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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So true...If you cannot handle a short sale, you should refer to someone who can and pay them because 2.5 of 2.5 equals 2.5 without doing all of the work. And zero of zero is still zero with a great chance of a family being foreclosed upon.

It's disturbing that so many brokers put their concern on their own paycheck ahead of their clients well-being. Doesn't do much to burnish the reputation of realtors in general, let alone the realtors who are ethical and put clients first.

Well put!

Guess what Francis, if you are an agent and you are doing short sales and you cannot prove that you are an expert, then you are violating the REALTOR Code of Ethics. 

The issue is, how do you prove that you are an expert? Talk about liability....

I feel the same way. I have never charged above what the SS lender was willing to pay in commissions and have never charged a buyer a processing fee. Yes Short sales are a lot of work, but if you have systems in place and know what you are doing they are simplified.

I have seen this before and my office has determined that it is illegal.  The ""processor"" has no legal connection to the buyer.  A negotiator works for a title company, a title company is not working for the buyer or seller but for the transaction.

That is my opinion and I firmly believe it.  When I run across it, I tell them that our buyer will not pay that fee.  It is in the contract.  It the offer is rejected, that would be a violation in my opinion.

Deb

Sorry!  I forgot to mention we DO disclose on the HUD.  It is on the buyer side.  Completely legal and completely legit...  And no lender has ever fought it hundreds of closed short sales later... :)

The concept of lenders not fighting the buyer's payment on the buyer side HUD is not true in my state of California. Some lenders, who request the buyer side of the HUD, do not want to see the buyer contribute to the short sale processing fee or real estate commissions. Even if we use an attorney and call it legal fees, it sometimes gets knocked out. Then again, we are an escrow state. Maybe you use lawyers in your state and for them to see legal fees will work for you?

Anyway, we get around the issue by adjusting the co-broke in favor of the listing side and then ask the buyer to enter into a buyer broker agreement with their broker for the difference. Therefore it doesn't need to be disclosed on the HUD.

This is what I do................I charge a 6% to seller and divide it 3.5 listing and 2.5 selling.  I feel the extra work put into these deals by us give us the priviledge to do this.  I also can't charge an administrative fee to the seller and I get charged one on every deal I sell. 

 

The buyers agent can charge their client this fee no problem.  Now as for the buyer broker agreement, does this allow the buyers agent to charge the buyer a percent of commission?  So in the case of my deals, they can ask that the buyer pay .5 percent?  

 

" I also can't charge an administrative fee to the seller and I get charged one on every deal I sell. "

I don't understand that statement.

"The buyers agent can charge their client this fee no problem.  Now as for the buyer broker agreement, does this allow the buyers agent to charge the buyer a percent of commission?  So in the case of my deals, they can ask that the buyer pay .5 percent? "

They can charge a percentage or a flat fee or both to their client. So in your case, the buyer's broker can get his .5 from his client directly.

our buyers agency agreements allow for putting in a minimum commission so if the agreements staes a minimum of 3% and the buyer buys a listing that is 2.5% then the agent can rightfully charge the .5 percent to their client due to their agreement.  does this make better sense?

Yes (i think)  haha   As a listing agent, you shouldn't charge a separate negotiation fee. Instead you should charge your commission. For example, if you normally charge x% for a listing, add 1-2% or whatever more for the short sale. So if you normally charge 6% for a listing, charge 8% for a short sale listing. If the foreclosing lender only allows 6%, then you have a right to charge your seller the other 2%. Now the seller can then put that expense onto the buyer. So now the buyer can pay the other 2%. With the buyer's broker's permission, You can also adjust the co-broke by 2%. So if you were offering 3%, now you offer 1% and keep 7% and let the buyer pay their broker 2%. This last strategy is used when the foreclosing lender doesn't allow buyer contribution to commissions.

The numbers used are for example purposes only. They do not reflect my brokerage practices nor should they be construed as standard practice for other brokerages. Also, each state has laws in place in regards to principals paying commissions to brokers. You must follow those laws.

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