Hey Short Sale Expert…Do You Have A Good Lawyer?
February 28, 2008
I was reading a post on my favorite real estate social network and the writer was stating something I hear quite often. That you need to be very aggressive in making sure the bank does not reduce your commission. In fact the writer of the post I mentioned said:
“Who do they think they are to cut commissions? Negotiate for this! You work ten times harder on a short sale, so why should we be paid less. Fight for this commission. If you have to, take all listings at 8% and start there. Don’t let them push you around on this issue. They will break when you push!”
Great advice. Too bad it could put you on the other end of a massive lawsuit.
Short sales are not new. We have been doing short sales since before they became cool. We were doing short sales back when Sellers actually had equity. Aah..the good ole days! It’s not the short sale that is new, it’s the opportunistic real estate agent that’s new to the game.
Newly dubbed short sale experts are out there trying to do short sales and obviously the reason why is because the lure of a big payday. Most have found out that short sales are, from their jaded perspective, a lot of work, and have elected to forego short sales.
However some, who have decided to make it a go are learning from “instructors” that they need to watch out for the big bad lender who will try to reduce their commission. There’s a couple of reasons for that.
The first is obvious, they want to net more. The other is you are required to do so.
We have spoken to a number of prominent real estate attorneys. We have also spoken to a number of real estate boards in regards to this. Here’s what it boils down to and you may not like it.
If you are taking on a Seller in foreclosure you do so knowing full well they are in financial distress.You know they are about to lose their home if a short sale is not completed. You freely chose to market to this individual and some even have told the Sellers that they are “short sale experts”. Once you have taken that listing your fiduciary responsibility is magnified.
Not only are you charged with protecting their best interests, you must place their interests ahead of your own.
So let’s say you are “negotiating” with the bank and the bank says they need to reduce the commission in order to make the deal work. At once, the agent is going to do everything necessary to defend their commission. Uh oh…you have just breached your fiduciary responsibility.
In speaking with the attorneys for the State Board of Florida, FREC, we were informed on 3 separate occasions, that if you have to reduce your commission to ZERO to make the deal work then that’s exactly what you must do. YOU MUST TAKE NO COMMISSION IF IT MEANS GETTING THE HOMEOWNER OUT OF FORECLOSURE.
If it means you work for nothing and the Seller gets out of foreclosure, then that’s just the way it is. You chose to take on a client in financial distress and your fiduciary obligation is to protect their best interests ahead of your own.
I am not saying an agent that knows what they are doing should not be compensated. For that matter even the incompetent agent may need to be compensated based upon their listing agreement.
However, that may be a matter for you to collect upon outside the transaction in your own lawsuit. In the short sale transaction you may have to forego getting paid if the bank wants to reduce the commission to make the deal.I know..I know..I have heard it before, most agents will come back to the Buyer and say the bank rejected the offer and wants more money.
So you tell the Buyer they need to increase the offer in order to meet the banks requirements. Then when the Buyer won’t you tell the Seller that the bank and the Buyer are being unreasonable and there is nothing you can do.
Oops..there’s that fiduciary issue rearing it’s ugly head again.Don’t believe me, then call your local board..not your broker, not your friend, not another agent…but the State Board and ask this question exactly.
“Hello, I am working on a short sale. I have an offer and it’s well below what the bank will accept. The deal will close and the homeowner will be saved from a foreclosure if I agree to reduce my commission or eliminate my commission. I have been told that I have an extraordinary fiduciary obligation to a homeowner in distress and that I need to forego my commission if it is in the best interest of the Seller and it will keep him from losing his home. Is this true?”
Make sure you are sitting when you get the answer. One attorney told us that the mere negotiation of a commission and trying to “beat the bank” up over commission could be potentially actionable.
It makes a lot of sense when you think about it. You’re the one who decided to take on this listing, and you have obtained privileged, and confidential financial information that you would not normally have, and by negotiating a commission you are using that privileged information for your benefit. Kind of scary when you think about it.
But don’t worry, no one’s ever going to know about you killing a deal because the bank wanted you to take less commission. No one is going to know that the deal may have been able to be closed but the bank wanted $10,000 or $15,000 more. There is just no way anyone can say it’s your fault. In the end it just did not close and you can tell the homeowner that the Buyer would not go up in price and the bank wanted more than the Buyer was willing to pay.
