Some realtors may indeed 1099 you. There are a few different ways to get it done but doing it above board and doing it right is what is important. The least expensive way to do it from the buyers point of view is to have the buyers agent reduce his commission, then have the seller credit the buyer directly that amount. The credit should be (could be) applied to non recurring and/or recurring closing costs. Or if the seller wants to do some upgrades/repairs, it could be held back in escrow and paid directly to the contractor.
If it is done in this manner then there is no 1099 to the buyer. It is also all documented and written into the escrow instructions and done early in the process so the lender knows what is going on.
