John MacArthur wrote a post yesterday expressing his disapproval of a Real Estate Company in his area that charges Short Sale Sellers a fee in addition to the commission. John’s opinion is that this is taking advantage of people. I thought his opinion was way off base. But hey…..that’s just my opinion. Go read his post and form your own.
My question to John was “Is it the fee or the amount of the fee that has you riled?” I asked this question for two reasons.
1. If it’s the AMOUNT of the fee then I would consider his opinion a possible violation of Sherman Anti-Trust Laws.
2. I list short sales AND I charge an upfront fee to my sellers. It's a very reasonable fee and they pay me prior to listing the property. I also charge a commission at time of closing.
For number one you can do your own homework.
Here is my explanation of number two.
I charge an upfront fee because Short Sales are riskier, more time consuming and contingent on the Seller and their Lender cooperating.
As any good businessman would I charge a small listing fee upfront to help offset my costs and risk. I am certainly not unethical and I am not taking advantage of people in a difficult situation. I am doing everything I can in my power to help them EXCEPT work for free.
Did you know I pay more for E&O insurance because I list Short Sales?
Did you know I NEVER reduce the amount of the co-broke if the lender reduces the commission? This is a benefit to my Sellers because Buyer Agents know they will get a FULL co-broke if they bring a Buyer for one of my Short Sale listings.
I closed on three Short Sales last week. All of my Sellers were very happy that I was able to help salvage some of their credit and get them out of a difficult situation.
I have only heard of one other broker that charges an upfront fee on Short Sales in my area. I tell my Sellers right upfront that MOST broker/agents will not charge a fee. They pay me anyway. Why? Because I build value. I bring a lot of knowledge and expertise to the table. I have 2 Sellers right now that are Attorneys and even have one who owns a C-21 brokerage.
A few months ago I had a Seller decide one week before closing that he would just let the house be foreclosed on. I had worked for five months on the deal. His Attorney advised him to do this so he would not have Federal tax issues. It was my Seller’s homesteaded property. He was exempt from Federal tax on the sale. His Attorney was wrong and probably just wanted to get the fee for filing bankruptcy. I had zero control over this outcome. I stared charging an upfront fee the very next day.
I refuse to have my compensation controlled by outside forces.
Below is what one of my recent Sellers had to say. What say you?
Bryant,
You are amazing! From the bottom of our hearts we want to thank you for this smooth transaction even from across the United States. We are all spread out - David in China, you in Florida, and I am here in California. Even with the distance this transaction did not skip a beat. You did everything on your end and we did whatever you told us to. Your hard work and dedication paid off! You even got us a better deal than what we expected - with the 2nd being forgiven. Your professionalism, patience, persistence, and follow through mentality kept this transaction out of foreclosure and made it into a smooth Short Sale. You are the King of Short Sales! Thank you again for all you did. We wish you and your family the best and keep up the good work.
Sara & David Fisk
FAQ #1 What is a Short Sale? DISCLAIMER: I am a Florida Licensed Real Estate Broker. This article is my opinion based on years of experience and the laws of my State. All Sellers are urged to seek competent legal and tax advice. I am NOT qualified to give advice in those areas. CENTRAL FLORIDA REAL ESTATE SHORT SALE INFORMATION MORE INFO FROM BROKER BRYANT... THE SOURCE FOR POINCIANA REAL ESTATE
FAQ #2 What is a Hardship and why do I need one?
FAQ #3 What goes in the Hardship Letter?
Copyright © 2009 http://www.brokerbryant.com/ | All Rights Reserved
Reserved Parking For "The Lovely Wife"...TLW...ROAR!
Hun...
As far as I can tell, when it comes to Short Sales...You RULE :)
TLW...ROAR!
Quite the testimonial, Bryant. I read John's post as well and it's really out of my jurisdiction. I found conversation an interesting one, though. I'm sure this thread will be more of the same.
Personally, the only way I make a dime is if the loan closes.
I don't want to sound incentive or uncaring, but I 'm in the business for the money ( what a concept right). I did some work on the famous Florida tobacco case and I don't know how the lawyers felt or what they did to earn millions of dollars but they didn't turn it down either. When someone would ask Mr. Levin always said look at the money and time it took for me to get to this point. People don't realize the time, money and education we put into this business.