Well…that’s not exactly true. We have spoken to 4 different attorneys in 3 different states and the next wave of real estate agent lawsuits are on their way.
You see, each and every time you call the bank to “negotiate”, those calls and everything you say on them are recorded. In fact, you AGREE to having those calls recorded as a condition to even being allowed to speak to a lender. Why do you think they record those phone calls? Did you ever think what the phone call waiver statement means and why they state it?
Lender reps are trained as to what they can and can’t say in regards to a client. More than likely in your newly read short sale expert manual, they failed to mention that little bit of information didn’t they.
Attorney’s that will be suing real estate agents can subpoena those phone records and in doing so can make a very compelling case for negligence. They can subpoena all of your notes, your short sale package…even your preliminary HUD-1 Statement showing your big fat commission on it. Yes, everything!
If that’s not bad enough, too many agents and brokers are chummy with their own title company or title agent and try and get “creative” with the paperwork. Unfortunately they used a title agent instead of a real estate attorney.
You see, that information can be brought in against the inexperienced, short sale expert as well. For if they used a real estate attorney, it’s possible another layer of protection would have been put in place per the attorney client privelege.
The two hour short sale expert class left out that tidbit of information as well.
Well, who knows, maybe the homeowner will just accept that he lost his home to foreclosure and believe that you did the best that you could. He probably will.
Here’s hoping for you that his attorney will too.
Check out this update to this post regarding the prospect of real estate agents being sued for misrepresenting themselves as short sale experts to vulnerable homeowners.
[...] the last segment of the show today, we talked about a new Barry C blog post titled, “Hey Short Sales Expert…Do You Have A Good Lawyer?”. I rarely hear, much less see, a more disgusting display of unprofessional and ego. This guy should [...]
[...] the last segment of the show today, we talked about a new Barry C blog post titled, “Hey Short Sales Expert…Do You Have A Good Lawyer?”. I rarely hear, much less see, a more disgusting display of unprofessional and ego. This guy should [...]
In my opinion, commission does not create fiduciary relationship, your “Agency Disclosure” does. Just because you are paid from the Seller’s proceeds does not make them your client. If you work with Buyers and have a Seller in need of a short sale you can have him sign a listing agreement that pays the Buyer’s Agent and have them sign the “Agency Disclosure” documenting they acknowledge you are a Buyers Agent. Here in New York we are required to have people sign the “State Prepared Disclosure” at the first substantive contact so that there is no confusion as to whom an agent represents. We have people sign a MLS Listing Addendum in which we charge $500 upfront listing/advertising fee in exchange for allowing us to be a Buyer’s Agent. On the actual MLS standard agreement we have them sign that they will pay 3% commission only to the Buyer’s Agent. If you are a Buyer’s Agent, he gets your fiduciary duty and he should not be under duress. If you only represent Seller’s learn to be flexible or put an attorney on retainer.
Talk about going around and around. Personally, I’m not a short sale expert, don’t claim to be… not planning to be… and I’ll refer out any opportunities to list one.
But, let’s look at this…
Every time ANY offer happens where the buyer isn’t just tossing cash at the seller in some uncontrolled manner, according to what you have said, if the seller says “if you cut youcommission (or eliminate it), this deal can work” then the agent MUST do it. No negotiation. No complaint. Not just banks mind you. EVERY sale. Fiduciary responsibility requires that they not be paid for their work and do what is best for the client.
Frankly, I think that you have had a big drink of the Kool-Aid from a lawfirm that is looking to massively profit from some class action lawsuits…
Hey Lane..an off the cuff unvalidated response is expected from a lesser agent ..but from you it’s downright unbecoming. Our lawfirm is one of the biggest and most respected lawfirms in the WORLD..hardly the advice of a ham and egger.
More importantly..before you take to spouting off and accusing others of drinking the Kool-Aid..it is easy for you to find out. Take your hands off the keyboards, dial your state board and pose the question as asked.
Once you have your answer, and you have had a chance to collect your thoughts, figure out what you want to do with the rest of your life.
I gave you and every other agent the opportunity to verify with their own state. You chose to spout before doing so. Maybe they do things differently in Georgia.
Since you did not, we’ll call for you and find out.
