TLW.  Thanks.  This situation didn't have to go this far.  I've been harping, yes I HARP, about this for 6 months.  This matter was covered by counsel to the Northern Virginia Association of Realtors in a Continuing Education class for brokers. 

It has always been clear that a third party to a contract cannot use extortion to lower the co-op to the selling and/or listing broker.  The lender for the seller is not a party to the listing agreement, a contract, between the seller and the listing broker. 

This isn't anything new.  I just want to get the word out from an authority, Fannie Mae, other than from Lenn.  This announcement is dates September 25, 2009.

Carolyn.  Thank you Dear.  Love those features.

Susan.  Get the word out.

Alan.  That's always been my position.

Bill G.  Agreed.

Michele.  Thanks.  The moving target these days are Short Sales and the dictatates of the seller's mortgage companies.

Missy.  My pleasure. 

Mark.  Fannie has an anticipated 6% commission and closing costs in their hypothetical net sheet.  That may be the basis on which they would try to reduct the commission.  They are treating the real estate commission as a closing cost, which it is but since the closing cost and real estate commission are fungible, they are probably hitting the real estate commission for the shortage. 

THAT IS WHAT WE HAVE TO FIGHT.

Example

Property value -$150,000

Total amount due on first lien $178,000

Sales price -$148,000 (99% of value)

6% Commission and closing costs ($ 13,000) (9% of sales price)

Less funds from homeowner for cc $ 1,000

Payment to $20K lienholder($ 2,000)

Net proceeds -$134,000 (90% of value)

Shortage/loss -($44,000)

20% MI Claim (100% of claim) $35,600

Shortage/loss ($ 8,400)

==================

Step 3: Negotiate the Terms

􀂃Focus on the bottom line.

􀂃If the borrower is not willing to make a contribution, suggest that he or she pay closing costs and commission rather than paying toward the loss.

Neal.  That's what it looks like to me.

Sally and David.  Thanks for reading.  Spread the word.

Andrea.  My pleasure.  We need to keep these servicers away from the contracts.  Lenders and servicers need to learn the meaning of "third party".

Gail.  My pleasure.

READERS.  GO BACK AND READ THE BOTTOM PART OF THIS POST AGAIN.  I ADDED A PARAGRAPH ABOUT THE DISCLAIMERS POSTED IN LISTINGS BY LISTING AGENTS/BROKERS. 

Gail.  We can't avoid them here.  Some of our very best listings are short sales.  They are priced right and in better condition than foreclosures.  All of the remaining real estate is homeowner occupied and far, far overpriced because the sellers think their home is worth what it was in 2005.

Dee.  Grinned, huh???  That's a good sign.

Steve.  The pleasure was all mine.

Lyn.  Thanks.  Spread the word.  Freddie hasn't made this announcement yet.  We'll see.

Teri.  Short sales are difficult primarily because there are no rules or guidelines.  But, we cannot avoid them in my market.

Jane.  Freddie hasn't followed Fannie's lead in this. 

The issue isn't .05%.  The issue is "bait and switch".   They promise X% and then the lender interjects themselves into the listing contract where they are not a party and dictates to the listing broker what they can pay.  It's a form of extortion.

.05% doesn't seem like much but it's causing agent to stop showing short sales which is not good for their buyers and causing disagreement between agents when it shouldn't be happening. 

.05% times several thousand transactions and it's real money that agents are losing. 

Sandy. Indeed it is.

Cat.  My pleasure. 

Amy.  Forward it to your MLS too.

Midori.  Thanks.  I love reblogs.

Sunil.  Great.  Pass it on to your MLS

Judy.  You wrote:  They further added, "An offer of compensation to cooperating Brokers made in a Potential Short Sale Circumstance which states that it may be adjusted by a third party after execution of a contract for sale and purchase, is an allowed exception to the general rule that offers of compensation must be unconditional." (Underline is my emphasis)

This is wrong, wrong, wrong.  This opens the door for any and all types of "exceptions" to listing brokers honoring the co-op. 

Thankfully, our MLS takes the opposite view.  Sadly, they keep the information under cover. 

Wendy.  Petition your MLS board of directors and BOR.

Joshua and Kathy.  Pass it on.  Pass it around.

Kristal.  That was my plan.  Now get out and use it.

Grace.  Thanks.  We have some very smart brokers and agents on ActiveRain and they know how to use this information. 

Wendy.  Even though the jumbos are over the FNMA limit, most lenders still follow the Fannie Mae guidelines.  In fact, Fannie just started buying jumbos about 2 weeks ago. 