Hi BB! This testimonial is your BEST form of advertising! You obviously know what you're doing and if I were selling in your area, I'd be confident that you would do the right thing and make sure that I continued to bring you buyers for your short sales. We don't have that many here--although they're becoming more 'popular' if you will--but, I showed one today in a country club area and chatted with the listing agent who told me that even if the bank only pays 3%, he is committed to being sure that I receive the full commission. I thought that was mighty generous and, of course, if the deal goes through, I am NOT going to let him walk away with nothing--heck, he's done the bulk of the work on the deal!
About the lender reducing the commission...is this what will be a violation of Fannie Mae as of March 1? And what does that really mean? The banks can't do it or will still do it and wait to be penalized and how will they be penalized? I should probably put this comment on Lenn's post-don't mean to hijack you!
http://activerain.com/blogsview/954243/MUST-READ-FOR-ALL-AGENTS-THAT-SELL-SHORT-SALES-KEEP-THIS-FANNIE-MAE-SERVICING-GUIDE-IN-YOUR-FILES-AND-ON-THE-WALL-OF-YOUR-OFFICEOFFICE
Bryant, I have no problem with you charging a fee because as you said it is soooooooo time consuming.
My issue is in Ann Arbor, listing agents are trying to charge the buyers a fee.
They have no contractual relationship with the buyers and it is illegal as determined by our MAR attorneys. But, still they try.
BB,
I too love a good story. I love even more though an Agent who knows is stuff and is willing to walk the talk.
BB, great testimonial. Let's give credit where credit is due, to you that is. We are just starting to see more short sales here, and I am scrambling to learn all I can from you. I do enough free work. Thanks for sharing all your wisdom!
Krista- I will answer your question; that rule is only for Fannie Mae owned notes. Fannie Mae does not own all the notes in the country. Freddie Mac usually follows, but as of yet, has not. The rule that Fannie Mae just said takes effect on March 1 and says that no servicer, those are the ones that collect the mortgage payments and negotiate the terms of the short sale in behalf of Fannie Mae and all other note owners in the world, those servicers will no longer be able to lower the commission of realtor to below 6%. Our fee is much higher than 6% so this is still going to be an issue for us. But it is better than what the servicers have been doing. The reason most servicers reduce the fees to 5% is because they make 1% commission on each short sale they get approved.
This is not binding on Bank of New York, Private investors, PMI companies, Etrade or any other note owners.
So it will still be a thorn to deal with from the others. Katerina
Bryant- What a wonderful testimonial! I love getting those letters. We get them from every seller to protect us should you ever get one that changes their minds years down the road:) You can charge whatever marketing fee you want to charge. That is your business. It is NOT anyone else's business!
More power to you -- there is way more risk and agents are, after all, not non-profit organizations.
I haven't heard of anyone here charging an upfront fee but it's certainly not a bad idea. More power to you!
Bryant - I have to say that you present a fair argument for the other side of the coin. Somewhere, my point that I feel this is not a good thing turned into a statement that I don't believe we should earn money. Nothing could be further from the truth.
In my blog, I assail a practice by one broker in my market that I personally find distasteful. I know that folks all over the country can prattle on about the greater risks and point to statistical analysis that indicates these transactions are more difficult to bring to close.
If that is the case, I would imagine that brokers might want to think about charging an increased commission. Each broker could ascertain the ROI of handling short sales and charge a commission that will provide them with sufficient income. I don't think the seller would object, they are not paying the commission. They are broke and will not be paying anything. They have no money. The purchaser will end up paying all the closing costs, including the brokers commissions.
I stand by my belief that asking a home owner to pay guaranteed money for the short sale is not in accordance with any principals. It is tatamont to kicking a man when he is down.
To state that these sales are riskier is one thing. The truth of the matter is that not one listing carries the guarantee it will be sold. In the flooded markets we have across the country, all sales are in jeapordy. Resales compete with short sales which compete with bank owned property.
All the extra work involved is having the seller prepare the package, submitting the package when an offer is received and following up with the bank. You must have permission to work with the bank, but you never have the right to negotiate with the bank. They are not party to the contract.
They will accept the short sale offer or reject it. If they reject it with advice regarding changing the price or terms of the sale, you can relate that to the seller and then the seller will direct you. If the lender rejects the offer and/or instructs anyone to reduce the amount of compensation to the broker...the lender is in violation of tort. The lender is not party to the contract and has no legal right to renegotiate terms that were between the listing agent and the seller.
All the forms the policy wonks at the bank contrive do not allow them to change those terms.