By the way, a law firm can only profit from a “massive class action lawsuit” if they are found to be correct. Hmmm…are you admitting that they have it in the bag on this one.
And people wonder why the American consumer has such a problem with Realtors.
In any event, thanks for the comment and the always valued discourse…however ignorant it may be.
Barry… Let’s take a longer look at this. If your lawyer has a fiduciary responsibility to you, could it not be argued that if the fee is damaging to you that they should work for free… even if they don’t agree to it? Bank fees? The bank has a fiduciary responsibility to me for my money.
In each case, I have agreed to the fee. In the case of a real estate agent and a short sale listing, if the agent does it right, they protect their fee with the bank prior to representing the sale. At that point, they are due the fee, and they are not violating the fiduciary responsibility any more than a law firm, bank insurance company or anyone else that has a fiduciary responsibility to their client.
It is quite simple, I agree to do the work, and take on the fiduciary responsibility for the fee. If the fee is no longer being paid (the consideration portion of the contract) then the contract no longer holds.
I agree with you about the people take a 3 hour CE class and think they are now “experts” at short sales. I am probably even more torqued than you are that the NAR promotes that as responsible behavior. But, there is a basic philosophy here. That is that individuals and companies have a right to collect fees to which they are contractually obligated.
Remember the law of unintended consequences…
Hey Lane..man…your beef isn’t with me..nor mine with you..to settle this all you have to do is make that call. Lane you make that call yet?
Rule out the buyer… you are taking a listing where there may be future legal action against the property. Your taking the listing could expose you to the chaff or direct blows of that legal action. Are you interested in taking the listing?
For most agents, the answer is no. But because of CE classes teaching us to be “experts”, most agents don’t think that a foreclosure sale is such a scenario. From my experience, it is. It’s not just about selling the house, it’s about the future impact of foreclosure and the likely bankruptcy that follows for the seller. It’s about the lenders ability to collect on a debt for which they have a secured interest publicly recorded and an individual potentially obstructing the collection of that debt. Foreclosures are different. The seller has an interest by title. The bank has an interest by lien. The agent does not have an equivalent interest. The agent has a thankless, after-the-fact interest, all the responsibilities, none of the benefit.
Great insights for us agents out there dealing with these issues every day. If there is one area that I have learned quite a bit about over the past 10 years in real estate, it is that there are many, many areas where we can be sued. I am not afraid, but I will be aware. Bring on the lawsuits!
Thanks for your comments!
Metro..love your attitude!
[...] Mötley Crüe Award goes to ‘Hey Short Sale Expert . . . Do You Have A Good Lawyer?’ posted at Real Estate Radio [...]
This is a great point about agents and their duty. I think if agents treat the sellers as they would wish to be treated they would find themselves less trouble. I don’t think it is just the commission issue that will cause agents to get sued. Many agents aren’t calling banks, failing to document, and these issues will also arise as potential sources of litigation. More education is necessary to help agents who want to help home owners in these situations.
Barry,
A great article, and it just goes to prove my belief that “you can’t teach ethics–you either have them or you don’t!” You did not, however, discuss the issue of Buyer’s (Selling) agents in the process.
Clearly, I owe my allegiance to my Buyer, and that means that if the lender does a “commissionectomy” I can (and will) disclose that to my Buyer. It is up to the Buyer if they wish to increase their offer to cover more commission or stand fast. In the case where they stand fast I have to go to closing, then choose whether or not to grieve the listing agent for failing to pay the co-op that was offered in the MLS.
In our Las Vegas market, we are seeing a disturbing phenomenon where listing agents are offering a 4%-10% co-op to selling agents, knowing the lenders will knock them down, but drawing more showings in the meantime. Our association grievance committee is starting to see some arbitrations on this issue, and hopefully there will be some large damage awards against listing agents and their brokers, which will hopefully put a stop to this outrageous practice.
Exellent article. I had also been to the seminars and been told that commissions were between the agent and seller and not to negotiate. We just closed a short sale and to their credit the lender never mentioned commissions. Thanks for he heads up. I will run it past one of the attorneys on staff for their opinion.
This is off topic but – - – Does anyone know how a short sale will affect the Seller’s Credit? after all is said and done???
