfinance.gov · checked
- 3.12 CFR §1026.3, Exempt transactions, with its official interpretation
Consumer Financial Protection Bureau · consumerfinance.gov · checked
- 4.12 CFR §1026.19, Certain mortgage and variable-rate transactions
Consumer Financial Protection Bureau · consumerfinance.gov · checked
- 5.12 CFR §1026.37, Content of disclosures for certain mortgage transactions (Loan Estimate), with its official interpretation
Consumer Financial Protection Bureau · consumerfinance.gov · checked
- 6.Closing Disclosure explainer
Consumer Financial Protection Bureau · consumerfinance.gov · checked
- 7.Selling Guide B3-4.1-02, Interested Party Contributions (IPCs)
Fannie Mae · selling-guide.fanniemae.com · checked
- 8.Selling Notice: Real Estate Commissions and Interested Party Contributions, April 15, 2024
Fannie Mae · singlefamily.fanniemae.com · checked
- 9.Handbook 4000.1, FHA Single Family Housing Policy Handbook, II.A.4.d.iii(G) and (H), Interested Party Contributions and Inducements to Purchase
U.S. Department of Housing and Urban Development · hud.gov · checked
- 10.Private Letter Ruling 200721013 (PLR-157111-06), released May 25, 2007
Internal Revenue Service · irs.gov · checked
General information about Florida law, not legal or tax advice. For your home, ask your county's property appraiser, a tax professional or your Comped agent.
What changed
When a law, a rule or a county's figures change, we update the guide and note it here.
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