An agent approached me, who I know, and asked if I would represent his buyer client in an approved WF Short Sale.  If he continues as the buyers agent, a commission would not be paid out to him as he is the buyers son... (WF refuses to pay him as he is related to his client... he's only been working for her for a YEAR). He would like me to split the commission (2.5%) to the buyers side with him 50/50.  I am fine with the split, but am wondering if that is unethical/illegal in the eyes of WF.  If my brokerage were to pay him a referral fee, is that defrauding the bank?  Please help!  Thanks :)

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I agree with Steele, in a sense. We all know where the $3200 is coming from. Wells is paying it out and if they say son can't get it then I don't care if son tithes it to his church, he is not going to get it unless Wells knows about it and approve. 

We are all assuming that the buyer needed the credit. In all reality the buyer's son agreed to do a favor for his mom in order for her to get a better deal (we all would do the same, I hope). Traditionally any closing costs credits would be stipulated on the PA.

But lets really think about this one. What I believe took place was the buyers son agreed to represent the buyer (mom) straight up. When this issue came up, now all of a sudden the son was going to give a his commission to his mom in the form of a credit anyway. Sounds like desperation not to lose the deal and still get something out of it. If it was that important then either reduce the contract price by $3200 or just eat it and be happy mom got a nice home.

Noel - 

Kelsey has clarified that the $3200 is coming from HER commission to be credited against the buyer's closing cost.  The buyer's son planned on crediting his mom from the beginning - which seems very likely to me - and as you point out many of us would likely do the same.  And, it will all be disclosed on the face of the purchase contract presented to the lender.

She has no evidence of any other nefarious plot.

Tni

Who's paying Kelsey the $3200? What the heck is a nefarious plot? 

Noel,

Thanks again for your comments.  I think that you have misunderstood so let's review it again :).  

The deal was originally structured with the buyers agent being the buyers son.  Since they are related, WF did not agree to pay a commission to the buyers agent.  The buyers agent called me and requested that I represent his mother and pay him a 50% referral fee.  The son was going to use his total commission to pay for closing costs - this was known from the beginning - and so it would be a big blow to their ability to purchase the property if they can't use this money.  After some research, we have determined that this is unethical and would be considered fraud as the monies that WF paid out is still reaching this buyers agent (referral fee/commission paid is the same thing in their eyes).  The buyers agent asked me to stay on as the buyers agent and continue to represent his mother despite this as he wasn't going to receive a commission no matter how the deal was structured.

As Tni pointed out, the $3200 is coming from my commission (not the original buyers agent, who has cancelled his original contract).  The son is no longer involved other than he is gifting his mother some of his money for her down payment - this gift IS allowable as it's not coming from the short sale lender and the buyer still has 5% of her own funds in the transaction.  The reason that the son is no longer involved (as the agent) is this: since the lender (WF) is unwillinging to pay a commission to him, as he is the buyers son, he figures that it would be better for me to represent her since there is a chance that they (WF) will approve my gift of $3200 to the buyer at closing.  If not, then he is fine with my receiving the commission in full.

Everything is fully disclosed to the lender, which is the important part.  On the CAR contract, we have disclosed the addendum which stipulates that my broker will be gifting the money to the buyer.  The HUD also has the credit disclosed.  

If WF does NOT approve this credit (there is a good chance that it WON'T be approved), then I will be awarded the full commission.  I will not be paying out a referral fee after closing.

Hope this helps clear things up!  Thanks for participating in the discussion :)

Now it is crystal clear.

Happy to help :)

If the SS is HAFA approved, the lender will pay up to 3% toward cc's. If it's a question of helping mom out, why not just have another agent represent her? It gets too complicated with the Arm's Length Affidavit Form that has to be signed by all parties, including the agents, the title company and the buyer & seller. 

What I find even more interesting is what is considered "unethical" and "ethical"...

for example:  We can't "pay" someone(unlicensed) a fee if they give us a client.   It's supposed to be so unethical.  BUT at the same time,  NAR pays people in Congress, etc. to do what they want through lobbying efforts.  

Well there you have it, maybe that should have been your first move-I fewl bad for the referring agent. I can't believe our Realtors Board wont use their clout to stop this type of crap. How in the world would a buyers agent relative hurt Wells? I still think the information is not correct and that the son got the info from the seller's agent who got it from a negotiator who got it from Wells legal(maybe more than likely the negotiator is interpreting their rule) and I'm sure they all assume an agent represents the seller. Don't think for a minute they understand shorts sales, not even Wells legal.

Steve and Noel, thanks for your comments!  Steve, I think you may have misunderstood a portion of this complicated story... In this situation, the former buyers agent is the buyers son.  He was planning on gifting his commission to the buyer (his mother) and so by me gifting $3200 to her to help pay her closing costs, this takes care of, a portion, of his gift to her.  He never stood to profit from this transaction as he was going to use his commission to help pay for her closing costs.    

So, I am certain that I am acting in an upstanding manner now because I am:

- Disclosing everything to the short sale lender (WF).  We have an Addendum, which states that my brokerage will be giving $3200 from our commission towards the buyers closing costs.  This Addendum is disclosed in the contract.  The deduction and gift are disclosed in the HUD and will be reviewed and (hopefully) approved.

If WF approves my giving this money at the closing table, then there should be nothing wrong with that since everything is out in the open (which is, I think, what you were suggesting Steve).  I know that the former buyers agent will not be profiting from this transaction, he is putting more money INTO the transaction, so we are good there.

Tni - LOVE the CAR legal hotline... such a fantastic tool!

Ahhh now it is clear, perhaps if the buyers son did that you would not be in the picture:) lol.

Just read this and this is exactly what I would expect.  

Most kids representing their parents on transactions that involve a loan are "gifting" their commission toward closing costs in my experience.  

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