If the short sale is correctly executed,, then the Seller will just show late payments. If it goes to foreclosure and lost, it will drop by as much as 200 points. Short Sale is MUCH better..if done correctly.
Thanks for your response – I have a seller that I think should do a short sale. She is not behind or late in any payments and has a good credit score now. If she does a short sale correctly would it still show LATE payments for her ??? Her biggest fear is that this will harm her credit.
Many banks won’t entertain a short sale if the client can not prove hardship..please email me the details at questions@ralestateradiousa.com
Most of the banks I am dealing with for new credit regard any loans over 120 days late as a foreclosure even if the deal is saved via short sale or just by getting caught up on payments. Again a short sale is better than an actual foreclosure by far, but it will affect future mortgage purchases for 2-4 years.
Ok, I did a little checking… You won’t like what I found.
I asked the state real estate commission three times. The style of the question varied a little, and I got three different answers.
I checked with a couple of lawyers, and they said they could see the argument your firm is making… BUT, they were issuing an opinion. There isn’t any statutory law and they don’t have much case law to go on. So, sorry. I can’t back up their line of reasoning. And certainly not “in all 50 states and situations.”
Further, if they start really thinking about it, they don’t want to be right, or they could be opening themselves up to the same problem.
“The style of the question varied a little”…ok….
As for attorneys..simple question..will they defend you based upon their responses? I want to know my back is covered. I was not trying to find away around the subject and I did not “vary”my questions. So no…your answer does not trouble me in the least.
Hi Barry, I listened to your show today for the first time. Very good. OK about this post. The only issue with your argument is that in Florida we are presumed to be Transaction Brokers. We have NO fiduciary unless we choose to work as a single agent.
Of course I do agree that anyone can sue any body for any thing BUt in this case the fiduciary argument would not work.
No one can make me work for free ever.
Glad you listened. Thanks!
I understand your statement. My question is and has been…does the consumer know this? Are they explained this in detail?
It may not stand you say…but are you willing to stand behind that in a court room?
So, are you saying, that if the difference between closing on a short sale or the homeowner losing the home to foreclosure came down to the commission tat you would not feel the necessity to forego your commission for the the good of the client? Are you saying that?
By taking the stance as a mercenary with no fiduciary responsibility in the transaction, why would any consumer in their right minds want to enter into that kind of arrangement?
I for one would never want to enter into an agreement to do business with someone who does not truly ave my best interests as heart.
But hey..what do I know..didn’t you just recently say that we don’t know what we are talking about because we are not agents?
Hmmm…not to hard to understand the whole transaction broker facade.
Does your law firm work for you for free? Does it make them mercenary to not do so? Do you work for free? Does it make you a mercenary to not do so?
Why would any agent (not just real estate, but anyone that could be operating under a fiduciary responsibility) work for free?
Doctors have a responsibility for my health. Their bills cause me stress. Stress is bad for my health, therefore they should work for free.
A bankruptcy attorney could never get paid… All the bank would have to do is say that they won’t make a deal that includes the lawyer getting paid, and any monies already received should be paid to them.
Unintended consequences.
If I agree to to a job for a fee, if I am not paid the fee, I am not responsible for the job. Of course, I don’t claim to be a short sale specialist or expert, and I don’t do short sales. If I were to do one, it would be representing the buyer, and he would be obligated to pay me if going forward with the deal after the bank kills the commission.
With regards to having an attorney go to court with the argument… if my listing agreement is with the “homeowner”, they are the ones that are obligated to pay the fee. The bank choosing to accept or reject the offer has no bearing on the fee. If the seller chose to accept the deal, and the bank won’t release funds for the fee, the seller would be obligated to pay the fee… not the bank.
So, in essence, your legal firm is saying that any time an agent refuses to lower their commission to make a deal, they are violating their fiduciary responsibility to the seller.
I call BS. Show me the case or statutory law. I stand behind it being an opinion and nothing more.
Lane..I don’t want to but I feel I must…so here goes…
You chose this business. Most agents…maybe more than you care to think, are incompetent.
I wish real estate agents would stop comparing themselves to doctors and lawyers…it’s so unbecoming and quite silly to say the very least.
Let me set you straight here. There is one issue and one issue only. Point blank and stop dancing around the question with childish innuendos and sophmoric comparisons.
