If you follow me on Facebook or Twitter, you will already know that I am experiencing a little frustration regarding a short sale I am negotiating for another agent. Because I am so well-versed in short sales and they require a special expertise, there are several other Lyon Real Estate agents who engage me to negotiate their short sale listings...our arrangement usually is that I am paid a percentage of the listing agent's commission from the transaction, and just deal with the lender loss mitigation reps. The other agent is responsible for all other pieces of the transaction like dealing directly with the seller, buyer's agent, etc.
Well for the last couple months or so, I had been negotiating a short sale with this type of arrangement for another Lyon agent. This agent listed his son's property. Fine...seemed like no big deal - just any old short sale.
The loss mitigation rep from the lender contacted me yesterday. "Erin, I have some good news, and I have some bad news. The good news is that the short sale has been approved! The bad news is because the listing agent and the seller are related, we are reducing the listing agent's commission to $0." WHAT!?
The loss mitigation rep explained that it is their policy that ALL short sale transactions must be at "Arm's Length."
Well no kidding! I have dealt with Arm's Length transactions before and have blogged about them...in fact most lenders will require buyer and seller to sign an affidavit swearing that they are not related, and not business associates. But the agents are not principles to the transaction...
I got my managing broker involved...basically Lyon Real Estate must still facilitate the transaction, but receive zero compensation, but accept all of the liability for the legal ramifications of the transaction. My managing broker suggested we switch listing agents...so we tried to convince the short sale lender to accept a substitute listing agreement, naming me as the sole listing agent rather than the seller's father. The short sale lender said no and they would cancel the approval if another listing agreement was presented.
So.....corporate legal counsel is now getting involved, and without going into more detail - the transaction is moving forward with no compensation to the listing side. Coincidentally, the buyer's agent commission was actually not reduced at all. The listing agent and his son (the seller) are just happy this short sale transaction was approved, and have assured me that my efforts will be compensated in some way...frankly, they are fortunate that Lyon Real Estate is still willing to facilitate the transaction.
So.....just be aware that this may happen if you list your short sale with a family member who is a Realtor. It looks like this transaction will have a happy ending, but I can see where this situation may cause problems for others.
There is no way this is not an arm's length transaction. The lender is way off - base on this one...proving once again that the lenders are too big.
They are too big to fail. But should always be in danger of failing - otherwise they act stupidly --- causing world-wide Great Recessions.
They are too big for their britches. And should never be able to abridge the agreements of others in an arbitrary manner.
They are too big for true competition.
They are too big for Congress -- and all their shills there.
They must be divided up before they conquer us all.
Where are the trust-busters when we need them? Who are we gonna call?
I agree that this is 100% ridiculous...but at this rate, I believe the path we are on is to focus on getting the escrow closed and tangle with the Arm's Length crap with the short sale lender after COE.
This issue has been rearing it's head alot this last year. I agree with Jim that the lender's are beginning to acquire more power than ever to control every last little aspect of a transaction. The principals are being reduced to minions for the benefit of the lenders. It is just a shame, that there is no shred of respect for the transaction. Luckily for the seller, they are still in your capable hands. I hope it all works out.
He is lucky that your broker will take on the liability without compensation! That is crazy that they are not allowing another listing agent to take over.
Actually they are not...a new development since I wrote this post is that we have to step away from the transaction. Absolutely ridiculous...I haven't gotten around to writing a follow up yet.
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