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Buyer' Agent is related to the buyer~Is this still an Arm's Length?

Posted by Kimberly Azzam on October 2, 2011 at 4:25pm in Short Sale Discussions
I just received an offer one of my listings and the buyer's agent is the father to one of the buyers. ASC is the lien holder. Just wondering if ASC will consider this to not be an Arms Length? Typically, it is relation to the seller.. Has anyone ever ran into this and had it be an issue? Thanks in advance.

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  • Linda Susan Fox October 9, 2011 at 9:07am

    ASC will make everyone involved sign an arms length transaction document with a notary stamp.  If this document states the buyer and agents need only be an arms length with regards to the seller then it would be OK.  Everyone will need to read it carefully as you will also be signing it.  I would have someone else in my office write the offer to be on the safe side.

  • David Tang October 9, 2011 at 6:25am

    Varies by lender.  I have had similar circumstances with Suntrust and Wachovia where it was allowed but B of A said no.  Wachovia is also owned by Wells Fargo (which owns ASC) so would seem okay.  I also recall one lender saying they would not allow the buyer's agent to earn a commission (forget who).  I would say it is safest to have someone else represent the buyer from a commission standpoint - but if the agent is stubborn, just have an addendum that discloses this and submit that to the short sale lender along with all the other paperwork and see what they say.

  • Jill P October 9, 2011 at 6:04am

    I would have my broker write up the offer and then it would not come up for questioning.  

  • Michael Kohler October 9, 2011 at 4:32am

    DIsclose Disclose Disclose......

    You need to disclose to ASC the relationship to the buyers agent.

    I would either disclose it in the arms length or draft an additional amendment stating the situation

  • Rodney Mason October 9, 2011 at 3:47am

    Any relationship between any party in the transaction must be disclosed.   An example of  a non-arms length transaction would be a son purchasing a home from his parents, employer, etc.  Any time a relationship crosses the lines between the buyer and the seller, it becomes non-arms length.  Non-arms length is also known as "identy of interest."

  • Lavina Samtani October 9, 2011 at 1:51am
    I just got a shortsale declined by Bank of America because buyer and buyer's were related. I called the negotiator and ask them why decline the short sale? Why not just offer less commission? She said no that is not possible.The buyer can hire another agent if they want and we can than reinitiate the short sale?
  • Bryant Tutas October 9, 2011 at 12:24am

    Putting this in the newsletter today

  • Kathy Lee October 5, 2011 at 5:16am
    I was recently involved with a short sale transaction where the buyer agent's client was his father.  It was disclosed in the contract that the buyer was related to the buyer agent.  The buyer and buyer's agent were not related to the seller.  The lender, GMAC, would not consider it an arms length transaction.  They would allow the sale but would not allow the buyer agent to receive compensation from the transaction.
    • Kimberly Azzam > Kathy Lee October 5, 2011 at 6:12am

      Thank you Kathy Lee, this is exactly why I posted this. I heard this happening to another agent as well. I did explain this to the buyers agent and gave him the opportunity to have someone else rewrite the offer, but he declined and said it should be fine. So we will just have to wait and see what ASC says.

       

  • cesar llanes October 5, 2011 at 5:13am

    Base from my experience, it is "arms length". Best way, prepare a disclosure signed by eyerbody to protect you and everybody. Let ASC accept it if it is "arm length" on their definition.

    Good luck!

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