Point Blank: If a Homeowner in foreclosure that you marketed to and chose to enter into an agreement with was going to lose their home on April 15th by order of the court. The Auction is slated for the morning of the 15th.
A buyer comes along on to save the day. The Buyer is willing to pay “X” for the property and the lender has agreed upon an acceptable price for the short sale. That price would require you to forego your commission so that The Seller can avoid foreclosure and sell the property.
The question just as written was posed to 3 various boards and EACH one said it would be the agent’s duty to forego their commission as to do so would be in the best interest of their client.
Are you and others saying that you would say..sorry Mr. Homeowner, looks like it’s not going to work out. Is that what you are saying? No long winded ansers or tales of different types of representation. It’s really simple. Now state to us all what you would do in this instance. Very simple. You either forego the commission and he saves himself a foreclosure or you refuse and he’s sunk. So, what is the deal? What would you do?
Comparing yourself to a doctor or lawyer…here’s the main difference that most agents can’t understand.
You chose to take on this client knowing full well they are in dire straits and in extreme financial hardship. yet you STILL chose to take them on as a client. You did not have to, you chose to.
So, unless you live in a cave, I am sure you understand that it was your choice to take on a financially strapped client and that choice places additional scrutiny and responsibility on your shoulders.
If you say not, you’re kidding yourself and BS’ing your clients.
So, since you opened Pandora’s box in a public forume, why don’t you tell us hotshot what would you do? For you see it does not matter what the doctor, lawyer or even I would do…it’s about what a real Estate Agent would do.
A doctor seeks to heal, a lawyer seeks to protect and defend..what are you doing to help your client if they need the deal to close to avoid foreclosure?
However, if you don’t do short sales as you say, why are you wasting my time and yours talking about the responsibility of one involved in a short sale?
Do you have that much time on your hand that you just like carrying the torch for realtors? This exercise was nuts.
Barry, I’ve actually never been put in that position but if I were I would close the deal. Not because I feel a legal obligation to do so but because it’s the right thing to do. I don’t do a lot of short sales and I’m very particular with the ones I take on. I also charge an upfront fee just in case. My sellers are well informed. I only work with them if they are willing to seek legal advice.
My market, Poinciana Fl, is saturated with short sales right now but I’m just too busy to tackle this market. I only work with Sellers and regular listings are a dime a dozen right now. The only problem is finding sellers that have enough equity to sell since my market’s property values are down a little over 30% in the last 12 months. It’s brutal out there.
To answer your question about defending my position in court. Like I stated, my sellers know the scoop. I am very open with them and have what I do and how I do it fully disclosed and in writing PRIOR to them hiring me. I would certainly feel comfortable defending my position.
You asked: But hey..what do I know..didn’t you just recently say that we don’t know what we are talking about because we are not agents?
Actually…no I didn’t say that. I was responding on a post by Lenn Harley, on ActiveRain, where Brett had left a comment that I did not get a chance to read because it was deleted. What I wrote was: I missed Brett Wilson’s comment. Bummer!!! But to put it in perspective he is NOT a licensee. He is a producer of a radio show. Just someone else that doesn’t understand what we do.
This was a response to several comments in Lenn’s post wondering who Brett was and why he had it out towards REALTORS(R).
Based on some of Brett’s comments he indeed does not understand what we do(meaning Lenn and I). Lenn and I are both long time Brokers and know exactly what we are doing and we treat the consumer the way they should be treated. To be lumped in as part of a “group perspective” is insulting. All REALTORS(R) are not created equal.
My comment is factual, nothing more. I have had several debates with Brett on AR. He tends to leave many comments just for the sake of stirring things up. Sometimes he is right and sometimes he is wrong. Sometimes we just have differences in opinion.
Truth be told I just figured out when I came over here today that what Brett posts on ActiveRain are actually articles that you have written. Personally I find that a little deceitful, since it is not disclosed.. I have been debating your words with someone that didn’t write them.
Now that I know who is writing I’m much more comfortable coming here and debating the source, or agreeing if the case may be.
Hello Bryant,
Thanks for your comment.
Our postings on AR are not deceitful at all. I believe at the end of every Active Rain post that we make is an author resource box that mentions Real Estate Radio. And every article that is submitted, states that the article is “POSTED” by Brett Wilson. It does not say “WRITTEN BY”. Please read the bottom carefully.
