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Ethical, or Unethical? You Be the Judge.

By Don Alexander

Real Estate Broker/Owner with 1st Prime Realty CA BRE LIC 01456248

July 06, 2010 08:27 AM

In my Real Estate Market the department of Real Estate implemented a Law which states that No Advance Fees, For Short Sales, and Loan Modifications. Excellent.

Also all Real Estate Short Sales Negotiator must be a Licensed Active Agent(Active meaning their R.E License must be Activated), and all fees paid to the negotiator must be stated in the MLS for which ever property a fee is required.

Here's the situation: I submitted a Full Price offer on behalf of my Buyer, all the fees of closing the deal will be paid by each party(Buyer, and Sellers pays their own fees). The Listing Agent then sends me an addendum to the contract: Buyer to pay $2500 Short Sales Application Fee, at the close of Escrow.

I called the Listing Agent Assistant, and asked what is the application fee for, and how does it pertain to this transaction. she replied, the Listing Agent sends this addendum to all the buyers for his deal.

Also our MLS requires all negotiator fees to be disclosed none were stated, but it says application fee. I don't care if it said Lunch for a Year fee(Joke), but in my opinion I believe the fee is to cover the Agents OverHead, and also believe that its a disservice to their clients, because the offers that are not willing to pay the short sale application fee will not be presented to the homeowner.

As we all know Home Buyers, waiting for short sale lenders approval at some point will walk away to the next available home if the lenders are not responding. What happens when the offer that has been accepted is no longer on the table, and the true Qualified buyers that wants the home is willing to buy the home but will not pay this application fee. the Home will foreclose, and the client is not aware of this application fee was the fault of their foreclosure.

This is my opinion, and I know the market is challenging for some of us, but don't lose your license over a $2500 application fee which is not permitted. to read more about this law you can go to: www.dre.ca.gov read Advance Fees, and also Point of Sale.

What's your opinion?

Thanks

Don Alexander REALTOR/Broker

1st Prime Realty

619-581-4255

www.1stprimerealty.com

D.R.E. Lic.#01456248

www.1stprimerealty.ning.com

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Michael J. O'Connor

Diamond Ridge Realty - Corona, CA

Eastvale - 951-847-4883

I have a twist on this same situation on a deal that I've just entered into contract on. In this case they have disclosed a 'short-sale negotiator fee' to be split between the listing and selling agents. The listing agent herself has told me that SHE is the one that has uploaded the executed contract into Equator for the one loan to be approved by BoA.

I'm still trying to get a copy of the 'contract' that is in place allowing them to pass on this 'charge' as a 50/50 split to my side of the transaction. The 'negotiator' is another sales person in the listing office.

So far I'm not pushing them too hard as my client really wants the home but it sounds quite stinky in my books.

Jul 06, 2010 07:41 PM

Jeffrey Smith

Author of 'Realtors Guide To Short Sale Success - Eustis, FL

Short Sale Education

My last broker insisted I tack on a "shortsale negotiation" fee to all the shortsales I was working and this fee was to go to him and paid by the buyers. Needless to say, this is why he is no longer my broker. I left listings and pending sales but it was worth getting on my own.

Jul 07, 2010 01:16 AM

Sally K. & David L. Hanson

EXP Realty 414-525-0563 - Brookfield, WI

WI Real Estate Agents - Luxury - Divorce

That is nuts.....couldn't find the suggest button....I would scream this to whatever higher authorities I could find...negotiation, application...any kind of fee is criminal,..not disclosed...smells funny....doesn't have a conscience...is greedy...scream it, report it, get rid of it...find someone on a mission to clean this up ...yuck !

Jul 07, 2010 01:27 AM

Kathy Batterton

RE/MAX Infinity CDPE, E-PRO, GRI - Pace, FL

TeamWork makes the Dream Work!

I had a buyer walk on a house he really liked because he refused to sign addendum to pay the listing agent's fee. Good point about not representing your sellers to the best possible outcome.

Why should I, or my buyer, pay for your clerical help? I have my own assistants that I pay for! This is the COST OF DOING BUSINESS! Good grief. You don't have the money to pay for staff, do your own negotiating. Like a previous poster said, this isn't rocket science.

Jul 07, 2010 01:29 AM

Aaron Seekford

Arlington Realty, Inc. - Arlington, VA

Ranked Top 1% Nationwide 703-836-6116

It's unethical. They should be reported. And it's mean. 'Nuff said. Good luck, Don.

Jul 07, 2010 01:38 AM

Irene Kennedy Realtor® in Northwestern NJ

Weichert - Lopatcong, NJ

Don,

Please give us an update after you talk to your Board and firm's attorneys!

Jul 07, 2010 02:02 AM

Michael Setunsky

Woodbridge, VA

Your Commercial Real Estate Link to Northern VA

Don, it appears the Addendum is misleading if it is in fact a negotiators fee. Let us know how it turns out.

Jul 07, 2010 02:16 AM

Morgan Evans

Douglas Elliman Real Estate - Manhattan, NY

LICENSED REAL ESTATE SALESPERSON

Thats a very tricky situation, you are right to have your guard up and thinking that this is not a common request.

Jul 07, 2010 04:22 AM

Kyle Jan

Scottsdale, AZ

Phoenix AZ Homes for Sale

A little confused, but why would a buyer pay for a seller's application fee? Why $2,500? Where does that figure come from? That is a pretty steep fee.