Cindy.  Good for you.  I've been ranting and raving about this for 6 months.  This FNMA announcement is good guidance.  You're right.  What they offer is what you get and there is no 50/50 rule.  The NVAR agrees and agents who have taken the listing brokers to the board HAVE WON in Northern Virginia.

George.  Pass it on up and down.

Gena.  Yeee Haaa!!!

Good for you. You deserve a

Dee.  She would be right, IMO, if the lender were trying to force the listing broker to pay more than 6%.  When was the last time you saw that happen???

Sally.  Our MLS is clear.  They advise that what is offered in the Co-op is what the listing broker owes.  It's just not enforced too widly nor is the information as clear as it should be. 

Gena.  Yes.  I believe that listing commission will be offering a lower co-op.  However, if a lender's attorney sees this, it may make some small impact.

Jane.  One small step. . . .

PS.  Good for you.  Spread the word.

Carla.  They are doing it to mitigate their losses and because THEY CAN.

Steve. WHAT???  You didn't read them all????  Not to worry.  We'll all get the word out.

Melina.  That means that if the bank decides to cut a commission to 1%, the listing broker can pay a selling broker anything or nothing.  When things don't make any sense to me, I want to see the regulation. 

Bryant.  You get a  for that.  Listing agents should care about paying their cooperating brokers.  I would do the same thing.  It will be interesting to see how this plays out. 

Simon.  You folks need to talk to your MLS.

Audrey.  There you go.  That is precisely what has happened many times in Virginia and Maryland.  Our boards and MLS are supporting us.  I've been following Virginia.  I've advised agents to go after the fee after settlement.  I think the best way to handle it is to just cloee the sale and then send a bill to the listing agent.  This Fannie Mae gives good support.

Ben.  I'm not sure what you're asking, but I don't list properties.

Neal.  What are they in violation of???  It is the listing broker that's violating the MLS and Board Rules.  Banks don't care. 

Chris.  So can I.

You bet Laurie.  Spread the word.  The agent interest in this post has been astonishing.  Even if it doesn't change the listing agents process or the selling agents process, as a matter of awareness, this is very, very helpful. 

Krista.  Great, everyone.

Lisa.  ReBlog away.  Spread the word.

Sally.  "Boards" can only act by committee, meetings, concensus, etc.  Perhaps you sparked a topic for them to have a meeting, appoint an investigative team, present a report to the board, take a vote and then publish a 2 line "advisory" to the membership.

Christine.  If agents are aware that this is not proper, perhaps the listing brokers will do the correct thing and pay what they offer to selling brokers.

Krista.  Not the bank, the listing broker who offered the co-op that they did not pay.  The bank is simply weilding power over the listing agent/broker.  They have no authority over what we are paid by the listing broker.  Folks just think that they do.

IMO, this entire process of the "banks negotiating or dictating what selling brokers are paid is a fraud". 

Katerina.  You wrote:

Lenn- I guess I am the only one that disagrees. Our mls specifically allows us to add the verbage in the broker remarks about how much the coop will be and that it will be 50/50 up to 3% to the buyers agent. Here, there is a check box that asks us if we are splitting evenly or not. We don't have to split evenly. If we get an 8% listing we can keep 5% and give the buyers agent 3% if that is what we want to do and there is nothing that prevents that in fact there is even a place for that on our mls. We also do not have to disclose how much our part of the commission is.

I don't know what your MLS allows because I haven't seen the text of the rules.  However, I have never claimed that there is any 50/50 rule.  In fact, I have said over and over again that there is NO 50/50 rule.  That said, the 50/50 nonsense is what is used AGAINST buyer's agents when the listing agent wants to close a deal by contributing part of the listing commission, including part of the buyers broker commission to increase the seller's net. 

I have no interest in what the total listing commission is.  I have only an interest is what is offered in the co-op and THAT and NOT A PENNY LESS is what the buyer's broker/agent should be paid at settlement.  If the bank negotiates a lesser listing commission as a condition of approval of the short sale and the listing agent agrees to that lesser percentage or amount, then the listing broker should pay the loss of commission out of their proceeds without touching the buyer's agent/broker co-op.  If we are offered X% of the contract price, we should be paid that percent of the contract price at settlement.  Anything less is a violation of the MLS rules.   I don't care of the listing broker receives 10% and I receive 3%.  As long as I receive what was offered to show and sell the property in the MLS.

That is the position of my MLS.  They don't monitor the Agent Comments because they assume, wrongly so, that agents/brokers will understand that rule.  Of course, all that does is add to the confusion by letting the REMARKS mislead buyer's agents into thinking that they have to agree to the "50/50" rule, which doesn't exist.