Once submitted a copyright message appears and asks if you have permission to post another’s work and that is answered affirmatively. Don’t you think we would have checked that out first?
They are posted on my behalf with full authority to do so. AR is much more of a utility for me than anything else.
As for the stirring of the pot, not the Intention whatsoever. We work together and things are brought to my attention and as such it is obvious that there is a HUGE disconnect with some of the people on AR and the rest of the world.
Lenn Harley is on her own planet. She is speaking to the choir and her joints are for the rah..rah..I am Realtor crowd.
I and those in our org, read the data, have been involved in the business for many years, have sold bought and sold hundreds of properties in all types of market conditions in various cities and towns.
We MOST ASSUREDLY know what real estate agents do.
I have never met Lenn Harley but yesterday she made a post, it was baseless, she got called on it and she did not like it. So like a good crybaby, she deleted the post so no opposing viewpoints can be seen.
Now that my friend is deceitful. It is also cause not to trust somebody. She is manipulating that what she writes. How many other posts or comments do people like her censor.
You may not like what we say on the air or post, but other than you using profanity, racist comments, or speaking badly about an unrepresented or unaffiliated third party, we don’t delete comments.
Bryant, it seems that a lot of agents have a delusion that what they do can’t be done by someone who is not a real estate agent and I hate to be the one to burst that bubble but that is wholly untrue.
We have more experience than most agents, and as for not knowing what agents do…Lenn and others should not make such statements, it just makes them look ignorant to the general public.
On an open forum like AR I guess it’s important to hold up appearances but unless she and others feel the American consumer is stupid, she is misjudging her market horribly.
Lastly, fyi…not only do we know what agents do, we teach them. We have had over 1,000 agents attend courses we offer, and we have agents on staff as well. So please….that argument does not hold any water.
The agents we work with do a lot more than that which Lenn wrote. She described an entry level secretary. Our people and those we work with are seasoned professionals and I am not talking about their age.
I wrote an article some time back about agents not having the ability to engage in discourse. You seem to be an exception while Lenn is the rule.
Look forward to speaking with you again…somewhere.
Hi Barry,
I for one do not delete comments and welcome all, whether they agree with me or not. That’s how I learn or teach, whatever the case may be.
The AR posts from your network actually don’t have an author’s name on them anywhere. They are though contributed to the radio show and I have no doubt that they are being published with your permission and on your behalf. But since I was not aware of who you are my assumption was that the person posting was the one writing and since I was never corrected, until just now, I still feel I was debating with the wrong person. But that’s neither here nor there, now that I know where to come to speak directly to the source.
Anyway I do agree that the consumer would be better served if we quit justifying our fees by what we do. It’s not what we do or costs involved as much as it is what we bring to the transaction. In my case, it’s many years of experience, having sold hundreds of properties in my market and my ability to get the deal done. Folks hire me because they trust me. My abilities lie in keeping folks focused during the very stressful time of selling a property. I am a calming force and a voice of reason. Not to mention a strong negotiator and problem solver. These are things that the consumer can’t get through a computer screen.
By the way, I Iiked your show a lot. Brian Brady is a friend of mine and is highly respected, at least by me. Good choice of guest.
Now just let me know when you are ready to talk to a “blue collar broker” in one of the worse markets in the country.
Glad you liked the show. I’ll have Lindsay our producer give you a call to set you up.
By the way..never said you deleted anything. It was all Lenn Harley’s doing.
I can definitely see where we as agents could open ourselves up to some lawsuits with these short sales. I also think it has to do with the agreement you have with the seller & what you have obligated yourself to do. If they have obligated themselves to a __% commission & the bank won’t pay it, shouldn’t they pay it? They signed he listing agreement, right? We have sellers flaking out on us too when we have neogitated an offer. One recently signed a deed in lieu while we were negotiating on their behalf for a short sale. I guess they were calling & threatening them so they caved. We worked hard & made nothing. I know that is how it goes sometimes but I see nothing wrong with negotiating for our commissions. The banks are playing hardball we have to be able to play back, save our seller, and get paid for what we do as well. Last time I checked, we are not a charitable organization.
Ok, I clicked thru to here from BB. You may find this surprising, but I love this post. I have been telling agents this since the 90s when I started doing short sales.
