Charging the Buyer a Fee to Process the Short Sale Listing

My broker just came to me with a question and I didn't know the answer, so I'm looking for some guidance.  We have an agent in the office who is charging the BUYER of her short sale properties a flat fee at the closing to process the short sale.  This fee is disclosed in the contract as well as the HUD.  Is this OK?  Legally speaking?  Does anyone else do anything like this?


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This is where I "Qualify" buyers.  They must first agree to my "Rules of the short sale" which is simply:

-90 contract

-Inspection up front

-Earnest up front

-attorney review up front

-Close within 30 days of lender approval

-Proof of funds

-my fee agreement

Those who are serious will not have issues with this.  Why?  because I will then allow the buyer to lower their offer.  This accomplishes two things: Compensates for my fee, and gives me negotiating room.  So long as the new lower offer is still supported by comps, I will always submit as low of an offer as I can to start. The buyer also agrees to be flexible upwards should there be a counter or extra cash needs to pay off sellers deficiency. Since the buyer is getting the incentive of a possible discount, I very rarely have buyers not agree to pay my fee.  Once you show buyers that, while I represent the seller, my work also benefits them, all parties are happy.

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OMG  Joseph I can't believe you actually put that in writing that you have a buyer lower their offer to allow you to obtain a fee.  The seller, and agent, even with short sales, has the duty to provide the highest and best offer to the seller's lender to result in the highest net.  What you are doing is transferring net proceeds that the original offer intended for the short sale lender's net  into your own pocket.  This is what gets agents in trouble.  This is mortgage fraud my friend 

Tony, you're just wrong on that.  The agent and/or negotiator has absolutely no duty to the lender.  The agent/negotiator duties are strictly to the buyer and or seller.

That duty demands that you take the "most likely to close" offer.  Also, this leaves room for additional buyer contribution, if needed, to get a deficiency waiver for seller.

If you think our duty is for highest Lender Net, then you should not get deficiency waivers, so the lender can come after your sellers later for more money.

Short sale lenders require the seller to provide them with the best and highest offer. I do not mean an excessive over-value offer.  Have you read B of A's Real Estate Licensee Certification  paragrah 3?   Fortunately I'm in California which is an anti-deficiency state on 1st and junior mortgages

Tony, good for you.  It's nice to see listing agents that have a fiduciary responsibility to the bank.  Most agents have a responsibility to the seller and in negative equity situations, a seller's needs are not necessarily to get highest and best.  Their needs typically are to get rid of the property that is draining them financially in the shortest amount of time because in many cases they don't get any money at closing or get capped or limited money.  The seller's needs are typically in direct contract to the lenders needs.  They should be taking the STRONGEST OFFER, which is usually cash, followed by conventional with a strong down payment and then lastly an FHA buyer who offers the most money, has to go though stringent appraisal and inspection process and may not have any excess funds in case a second lender or another lien needs to get paid off.

Don't confuse a traditional highest and best sale with a negative equity sale.  They are two totally different types of sellers.


I've got to take a shot at this:

If you take a listing for a SELLER, you have NO FIUDCIARY DUTY to the bank.  You always have a duty to be fair and honest with all parties, but that is not a 'fiduciary duty'. 

Without going to webster, 'fiduciary duty' is putting your own interests second to your client's interests. You didn't enter in to an agency agreement with the bank I hope.

If I were a seller,and my agent told me about his 'fiduciary duty' to the bank, I'd sue my agent.  You do realize (assuming you are doing a short sale, and your seller has a genuiine hardship, isn't paying and will eventually face foreclosure), that the bank has an ADVERSE interest to your client?  You can't possibly have a fiduciary duty to two, separate parties who have an adversarial relationship to each other.

All this does actually beg a new question:

when an REO agent is handed a short sale, what are the agency relations?  That could be an ugly one.


Tony seems to have his fiduciary responsibility to the lender though. 

Tony, you can't have highest AND best.  Pick ONE.

As for the addendum, 'highest and best' will be what ever my professional judgment says it is.  :)

Wayne is exactly on it.  Perfect!

You are representing the Seller and the Buyer is a customer,... you have the right to your "rules" but your "rules" could be in opposition to the Seller's needs which violates fiduciary responsibilities,...

Glad you like your model,.. but better keep your attorney on sped dial.

EXACTLY - I'm a 3rd party negotiator that charges a buyer the fee.  I'm a transactional facilitator.  I represent NO ONE other than the "transaction" AND it is because ALL of my sellers have a listing agent and ATTORNEY that represent them.  I have no need to advise them of anything.  The buyer also has either a buyer's agent or attorney or both.

So what's the problem Randy?

Randy, was it Joseph's rules you were referring to? [This conversation is getting way too long and cumbersome.]

Joseph's rules will never be in opposition to the seller's needs: the seller gets Joseph's rules upfront and has the choice to abide by Joseph;s rules before he begins working with Joseph.  It's the seller's choice.

If there's a seller who doesn't like the rules, just like with medicine, choose a different doctor.

And I don't think there are that many doctors with rules.  Many (not all, before everyone jumps on me) don't seem to have more attachment to the patient's outcome than 'you see me, you pay'.



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