Home : Blogs : Sue Nelson, Broker/Associate Las Vegas Real Estate ~Team Rhino~ : Sue Nelson's Blog About Las Vegas Real Estate & More!

You Be The Judge! Unethical or Nature of The Business??

I'm days away from closing a deal that is now 3 weeks delayed. Las Vegas has a major buyers market going on, so trying to get the buyer to pay late fees for the delay is out of the question. We can live with that.

I represent the seller. Buyer is obtaining a VA loan, that we limited my sellers liability to the buyers recurring, non-recurring and non-allowable costs to $500. Buyer agreed, Seller agreed, Agents were aware & the lender was fully aware.

We received the buyers loan documents yesterday and the title company forwards me an estimated HUD reflecting an additional $1500 in lender JUNK fees (that the buyer can't pay).

Politely I place a phone call to the lender who informs me - it's not HIS problem. I said, excuse me? Did you not receive a copy of our counter offer limiting our liability? His response - word for word: "I don't care what your counter offer says. These are the fees we charge, the buyer can't pay them & therefore the seller either pays them or you have a DEAD deal".

After my conversations with the Veterans Administration, their response was "although this behavior in their mind is highly unethical, our only recourse is to cancel escrow or close escrow and file an ethics complaint against the lender after COE."

My client has purchased another home, has been in temporary housing for over a month (as the lender promised us EVERY DAY for 2 1/2 weeks that we'd have loan documents tomorrow). Then we find out he never ordered the original Certificate of Eligibility (which of course why the delay)! LOVELY!

My seller is most likely going to pay the difference and close. Me personally, I think I'd be inclined to let the deal go. The lender not only charged a 1% loan origination fee, but is receiving a massive Yield Spread Premium & somehow felt the need to add $1500 in additional JUNK fees!! He has WAY more to lose than I do... although not nearly as much as my client. Therein lies the problem.

You be the judge! What would you do?

Posted by Sue Nelson, Broker/Associate Las Vegas Real Estate ~Team Rhino~ on 06/20/2007 10:59 PM

Comments (27)

las vegas, real estate, clients, attitude, due diligence, representation, lenders, unethical, criminal

27 Comments on You Be The Judge! Unethical or Nature of The Business??

JUN

2007

As sad as this situation is I think it's in the best interest of your seller to pay the additional fees and move on. Since we all know it is a buyer's market they have your seller over a barrel. To back out would cost your seller the potential loss of their replacement home and money in the delay of selling their home once again. It might not sell for the same price another 60 days down the road. Sometimes I think it's best to cut your losses and move forward. The positive side to this story is that they move into their next home and will be happy in doing so. I'm sure it willo be a relief for everyone to get it all closed after these delays. I most definitely would file a grievance against the lender!!! His behavior is truly unethical, and his comments are disgusting. I would do my best to bring him down! Good luck to you and your seller.

Sue,

Sounds like you were dealing with a broker rather than a lender (YSP is paid to brokers). Anyways, this is a common play by unethical brokers. They will either charge more or raise the rate (earn higher YSP) and not disclose until closing. This puts the buyer (and seller in your case) in a position to either close or cancel the loan. 9 times out of 10 the loan goes through because it is at closing and no one really wants to walk from the deal.

Even if the loan closes, I would still report this person to their governing authories. In Florida, they just passed a law (yesterday) that will make this kind of activity officially illegal. Good luck.

I think this is unethical and the nature of the business. It's using the market to the lenders advantage. They know Sellers are in a pinch and so they wait until the last minute to add the junk fees. File a complaint!

I have to agree completely with you. But, sometimes, I let principles, ideals and ethics get in the way.

I think that is appalling behavior, but not all that unexpected.

Linda: Thank you for your thoughts. We will definitely file a complaint. Normally I don't mess with that stuff because it requires too much negative energy. In this case, I think I'll have to make an exception.

Jason: Excellent law. It should be illegal.

Endea: My husband said the same thing... Unethical & the nature of the business. Sad isn't it?

Roger: I've been told that one day I may choke on my principles. Who knows... this could be the day!

Steven: Again... sad that it doesn't surprise us all that much. As wrong as it is, it's not shocking. Ugh!

Sue, I agree with Linda that your seller is probably better off paying the difference. What I do think you should do is 1) have the seller file a complaint for unethical behavior. It won't do much but might register if others do the same. I would forward any such complaints to the local BBB as well. 2) provide the rest of us with the name of the unethical LO and we can all do our best to avoid this person. The world is getting smaller by day and we refer business all over (AR is a perfect example). If we can prevent just one deal from getting to this lowlife, it will more than make up for his slimey ways (dollar-wise).

One last thing, I do think that you should call his bluff. Have your seller say that he won't pay the difference and let the buyer know that he's being bent over with the fees. Let the buyer know that either he pays the fees, gets the LO to reduce them or the deal's dead. The buyer has already invested and doesn't want the deal to die, same with the LO. Call him on it. I bet he flinches. At the very least I bet he cuts the $1500 down.

- Tchaka

Tchaka: Good points. The sad part is this... the buyer knows about the situation, has asked the lender to adjust the fees but the lender refuses. (Because it's a VA deal - he can't pay the junk fees even if he wanted to).

The problem with calling their bluff is the seller will actually lose her new home incentives (which are substantial) if she doesn't close by Tuesday. If we had more time, we could maybe torture him a little... Unfortunately, his timing was perfect... FOR HIM!