Agents do not seem to get the fiduciary part of this business. Regardless of the answers Lane got from the calls he made, all that matters are the questions that the agent answers with the two words “Your Honor” tacked on to the end.
Hey Bob! Love that ending line. no I am not suprised you commented. You are a great debater and very knowledgable!
A real estate agent showed me a house that I really liked that he described as a short sale. He informed me that there is a $400 fee for me to make an offer. The fee goes to a third party that handles all their firms short sales and that it is non-refundable and there is no guarantee the lender will even respond. Is this normal? Crazy? I can find nothing on the internet about this so it makes me think I shouldn’t pay any fee. I don’t get it. I’ve never heard of this. Can anyone help?
Julie, I am not sure who you are dealing with but RUN!! This guy is a scam artist and you should report him to the local real estate board.
DO NOT PAY SOMEONE A FEE TO PLACE AN OFFER!
Way too much inventory out there to subject yourself to this kind of bunko artist!
Thanks for the feedback!
This is an interesting post. I’m sure that you have a great lawyer but I think this line of reasoning is a little thin and I’d truly be surprised if a court would agree that an agent has a fiduciary duty to work for nothing. When it comes right down to it, it would always be in the client’s “best interest” to cut the agent’s commission to nothing and I don’t think that there are any “hardship” provisions in contract law.
That said, agents who choose to specialize in this area should probably be sensitive to the fact that everyone involved is taking a licking on the deal. I don’t know how you expect a lender to suck up $50K in losses while taking the “I’m not flexible” position.
In looking at information I obtained from the title co. I notice that in a trustee sale the bank was getting $50,000 to $70,000 less than the loan amt. due.
That is a loss even after they have taken someones home. I appears to me it would be better for the real estate market if they credit the owner with that amt.
to be applied toward the mtg payment only and let them remain in the home.
There would need to be guideline and standards but it would reduce the number
of houses on the market and help the home owner remain in their home.
It is just a thought.
I am a seller and hired an agent to do short sale. I have lost my jod due to disability sustained caused by an uninsured motorists. I have requested Countrywide to refinance, loan modification, buy back my house to the amount we can afford since we now have 1 income from my husband’s retirement, but all our request were denied citing low income. I have put my house for sale in July of 2007 and the listing expired, we had 6 buyers backed out due to long process of short sale. I have listed again my house to the present agent for 4 months, we have had 3 offers ut the 1st buyer backed out long process of short sale. We have purchase money loan, put down 5%, and have $80k upgrades in this house. We have used all our savings, equity from previous home and retirement in this house and we have moved out of the house. We were told by the first lender that if we put 5% down we didn’t have to pay PMI(Private Mortgage Insurance). But now Counrytwide told us that Old Republic the mortgage insurance wants us to sign a promissory note stating we will pay for the deficiency judgment which is about $86k on the 2nd mortgage. I cited section 580b but was told that the mortgage insurance is not mentioned in this section and that mortgage insurance will sue us for the deficiency judgment. I said then let the house foreclose. Then they told us that the 1st mortgage offered $14k to be applied to the 2nd mortgage and then they turned around and said they changed their mind and wants only to give $5k to 2nd mortgage. I reminded the Negotiator that my listing expires in 14 days, the value of the homes went down again to $215,000, my selling price is $290,000. The negotiator responded and turned around that the 1st mortgage is back to offering $14k to be applied to the 2nd mortgage. My question to you is, is it true that the mortgage insurance can sue us for deficiency judgment? Aren’t we covered by section 580b since it is a purchase money mortgage, we have not refinance, the reasn why we have 2 loans is because of jumbo loans and the original lender set it up as 1st and 2nd mortgage and then Countrywide bought the loan. Is it to my best interest to foreclose the house since Countrywide has been prolonging to make decision on the short sale. Your help is greatly appreciated.
Thanks
Hileng
Hello Hileng,
You ask a couple of legal questions, so I am going to refer you to our legal expert here on the program, Erik Wesoloski.
As for letting the house go into foreclosure without any action, depending upon your which state you are in, the lender may be able to come after you once the foreclosure is completed. Just because the bank takes back the property at a foreclosure auction does not necessarily mean they cannot obtain a deficiency judgment against you as well.
