ILLEGAL PRACTICES IN SHORT SALES?

Ken, the first example is probably legal.  Fees are negotiated between broker and client.  But to qualify for the tax credit, doesn't the house have to be owner occupied?  I'm not sure of that.

Well, I believe that in Arizona you can charge any fee you can negotiate. Often agents charge a retainer fee that is deducted from the final commission- for example when you are working for an investor and doing alot of prework. All commissions in this state need to be paid to the broker. Personally, I don't charge a fee for short sale clients. They are typically having a hardship and don't have the cash to pay you.

The question regarding the Owner leasing back the property may violate the arms length rule. I would check with your broker.....since they will be named in the law suit  :)

Any fees collected need to be made out to and approved of by the broker.  If it is a retainer, it goes into the trust account until closing.   I've heard of agents collecting a retainer from buyers to make sure that they actually plan to buy, and that is their earnest money when they write an offer.  If it is made out to the agent without the broker's approval, it's not ok.  People who are distressed will sign anything because they are scared and are hoping someone will help them.

I've had sellers ask if their wife, cousin, uncle, best friend can by the house at short sale.  The bank rquires that there be no relationship between parties, and I agree with Kim that it violates the Arm's Length rule and could be considered bank fraud.   The point is that friends can conspire to default, present documentation for a short sale, and manipulate the price down.  Don't go there.

First time buyers can't file for their incentive money online anymore because of too many undocumented e filings.  Now, they have to present documentation from a closing.  They should have thought of that in the first place.