On the Fannie Mae deal- that is awesome news. But this is just the beginning. All short sale agents must remember that not all short sales are fannie mae note holders. Freddie Mac usually follows suit, I am waiting to hear from them. But all the private investors- that is another story.

Unless something has dramatically changed, even private investors generally follow Fannie Mae guidelines.  My post was limited to Fannie Mae guidelines.  However, it is Fannie Mae, through laws and regulations the Congress and HUD that promulgate those guidelines.  Other entities generally follow.  Fannie is the big Kahuna. 

There is no way in Hades that I am going to eat the whole short fall. The buyers agents here love working with us. In fact, we get letters from them after closing even when we all have pitched in to put the short sale net where it needed to be. Sometimes the amount that is going out is more than is coming in. We all share in that burden happily in our area. The buyers agents are getting FREE short sale training from us all during the process, talking to their buyers to stay in the deal! We take the buyers agents by the hadn and teach them. So if they happen to be in a deal where the lender is going to cut into our fees, they know we have done all that we can possibly do. We are pretty good at getting our full fee, but there is always those times where that is not going to be the case.

The issue isn't "eating a short fall" or "buyers agent love" or "share the burden".  The issue is the preservation of and the efficacy of the MLS and the co-op.  I doubt that when a Buyer's Broker receives less than they were offered in the MLS co-op that they can pay their rent with the value of the training received.  If that's so, then the co-op would have to be "X% + Free Short Sale Training".

I'm not in the least interested in pitting broker against broker.  It is the lender that is weilding more power than they have an using the listing broker to dishonor their offer to the buyer's brokers as an accomplice in this extortion by the lenders.

We also know which lenders do this and don't/ When the buyers agent calls to set up a showing, we tell them before they show the property what the commission is going to be based on our experience with that bank.

If it is common knowledge that certain lenders are routinely using their power to cause listing brokers to dishonor the co-op, that system upon which all selling agents rely, why are agents accepting their listings??  If listing agents are mere tools of the lenders, the MLS co-op has no legitimacy or value and the Buyers Brokers should understand that, like the menu at Club 21, it is merely a suggestion.

Katerina.  You wrote:

I wanted to make it clear though- we have NEVER had the commission changed at the closing table. We have always known in advance what the commission was going to be and the buyers agents and us have always been in agreement prior to them showing the house. We have done so many short sales and closed so many of them that we know ahead of time what the rate is going to be. We have also been given more than the usual fee many times as well, which then is a pleasant surprise when I get to call the buyers agent and tell them, guess what, they just got more money!

Which gives me no comfort.  The MLS listing is the offer of compensation upon which the buyers agent/broker should be able to rely.  We should not be at the mercy of a listing broker's decision during the process as to what our compensation will be. 

A system that puts the listing broker in the position of changing the offer of compensation from that stated in the MLS puts the buyers agents in a position of QUIETLY ACCEPTING HAND OUTS.

Katerina.  You wrote to Krista.

What Fannie Mae is saying in their new rule is that they no longer want their servicers, ( the lenders who are collecting the mortgage payments in their behalf) to lower the commissions to meet the net that Fannie wants on a short sale.

That is not waht the rule states.  I am relying, not on what I think Fannie Mae meant by their guideline.  I am relying on what the guideline says:

"closing of preforeclosure sales may not be conditioned upon a
reduction of the total commission to be paid to real estate agents to a level below what was
negotiated by the listing agent with the borrower"

That rule does not state that "they no longer want their services, to lower the commissions to meet the net. . . .

That rule states "that the closing may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower".

Meaning, as I read it that the lender may not say, "we will approve this contract if the real estate broker commission is reduced".  Plain and simply, WHEN A LENDER CONDITIONS THE APPROVAL OF A CONTRACT OF SALE, THEY MAY NOT REQUIRE THAT THE LISTING BROKER REDUCE THE COMMISSION, which, of course is the excuse that listing brokers have used to reduce the co-op.

The ruling is quiet clear.  The lender may not. . . . . . .  do what they are doing and the lender has no authority to pass that reduction in commission on to the selling broker by dishonoring the co-op.

Gary.  Thanks.  You hit the nail right on the head.  It is what is legal that should rule.  If there is a bad law, change it.  Until the rules are changed, the lenders may not condition acceptance of a short sale contract on a reduction of the real estate commission agreed by the seller and listing broker and to which the lender for the seller is not a party. 

James.  Thank You.  I'm hearing that some MLSs across the country have other rules, but to date, I haven't read an actual rule to the contrary.  I have only seen rules stated.  It is possible that this release by Fannie Mae may cause some MLSs to change their advise to their members.  Or not.

Georgia.  Spread it around.

