My wife and I are buying a new house and we are using the builder's mortgage company.

Assume our HUD-1 breaks out like this (numbers manufactured to hide real transaction amount):

Line 103 - Settlement charges to borrower: $5000
Line 204 - Settlement charges paid by seller: $4000
Line 205 - Settlement charges paid by Broker: $1000
Line 700 - Total Real Estate Broker Fees: $4000

Line 700 is 3% of the total transaction; it is paid by the builder. Line 700 is the full 3% commission expected by a typical realtor.

In terms of credits / debits towards us (the buyer), this is how the actual HUD-1 breaks out for those lines:

Line 103 - Settlement charges to borrower: $5000      [Buyer Debit]
Line 204 - Settlement charges paid by seller: $4000   [Buyer Credit]
Line 205 - Settlement charges paid by Broker: $1000   [Buyer Credit]
Line 700 - Total Real Estate Broker Fees: $4000       [Seller Debit]

When we signed the agreement with the realtor, we worked it out so the realtor would take 1.5% as commission and pay 1.5% towards our closing. We also negotiated the amount in Line 204 with the builder.

Now here we are days before closing, and the builder's lender refuses to allow more than $1000 of the realtor's commission towards our closing costs (reference Line 205). They claim it is illegal for us to receive outside money at closing that exceeds the aggregate in Line 103 of the HUD-1. Unfortunately, I was depending on the realtor's 1.5% contribution ($2000, in this fake example) to offset the cost of some options we selected for the house.


In this case, is it illegal for the realtor to contribute the full 1.5% on Line 205 (which means we should be getting $2000, not $1000)?

  • Line 103 are your total charges, $5K, which you are getting back on ll 204/205, so net is zero cost, right? Were you expecting to pocket some cash at closing? Jan 10, 2012 at 18:28
  • @JoeTaxpayer, ha there is no cash to pocket, I'm showing a fraction of the HUD-1 and we're still taking over $10k of personal money to closing even if we managed to convince people to do this... I want to apply the positive credit towards insurance, taxes or principal Jan 10, 2012 at 19:01

1 Answer 1


Nothing about the HUD-1 nor federal low specifies a minimum or maximum for commissions, rebates, points, or anything like that. The purpose of the document is to show the numbers in a concise and standard way, to avoid shenanigans by any of the parties.

I'm sure you already know that the builder's lender is blowing smoke. I have heard of lenders balking at the borrower walking away from the closing table with money. But I've never heard of a lender capping the amount of agent (or seller) paid closing costs; certainly not as low as a paltry $1000.

Call their bluff. If they won't let the transaction go through, let it fail. They'll either back off, or you can go find a less brain-dead lender.

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