Jul 07, 2010 04:26 AM

Scotti Jowers

CENTURY 21 Shackelford French, Search West Monroe Homes - West Monroe, LA

Realtor - West Monroe, Louisiana Homes for Sale

Sounds like another in a long list of examples of why the public doesn't trust real estate professionals. I believe that EVERY infraction of MLS rules should be reported no matter how miniscule it may be. We have a resposibility as professionals to police ourselves.

Jul 07, 2010 04:43 AM

Bruce Swedal

Denver, CO

Denver Real Estate

If the seller agent is expecting the buyer to pay a seller fee then that should have been disclosed up front imo. Saves everyone a lot of hassle in the kind of deal where there is already enough hassle.

Jul 07, 2010 05:43 AM

Don Alexander

1st Prime Realty - San Diego, CA

To Response #60 Great information and I understand you're not a California REALTOR, however I am. Great business Practice is very well appreciated, but unethical Business Practices does not belong in my Marker area.

This is a true Scenario I've posted, and your comments is appreciated, But my borrower is a FHA borrower, which requires them to pay a 3.5% Down payment, in addition Closing Cost. Not a problem there.

Our Real Estate Boards, and the California Department of Real Estate says all Short Sales Negotiators must be Licensed Agents, and all Negotiator fee is to be Disclosed,and its not, I have the MLS Printout which I will be submitting along with my Complaint to the Department of Real Estate, and if I'm wrong, they will tell me so.

The problem with this is my clients are Qualified to Buy a Home, I believe if a reasonable offer was submitted with terms, and condition that will benefit the Home owner, and the Foreclosing Bank the Listing Agent is required to present this to their client.

The offer will not be presented because the Short Sale Application fee will not be paid by my buyer. I'm happy to see they emailed this to me, and asked that I withdraw my offer. I can walk away from this, I can give them a courtesy call, or email, and I have.

I'm in the Business of Real Estate, and unethical behavior is the reason why our Industry gets alot of criticism.

Jul 07, 2010 06:05 AM

David M. Dwares

Title Professionals Corp. - Fort Lauderdale, FL

Title guy with a broker license

Just a quick response to Craig Post's post.

First the disclaimer. I am not a California real estate agent or attorney, nor have I read the law in question. My comments are based on my version of ethics only.

Craig makes some very valid points, however he says that the listing agent's response was a nothing more than a counter offer. Don stated that he made a full price offer. I would think the counter would be for a higher sales price and not, "Oh, the price is fine but pay this third party fee pursuant to an addendum that wasn't mentioned in the MLS." That's where I think ethically, in Don's case, that the listing agent should have disclosed the fee request upfront.

Jul 07, 2010 06:05 AM

Don Alexander

1st Prime Realty - San Diego, CA

That is my agruement. I wouldn't have a problem if a Short Sale Negotiator fee to be split between me and the Listing Agent. I'm ok with that, but I asked the Listing Agent Assistant what is this Short Sales application fee, she replied the Agent sends this on all of his deal.

That's not what I asked, if she said it for our Negotiator, I would have countered back,and said Listing Agent, and Buyers Agent to Split Short Sale Negotiator Fee 50/50

Jul 07, 2010 06:15 AM

Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Don,

You know what's funny? The lising agent's assistant believes that she answered your questio: what is the application fee for?

she replied, "the Listing Agent sends this addendum to all the buyers for his deal."

Yeah, yeah, I got that, BUT can you tell me what it's for?

Jul 07, 2010 06:16 AM

Don Alexander

1st Prime Realty - San Diego, CA

I appreciate the feedback, and its important to find out what my peers thoughts are, some Agents are making our Market tough.

If we submitted a Low Ball offer, I would expect a Counter, or even no response, the price range for this home is $199k-219K we submitted an offer of $220k without any sellers concessions, 30day escrow, clients are fully DU Approved, Mid Fico is in the Mid 700.

This could have been resolve better with proper communication, the agent wants to have his assistant to field all calls, that's their business, my business is to get deals close, and communication is what will get them closed.

Jul 07, 2010 06:30 AM

Lorraine or Loretta Kratz

Crescent Moon Realty, Inc. & Land N Sea Auctions. - San Marcos, CA

Certified Negotiation Consultants

Call the California Association of Realtors legal hot line, this is a question for them.

Jul 07, 2010 07:39 AM

Larry Johnston

Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN

Broker,Friends & Neighbors Real Estate, Elkhart,IN

Thanks for sharing,I agree, I think it is wrong to charge the fee for your own advantage. That's why they make laws. (Unlike setting a recored, to be broken) These people should lose more than their license.

Jul 08, 2010 10:17 AM

Brent Wells

The LivingWell Team - Prosper, TX

Dallas - Fort Worth

Wow, I would be pretty upset if this happened to me. I would call legal and see what they say. It does not pass the smell test...

Jul 08, 2010 10:29 AM

Tony and Suzanne Marriott, Associate Brokers

Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ

Coldwell Banker Realty

Unethical and downright dishonest behavior is a hot topic for me right now. It's incredible and appalling how some agents that are clueless when it comes to Short Sales boast of hundreds of transactions and high closing ratios - neither metric being supported by the MLS, apparently in the hopes of leading unsuspecting homeowners to financial disaster.

Sep 03, 2010 02:00 AM