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Truthful co-op commissions and property pricing...

By
Real Estate Agent with Coldwell Banker Residential Brokerage

The fact of the matter is that agents and brokers are required to only give out and post factual information. This is regulated by Board of Realtors, as well as the state licensing division. Every multiple listing service has a requirement that all data be accurate, price and co-op commission included. It has been ruled in many cases throughout the country that when a certain co-op commission is quoted on the MLS, and then a different amount is offered by the listing broker upon receipt and acceptance of an offer, unless the selling broker agrees to the new co-op amount, the listing broker remains liable in arbitration for the original co-op amount advertised in the MLS. Teaser co-op splits have been deemed unethical by many boards, and have forced the listing brokers to pay the original co-op they were committed to. 

Short sales are not very complicated as they simply require any mortgage holders to agree to an amount that is less than what they are owed. Lenders have placed some parameters on both the amount the seller can contribute towards closing costs, as the seller in reality is not contributing anything as this amount is simply another reduction in the proceeds to the lender or lenders, as well as a cap on the real estate commission. also, the closing statement must zero out the seller, in other words, the seller cannot receive any proceeds or benefits from the sale and closing other than a release of the property to the new buyer. The seller is also issued a 1099 for the deficiency to the lenders, the difference between what was owed and what the lender settled for.

Lenders today have realized that a short sale is far better than having to deal with a foreclosure. Every lender or mortgage servicing company has a loss mitigation department that specifically handles these situations. That is the department that will review and consider any contract offers. Short sales must be noted as that in the MLS and sellers should not accept any offers unless it is contingent upon the further acceptance of any lenders involved. The posting of a low price by the listing agent is a serious problem and is a deceptive practice, not allowed by any state licensing division and certainly not allowed by any Board of Realtors.

Rick Foster
Starate Real Estate - McDonough, GA
How do you think that listing a price contingent upon a third party acceptance is a deceptive practice?  I'm not aware of any regulation stating what price a house can be listed at.  When an agent list a house at an overinflated price that it won't possibly sell for isn't that agent failing to due his due diligance?  That truly is a deceptive practice.  Houses that sit for better than a year on the market with no offers.  Sorry but price drives the market.  Thr price that a reasonable person will pay in a market is the true value.  Please state the statute that this violates.
Jan 23, 2008 10:57 AM
Cristian Koch
Coldwell Banker Residential Brokerage - Alpharetta, GA

Rick,

A seller can sell a property at whatever price that seller wishes to sell it for. However, if that seller owes money on the property, ie. a mortgage, and a broker advertizes a price for that property that is less than what is owed, knowing full well that the seller cannot make up the difference, and not having advance knowledge of exactly what the lender will settle for, requires an upfront notice to any buyer that the advertized price is nothing more than a suggested offer price. Without such notice, it may be a deceptive act. The "Fair Business Practices Act of 1975," O.C.G.A. Section 10-1-390 et seq., is the primary consumer protection law of Georgia and is enforced by the Governor's Office of Consumer Affairs. The Act regulates unfair or deceptive practices in consumer transactions.

Jan 24, 2008 02:57 AM
Rick Foster
Starate Real Estate - McDonough, GA

Cristian,

In speaking with my closing attorney he assures me that stating "approval is required" meets the intent of the law.  Actually any price stated is only a suggested price be it a Short or Traditional sale.  In addition for anyone to state that Short Sales aren't very complicated obviously hasn't done many recently.  My Short Sale Package consist of 80-100 pages.  Whereas the traditional sale is normally less than 20.  In order to get  20-30% off of the BPO as the lenders net, you must justify that price.  This requires much more than a yard sign, lock box and a CMA.  In addition to be successful you normally have a 30-60 DOM to get this done.   Last I heard average DOM for those hard traditional sales were 6 to 9 months or longer to get the job done.  I don't pass out legal advice but i do check with attorneys.  Seth Weissman has written several interesting articles about the "FAIR BUSINESS PRACTICES ACT" and how it relates to Realtors in recent years.  I bow to Mr. Weissman on legal issues. 

Jan 24, 2008 10:56 AM