It is a difficult time for anyone in this situation. It is a challenge to handle the sale. It is not a time to go those in the worst shape and ask them to pay for services that are available for free.
We have a difference of opinion. I respect you and your right to do business as you do. It is difficult to even have this interchange because you are there in your market and I am here in mine.
Bryant - Right on! I also guarantee a minimum co-broke fee to buyer's agent, none of the "you'll get x percent". I happily increase their fee if I get more. Tonight I was promised an approval on a short sale tomorrow by Countrywide. The buyer is withdrawing- defaulting - unfortunately, his earnest money will not be returned. I might start charging other agent's buyers an upfront fee, too!
I haven't heard of anyone around here chargng their sellers an up-front fee for a short sale listing. But I have to admit, I've steered clear of them, so I'm certainly no expert. I tend to get buyers who previously had contracts on short sales, and got tired of waiting to hear from the bank, so they buy my listings instead. Yay for me and my sellers.
Don't get me wrong. I don't have anything against the short sales and REOs as a whole. And I really feel sorry for those sellers. But I sold mobile and manufactured homes for several years before switching to real estate. I left the brokerage that sold so many mobile and manufactured homes because I was fed up with the amount of work I had to do, for the small commission that accompanied. And I could tell you so many sad stories of retirees who needed to sell a home in a park where they didn't own the land, and their lot rent had increased at 3 times the pace of their Social Security income. After a few years, their retirement dreams had gone down the toilet, and they couldn't sell their homes because of the depreciation factor, and their health had declined to situations that I don't want to tell, because I can't stand to think about what I saw. Then there are the family parks. Ugh. Anyway, I bring this up because working with any clientele that reminds me of those days just upsets me too much. I do all I can to avoid traumatic scenarios.
Hmmm, this is quite the interesting read. I'm not sure how I feel about charging an upfront fee. Both you and John present some great points. I personally have not charged upfront fees, although I do charge a fee at closing for the extra work. It's so hard to close these deals that I do understand your point of view.
Hey guys. Why am I on AR at 5:50 AM? Great comments as always. I am heading out to show properties right now and will be back later to respond.
I woke up at 5am checked my emails and this was there:
SHORT SALE TESTIMONIAL
When we first met Bryant we were at the point of total despair and we were seriously contemplating walking away from our home, but Bryant calmed our fears and explained to us the option to do a short sale, which is a better avenue than going into forecloseure. Just a short two months later Bryant got the bank to accept an offer. Our house was sold and most importantly we saved our credit. My wife and I now have a second chance to make it right this time. Thanks Bryant for all your hard work and dedication to us.
Sincerely,
Vanessa and Garry
If I was to tackle any more shot sales (and im not looking for any) I would also charge an upfront fee. Im not so sure it would be that small. Its a lots of work and time consuming.
Broker Bryant- Hello, again! Looks like you're doing what you do best--selling homes! Okay; I have to confess-I didn't actually do it but I thought about swiping one of your pics and putting a crown on it but I don't want to swipe a Tutas Town Pic without express, written consent b/c I don't want to get shot by TLW. So, could you help me out and photoshop or picnik one of your headshots and add a jaunty crown to it and place it here for the newly-proclaimed "KING OF SHORT SALES"? Thanks a bunch! That's an amazing testimonial.
--Lisa
Bryant - We have been charging up front fees for years. If a buyer wants me to work with them then there is an exclusive agreement as well as a retainer. This is because they may never buy anything and my time has value. We do the same thing with our auction sellers. They have the right to reject a high bid in a non-absolute sale, therefore the property might not sell. Because of this, we charge them in advance for all of the marketing we will undertake on their behalf.
It's called having Skin In The Game.
R
yup, we just had a board meeting about this very thing yesterday. you have to be very careful how you market and provide your services.
I recommend anyone in Florida to be careful charging the upfront fees if a lis pendens has been recorded. With the new Florida Foreclosure Fraud Act FS 501.1377, upfront fees could be in violation. The Florida attorney general gave an opinion to FAR a few months ago and he said in his opinion Realtors are exempt unless they are charging upfront fees. See link below:
http://www.floridarealtors.org/LegalCenter/HotTopics/upload/Short_Sales_AG_letter.pdf
Hi Rob, I certainly agree people need to do their due diligence and make sure they are properly disclosing. By the way I completely disagree with the attorney general's opinion on this. This law was put into effect to help protect the public from scammers. I charge a processing fee. It has nothing to do with getting the short sale approved or any foreclosure remedies.
