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Short Sale Lenders CANNOT reduce Realtor® or Agent's Commission - New LAW

By Regina P. Brown

Real Estate Broker/Owner with MBA Broker Consultants CalBRE Broker #00983670

March 08, 2009 06:02 PM

NOTE that this law went into effect March 1st and applies ONLY to loans backed by Fannie Mae. From the C.A.R. Newsline issue emailed on 04 March 2009:

"NO MORE COMMISSION REDUCTIONS FOR FANNIE MAE SHORT SALES
Fannie Mae loan servicers no longer can require real estate brokers to reduce their commissions as a condition to a short sale approval. The new policy was effective March 1. According to Fannie Mae, the closing of a pre-foreclosure sale cannot be conditioned upon a reduction of the real estate commission to a level below what the listing agent and borrower negotiated. An exception applies if the total commission is more than 6 percent of the sales price.

"This good news may be tempered by the difficulty for REALTORS® to ascertain whether the underlying loan in a short sale transaction is a Fannie Mae loan. REALTORS® may wish to ask the lender or loan servicer whether the loan is a Fannie Mae loan, and to consider submitting the Fannie Mae Announcement to the lender with the short sale package.

"For a copy of Fannie Mae's Announcement 09-03 (Servicing Guide, Part VII, section 504.02), go to https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0903.pdf. For a list of Fannie Mae lender partners in California, go to http://www.fanniemae.com/flApplication/fanniemae/findLender.jsp?p=Find+a+Lender+Search/."

SELLERS & AGENTS: If you want to find out if your mortgage loan is backed by Fannie Mae call 1-800-7FANNIE (732-6643) from 8am to 8pm EST. For Freddie Mac info call 1-800-FREDDIE (373-3343).

Sellers, if you want to sell your home instead of letting the bank forclose on your mortgage loan, please contact me and I can guide you in the right direction. I can educate you about the short sale process and recommend a great agent in your area!

Join my new AR group and post your blog at http://activerain.com/groups/virtualoffice

Regina P. Brown
Broker, Realtor®, e-Pro
Author of eBook "Stop Foreclosure Fast: Solutions to Save your House"

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Joseph Alfe

Short Sale Processing Inc. - Chicago, IL

Sorry to rain on your parade, but many major lenders including WAMU and Bank of America refuse to follow the Fannie Mae guidelines. Unless you are prepared to sue, theres not much to do about it. B of A will now only pay 4%! Tortious interferance in a business contract (listing agreement) is illegal, but lenders can and do whatever they want.

www.short_sale_expert.activerain.com

May 05, 2009 03:44 PM

Anonymous

Marti Rundus (Elite Realty)

I received a short sale approval letter today from Bank of America and they cut the commission down to 4%. I sent the negotiator a copy of the Fannie Mae guidelines, and the negotiator said "it's not a law, and commissions are always negotiable". Negotiable? I don't remember them doing any negotiating at all. The negotiator is telling me what they will pay. It makes me not want to sell any homes where Bank of America is involved.

Oct 05, 2009 02:47 PM

#18

Peter McGahan

Keller Williams St Pete Realty - Saint Petersburg, FL

I am a Realtor purchasing my own home in St. Pete, FL and Regions Bank is asking me to sign a form waiving my commission. Has anyone ever heard of this?

Dec 08, 2009 02:29 AM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Joseph, you're right, it is illegal, but it won't stop the banks. They are too powerful to be held accountable to the law, or so they think.

Marti, some of the banks think that they don't have to follow guidelines (or the law) if they don't want to.

Peter, I have never heard of that before. I wouldn't mind waiving my commission, but I would want the purchase price reduced to compensate.

Regina P. Brown

Jan 09, 2010 02:21 PM

Anonymous

Bonnie Cox

Does anyone have a recent update on dealing with BOA on commission reductions? I have one ready to close and, of course, they want to reduce the commission to 5%. This, on the same day they indicted their CEO (Feb. 4. 2010) for fraud. Their executives are thieves and have committed fraud and misreporting to the SEC, their attorney fees to defend these jerks is through the roof, yet they want to take it out on the backs of the people that are willing to sell their toxic assets.

Feb 07, 2010 10:23 AM

#21

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Hi Bonnie, I can't speak to your specific situation but I have noticed that some of the banks don't think they have to follow any rules. There is NO accountability for gigantic corporations. Very sad.

Feb 08, 2010 05:14 PM

Jim Paulson

Progressive Realty (Boise Idaho) www.Progressive-Realty.info - Boise, ID

Broker / Owner - Progressive Realty Corporation

My company just had BofA do a commissionectomy down to 5%. It is not a Fannie Mae loan unfortunately.

Feb 09, 2010 03:09 AM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Bank of America has developed a reputation for cutting commissions.... even on Fannie Mae loans! I've heard that from multiple agents.