Nancy.  My pleasure.  Our best friend is an awareness of how things work.

Krista!  Yee Hah!

One small step. . . . . . . 

Karin.  I'm working on one as we speak too.  Fortunately I haven't heard a peep about reducing the commission. 

Steve.  Thanks.  I don't listen to "folks".  I want authorities. 

Michael.  You bet.  I stay informed on AR too.

Amiri.  Everything you state is absolutely correct, if your short sale listing is the only home listed for sale in my buyer's price range.

Katerina.  I never wrote or implied that this announcement applied to anything but Fannie. 

Katerina.  There may be more hours on the part of the listing agent in processing a short sale.  However, for the buyers agent, they have probably spent an equal number of hours or more with the buyer in identifying a property to buy. 

Locking a buyers agent into a 50/50 commission split when we are not netogiating with the bank, is not fair because, in order to get the sale to closing, the listing agent could easily negotiate a reduced commission of half the original co-op, or one third.  The buyers agent is presented with the reduced commission as a feit accompli.  This makes the foundation of the co-op system that has successfully worked, particularly since the acceptance of buyers agency and the risks of dual agency.  Sub agency was unfair to home buyers who were treated as second class citizens, caveat emptor.  Now, buyers agents are expected to work for hand outs. 

If listing agents want to negotiate my commission, then the system has to change.  Until then, I'll support enforcement of the co-op.  We can't be led down a slippery slope of permitting the banks to destroy our co-op system.  They've destroyed just about everything else. 

I know I'm absolutely impossible when it comes to contracts, agreements and, yes, my word which means more to me than anything in the world. 

They don't call me Lenn "what does the contract say" Harley without reason. 

Amiri.  In the 80s and up to the early 90s, I was always a sub-agent and YES, the co-op was always enforced. 

About 1989, I had on seller refuse to pay the full commission because closing was.  i arbitrated it and he paid. 

I have tremendous respect for good listing agents who bring these and any listings to market.  That said, I believe that good buyers agents are due the same respect for bringing ready willing and able, qualified, motivated, patient buyers to buy these properties. 

I understand that listing agents have a hard time dealing with the bank negotiators.  Sitting three hours on the phone isn't fun.  However, I have been spending the same amount of time, many times over preparing the buyers to have patience while the bank keeps us waiting day after day, week after week, sometimes month after month while we see homes coming and going in the MLS.  While the contract is sitting with the bank negotiator, I'm holding on to that buyer and in order to keep them in it, I may have to continue to show them new listings so they know that it's worth their while to wait for the bank to get around to doing something.  Yet, no matter how long it takes or how much time I spend showing, loan approval, etc., my commission is going to be that offered in the co-op.  I accept that.  What I object to is the cirdumstance whereby someone dishonors the co-op and says that I should take what they want to hand me. 

The commission offered when we show these properties has to be honored or the offer of co-op will become worthless. 

Randy.

Yeee Haaa!

This is great.  The word will spread.  Of course, I'm sure the banks have ordered a posse of lawyers to converge on the banking committees of Congress to try to get this reversed. 

This has become a rather hot potato. 

Love it. 

Katerina.  This was too interesting for a comment. 

I just opened it, the question, up for everyone. 

http://activerain.com/blogsview/960454/MOVING-THE-SHORT-SALE-DISCUSSION-UP-A-NOTCH-ARE-THERE-ANTI-TRUST-IMPLICATIONS

Matt M.  What part of 94 do you mean.  There are many points in 84 on which we disagree.  What is your point???

Matt.  Thanks for pointing out the fact that posts are now numbered.  I need to start using glasses to read ActiveRain. 

I would edit that comment and correct the 84 to 94, but my "Edit" button won't work.  Yes, I'm logged in.  I'll just (*$$&*  a bit and forget about it.

Sally.  I just reported an agent whose listing said

Co-op:  50/50 for each agent.

Isn't that cute. 

Sally.

Our MLS doesn't permit anything other than a coop in the Co-Op field.  If reported, they contact the listing agent and have them fix it.

Bob.

Fine, if you believe that the buyers agent should work for hand-outs with no input in the negotiation with the bank.

In MD and VA, buyer's agents are taking these things to the boards with complaints against the listing agent for the difference.

We want what is offered in the co-op and not take hand-outs from a listing agent who will throw us under the bus in a heartbeat.

Our Boards are supporting the BA claim for the co-op offered.

We also report those listing agents who try to put 50/50 in the Co-Op field.  I report and the MLS contacts the listing agents and makes them change it

We don't care what they put in the REMARKS because our MLS says it's what's in the co-op field that determines the amount paid.