Sue, I've run into situations like this before that make my blood boil. I don't like either the buyer or seller getting taken. I don't care what side of the fence I'm on, it's just not right to take advantage of a situation like this. One deal I had, I represented the seller, but the buyer was getting taken for 10,000 of fees that where outrageous. I pleaded with the buyer, (with the approval of the buyer's agent) to look for another mortgage company. But they declined as they wanted the deal to happen. I just think this type of behavior needs to be reckoned with and would be interested as to how others respond. Thanks!

David: Yes, blood boiling was certainly one of the emotions I experienced yesterday and today. I just have zero tolerance for deceit! Thanks for your comment.

I certainly understand how your blood must be boiling. If there's no time for calling the bluff then I guess the next best thing is to look at the positive side: your sellers are getting the home they want...and that has to count for something. Best of luck with this!

- Tchaka

JUN

2007

My lender did the same to my personal deal before I became a realtor... I insisted on seeing the HUD statement 4 hours before closing and found out $1500 junk fee.. (My realtor didn't even know she needed to do this for me)... I argued line by line and told the guy that I would rather give my earnst money to the seller than giving him this money so you choose.. He backed down half way... I ate $700 loss and moved on... After I became a realtor, I told everyone in my office not to use this lender.

The lenders I work with pick up the VA non-allowables. This just reinforces some of the blog posts requesting better control over lenders.

Tchaka: Thanks!

Christine: This guy will not only never earn my business, but he will need some serious damage control when I'm done with him.

Randy: You're exactly right! The buyers agent had no control over the lender (even though she chose him). If one of my lenders pulled a stunt like this (and they wouldn't... but if they did), they would never do another loan for me EVER!

Have a great day everyone!

Sue,

Make a formal written complaint to the President (or attorney) of the Title Company. Their role is to be the neutral party.

Next, let the mortgage broker management know that you are filing a formal complaint with the agency who regulates the professionals in your state, and that you are going to file suit in small claims court after closing - in writing.

Then, follow through. These folks are counting on you giving up because the amount is small.

Jack

JUN

2007

Thank you Jack. We will definitely take your advice and agree on all counts.

I feel your pain, however every VA I've done has had about $1500 in non-allowable, so the $500 limit seemed unrealistic in the first place. Didn't you get a good faith estimate?

I also would advise the seller to pay it and move on. Does he really want to buy back the house and lose out on his incentives for $1000?

Time to move on ... NEXT!

- James

Sad, but the seller stands to lose more $$$ if they don't close. Close it and then spend a little time going after the unethical lender. May I ask who the lender was? ( you can email us directly if you don't wish to post)

James: Here's the problem. We did get a GFE, but the buyer switched lenders. And it is not uncommon for our VA deals to have a $295 processing fee and their miscellaneous Tax Service fees equaling just under $500 (which is why we limited it to that).

Stacy & Jackie: Hopefully it will record today. Then we go after the lender & hopefully we can make him regret his greedy, unethical ways. Watch your email. :)

JUL

2007

When I lived in Pensacola, the military was my niche. I have represented probably 40 buyers who used their VA eligibility. Not once did that have to pay an origination percent, and their lender fees never went over $600. As a Buyers' Agent, it was my duty to get a good faith estimate and deliver it to the listing agent so they could see exactly the costs that the seller would have to pay. Only one time did a lender try to sneak something in. Everyone threw such a fit that the lender finally relented and ate the cost. Here are the most important things to get when working a VA loan:

1) cert of eligibility confirmation (these can now be pulled on line to cut down the request time)

2) Good Faith Estimate from the lender

3) addendum stating the max junk fees the seller will pay, as well as an addendum that states the max seller will pay should the appraisal call for any additional repairs (these are two separate costs) For example, in FL at least, if the roof is over 13 years old, a lot of times the bank will call for the roof to be replaced before they will close on the home.

4) a lot of times the VA funding fee will be rolled into the loan. So it is important for the seller to realize that the contract price of the home might include this fee, but will not be going to the seller.

Jennifer: Thanks for the comment. I thought we had all that wrapped up, unfortunately the buyers agent apprently has no control over the lender. None of my lenders would ever pull that type of stunt.

I would report him, spread the word, and help us clean out these dodgy lenders that are giving our industry a bad name. I would call the owner of his company also.

I would defiantly report him and file a complaint. The sooner we get these unethical lenders out of the industry, the better.

Ben: The owner is his Uncle, and he honestly doesn't give a rats butt. Sad.

Ray: No question. We're still hoping to close it this week - then a formal written complaint will be filed.

JUL

2007

~~UPDATE~~ We closed the deal & the seller is happy (with me at least). It should get interesting from here!

JUL

2007

Sue - "Been there done that" I just had a sale fall where I was assured the buyer was qualifed. Both my seller and the seller she was purchasing from had already purchased replacement property. We gave the the buyer of our property 2 separate extensions they needed and on the final closing date the buyer could not close because he was never approved even though we had an approval letter within 7 days after the offer was accepted! My seller filed a complaint with the finance department of the state of Idaho as did I. I would let the seller make the decision and either way would file a complaint with the finance department of your state against this lender. Good luck to you.

George: It is SO amazing to me that we can't police our industry better than we do. Larger fines & enforced rules/ethics should be a minimum.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?