Feb 09, 2010 03:35 AM

Anonymous

If the Seller signs and Exclusive Right to Sell and agrees to pay a commission of say 6%, then doesn't the seller have to pay the difference between that and what BOA cuts commission to? I don't understand why we only follow part of our agreements with the seller to do the short sale for them. Some of these Sellers are walking away from huge debt obligations.

Mar 24, 2010 12:40 AM

#25

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

TK, that is a good point. If the sellers had to cough up cash out of pocket, many would choose to walk away and allow a foreclosure instead.

Mar 25, 2010 03:21 PM

Joel Williams

Exit Realty Advantage - Pensacola, FL

I did send the Fannie Mae guidelines to BOA during negotiations as I was both the listing and selling agent. They wanted me to reduce my commission to 3% instead of 6%. After that, the offer was approved to send to PMI company at 6% commission. I should have the approval letter this time next week!!!

Apr 28, 2010 05:50 AM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Joel, great job! BOA does know the guidelines... sometimes they choose not to follow them. Great job holding their feet to the fire!

May 06, 2010 06:52 PM

Alan May

Jameson Sotheby's International Realty - Evanston, IL

Home is where the hearth is.

Regina - it turns out (according to a local short-sale attorney) that this is NOT a law... just a suggestion, regarding fannie mae propertoes... there is no rule or law out there saying they can't require us to reduce our commission...

and they CAN (and are required to have it reduce) if/when our commission is over 6%.

May 17, 2010 06:39 AM

Darryl Brasseur

Brasseur Realty - Prairieville, LA

Regina, I am currently in a fight with Wells Fargo on a commission reduction...below is a series of emails...

Broker:

I noticed that Wells Fargo cut my commission to 4%. When the listing agreement was signed, the seller and I negotiated 6%. Attached is the Fannie Mae ruling on Realtor commissions, the listing agreement, Preliminary HUD1, WF demand letter. Did something change since Fannie Mae issued these orders?

Wells Fargo:

My guess would be that commissions needed to be cut due to the fact that the offer did not meet either mi or investor minimum net requirements as both entities did approve the offer while still under their minimum net requirements.

You really have two options here, one, proceed with the offer as is, or two, raise the offer by $5,000 and have Derek resubmit the offer to both the mortgage insurance company and the investor for reapproval.

Regards, XXX

Broker:

the buyer sent his best and final and will not give any more. I will contact Fannie Mae at the number provided to see if they can remedy it..

thanks

Wells Fargo:

You will need to notify XXX of any changes that Fannie Mae makes, any changes to the approval as it stands will require a new approval from the mortgage insurance company, Fannie Mae states that the offer needs to be sent to the mortgage insurance company first as without their approval, you do not have a valid short sale.

My question is...the difference in commission is $3200. Why is he asking me to get my buyer to resubmit an offer that is $5000 more?

Sep 25, 2010 07:02 PM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Darryl, my experience with these banks is that real estate transactions are being negotiated by clerks, and that is always bad news! The clerks do not understand the complexity of real estate transactions and they are used to working for a large red-tape corporation.... Plus, the banks don't have anyone to supervise them so there's no accountability!

Sep 30, 2010 01:13 PM

Darryl Brasseur

Brasseur Realty - Prairieville, LA

This was a supervisor that I was corresponding with..

Sep 30, 2010 01:39 PM

Dennis Neal

RE/MAX, Big Bear - Big Bear Lake, CA

Your Home Sold in 21 Days or We Sell It For Free

If you look on the Fannie or Freddie website they have a number to call and see if they back the loan. You just input the APN number.

Nov 11, 2010 08:10 AM

Paul Howard

Cherry Hill, NJ

Paul Howard Realty, 856-488-8444

Only one thing is necessary to avoid reducing brokerage fees at the request of a 3rd party. Just say no.

This should go for the listing agent and the buyer's agent but in the case of the buyers agent they have no contract relationship with the seller and should have negotiated their fee upfront with the buyer. Ignore the MLS 'offer' as it is (or should be) meaningless.

The lenders may take a hit and get less than they are owed but they took on that risk when they lent the money. The Realtors did not. Just say no.

Could that lose you the deal. Yes. Could that give you standing to file suit against the lender for tortuous interference with your contract? maybe I'm surprised there aren't some attorneys out there trying to make a buck off this issue. There should be, there can be a lot of money in class actions.

In any case, the lender can't "make" you cut your commission. They can only ask. You get to say either 'yes' you can have my money or 'no' you can't have my money.

Nov 12, 2010 11:56 PM

Anonymous

Deann Rex

Is an APN number the same as a Min number? See #34 above

Aug 24, 2011 08:38 AM

#35

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Deann, APN is the tax ID for that parcel number. All properties in the U.S. have parcel #'s which are filed with the local county tax assessor's office. In some states, especially the South, it's called something different than APN. MLS listings will include the tax ID # in the listing, and often it is linked to the public county tax records, where you can click and see the owner of record, etc. Hope that helps you answer your question!

Regina P. Brown

Aug 26, 2011 05:36 AM