How Will Real Estate Commission Get Paid on a 2010 HUD-1 Form?

When presenting a HUD-1 form at a closing, I used to follow the HUD-1 form when confirm with the consumer (usually the seller) the full commission amount in terms of a % of sales price.  It went something like “you agreed to a sales commission of 7% of the sales price which was $200,000, that is being split 3.5% to ABC Real Estate and 3.5% to XYZ Real Estate.  The amount of commission totals $14,000.”

The 2010 HUD form has no requirement for display of any commission percentages.  The rule calls for line 700 to display the gross commission amount.  Lines 701 and 702 will show the dollar amount of commission that is due to the real estate companies.  Line 703 on the new HUD-1 form will show only the actual amount of commission being disbursed by the settlement agent.  If a real estate broker is retaining earnest money to apply towards their commission, then line 704 should reflect that amount and indicate that the real estate broker is retaining it as a POC item.  Line 704 may also be used for show any additional fees owed to real estate brokers.

Will this change the way you present the HUD-1 form at closing?  Could it change the way commissions are charged?  Might sales commissions change from a percentage of sales price, to a flat fee?  We haven’t yet seen any direct evidence of this, but many real estate companies now charge additional flat rate fees to buyers and sellers in addition to the percentage amount of commission.   So flat rate fees aren’t entirely unheard of in the real estate world.

Regardless of whether or not the commission fee structure changes, we have a new way to prepare and present the 700s section on a 2010 HUD-1 form.