Look at this this way. I know you have a part of your business that will charge a seller a fee to place thier property in the MLS. Wouldn't you agree that a short sale seller could use this service if they choose to? And if they made that choice would you turn them down?
Saying Realtors(r) are exempt only if we don't charge an upfront fee is taking the easy way out.
BB - I am with you 100%. I actually changed my flat fee MLS agreement to clearly state that the seller acknowledges that I am not in violation of this fee by listing with me. From my meeting (group I was with) with the Attorney General last Fall, I would say that I doubt he would go after a Realtor for doing this however I don't know if that gets us totally off the hook. One thing we did request at our meeting with the AG is to get this law cleaned up a little, so that Realtors would get exempted altogether. Hopefully that will happen in the next session.
BB~ Great testimonials! I love your direct communication style and your commitment to what you believe in...Thanks for commenting on my post these past few days!
You are always direct in your beliefs and obviously knowledgeable in short sales. They are more difficult, more time consuming and less likely to close. I understand why you would charge a processing fee upfront.
Great idea. I for one know I hate putting a lot of time into something with hopes of earning a check, just to walk away empty handed.
Your experience is the service you are selling, if the people need it, and see a value, they will pay.
I think you have every right to charge a fee...if a seller doesn't like it they can go else where. One of the hardest things about this market is how many hours we spend basically working for free....My daughter told the the other day that my buyers should pay me for all of the time I spend with them without a sale. I like her empathy but don't see that working...yet!
BB - There is no problem in charging a fee as long as proper disclosure has been made and documented. Good for you. Now, I hope you don't mind me asking - do you credit your upfront fee back to the sellers at closing?
"I refuse to have my compensation controlled by outside forces."
Which is exactly what happens when you get involved with banks at any level. Bravo.
Hey Broker Bryant - thanks for the detailed explanation of what should go into a hardship letter. Wish I'd had that a few weeks ago but that's okay. We are moving along (two lenders) slowly but surely.
BB,
I instituted an up-front fee the day after this scenario:
1. Spent money marketing to get short sale prospect.
2. Spent time (read - same or more valuable than money) meeting and closing on short sale prospect.
3. Spent more time doing the listing (docs, pics, lockbox, MLS data input, etc.)
4. Spent money and time marketing to sell the property.
5. Spent time negotiating best offer/contract with buyer's agent.
6. Spent time negotiating an approval with the bank.
After all this time and money the buyer decided she wanted to move back into the house (yes, she had moved out) AND KEEP IT!
Note: I threatened client with a lawsuit since I had brought a ready willing and able buyer, etc. But you know how that would have worked out so it was an empty threat. I quickly moved on.
Bottom line: After all that time, effort, and money expended. Nothing to show for it! Now I ALWAYS charge an up-front fee too! Haven't lost a short sale client yet either. None of them blink an eye when I explain the fee and the reason for it.
Oops. Forgot I was logged out when I posted the comment below. ;-)
BB,
I instituted an up-front fee the day after this scenario:
1. Spent money marketing to get short sale prospect.
2. Spent time (read - same or more valuable than money) meeting and closing on short sale prospect.
3. Spent more time doing the listing (docs, pics, lockbox, MLS data input, etc.)
4. Spent money and time marketing to sell the property.
5. Spent time negotiating best offer/contract with buyer's agent.
6. Spent time negotiating an approval with the bank.
After all this time and money the buyer decided she wanted to move back into the house (yes, she had moved out) AND KEEP IT!
Note: I threatened client with a lawsuit since I had brought a ready willing and able buyer, etc. But you know how that would have worked out so it was an empty threat. I quickly moved on.
Bottom line: After all that time, effort, and money expended. Nothing to show for it! Now I ALWAYS charge an up-front fee too! Haven't lost a short sale client yet either. None of them blink an eye when I explain the fee and the reason for it.
Good for you BB! Can you charge a processing fee to the buyer for negotiating and processing a Short Sale if you're the listing agent? I've been told by my Broker that I can only charge a commission, no other fee....
We have a broker here that is an Attorney and real estate agent offering a 2% percent commission and then in the agents remarks is saying that the commissions shall be splint equally but only after subtracting out their short sale possessing fee! No disclosed amount! What you do is the right thing to do. Good Job