Erik can be reached at 305-239-1020. He will be able to help you and answer your question.
Barry,
I must say this is an EYE OPENING post. I have also been doing short sales in Kenosha, WI since before they were popular. One of the documents that I have my sellers sign explains that their lender may try to reduce the amount of commission paid to my company, and that if that compensation is reduced, I will not expect them to pay the difference.
I have never had a lender kill a deal because I wanted to get paid… the problem is typically the selling price. Most lenders allow for a commission in the net proceeds if the price comes in within a percentage of their BPO or appraisal.
I have had them cut my commission, but that’s just part of the game, others pay me my full 7% commission and it evens out.
When you take a short sale listing, you should have a working knowledge of the lenders involved before doing so. That alone would eliminate most of these so called surprises. For the majority of lenders out there, these policies don’t change from transaction to transaction.
If you are working with a lender for the first time, or for the first time in awhile, call and ask what their procedures and policies are. Some, like Ocwen, have sold off large portions of their portfolio to Wall Street ( you would be surprised about the market for bad debt) and those loans are not easily negotiated. Then decide whether or not to take the listing, because tying a distressed seller up in an exclusive listing where the agent is in over their head will get the agent sued.
I’ll bet Barry has a “Do Not Touch with a 10 foot Pole” list that he screens every potential deal against.
[...] we wrote about these so-called short sale experts almost a year ago and told you it was going to be coming. But so many agents didn’t want to [...]
I have a couple of questions – Im a buyer in the process of buying a short sale home. The sellers bank has accepted our offer and wanted to close by April 15th, but because we are doing a VA loan our mortgage company stated they were backed up and needed more time to process our loan application and requested an extension. So me and my husband signed the extension form, and I dropped it off at the listing agent who was suppose to get the sellers signature’s and then forward it to the sellers bank. Well, the listing agent didn’t even tell the sellers about the extension and the extension of course was never given to the bank so we missed our deadline and the listing agent had to resubmit all the paperwork again to the sellers bank for processing. What are my legal rights as a buyer when dealing with the listing agent. Can the listing agent really sabotage this deal. Im not sure what her motive would be. Me and my husband have gotten to know the sellers and keep in constant contact to keep each other up to date on each side of the process. We had to get the signatures’ of all parties for a FHA disclosure I had dropped off at the listing agent two weeks ago. The listing agent claimed she had fedexed it to one of the sellers and just hasn’t gotten it back yet, but it turned out that she never sent it to him. I spent an entire day traveling across town to get the sellers signatures’ and back to the listing agent for her signature for this disclosure form needed for the mortgage company. My husband tried to call the sellers bank directly to see if the listing agent actually did resubmit the paperwork again but he was turned away because they don’t have authorization to talk to him. We didn’t get a real estate attorney, which I now see we should have. Is it too late to get an attorney and can they do anything to speed up this process? Also how long do you think it will take for the bank to accept and process the paperwork again, it originally took 3 1/2 months to hear from the sellers bank the first time.
One more question, the listing agent is asking the seller for a set of keys to the house. What could this be for? We already had all the inspectors through the house. The sellers have been very accommodating and let us in after they moved out and cleaned up a bit. I understand that at closing the seller will be there and will be able to give us the keys directly. I have a bad feeling about this listing agent and really don’t want her having access to the house in fear she is trying to sell it to someone else.
Thanks in advance for any advice. This is a frustrating process, but it will be well worth it in the end if we get this house, our first home…
Hi Lisa..what a nightmare. Unfortunately your situation is not unique. Where are you located?
Also, I want to make sure I understand something. You mention that you went all over town getting disclosures signed. But you DON’T mention if the Seller’s signed your contract extension.
If you don’t have an extension, then more than likely you don’t have a contract and the SELLERS could sell the house to anyone that they want to.
Don’t worry about the agent trying to sell the house from under you. She doesn’t own it. So she can’t.
However, if you are out of contract and she entices the Sellers to take another offer, you could be up the creek. How good is this relationship you have with these Sellers. If they want you to have the home then make sure that you get an extension signed.
Remember, listing agents work for the Sellers…not you. You have some digging to do.
Find out the answer and get back to us. Why would she want the keys? To put a lockbox on the house to show it to other buyers.
You need to delve into this.