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Negotiator fees

Posted by DAVID REEVE on January 27, 2013 at 1:24pm in Short Sale Discussions
In Florida, if you are charging a negotiator fee the one charging it has to be an attorney or a licensed loan originator. Check on the office of financial site for the State of Florida. However, there is nothing keeping a buyer from paying a commission if disclosed to all parties. All of our listings for short sales require a 2% COMMISSION paid by the buyer if the short sale goes through. We split all commissions with buyer's brokers 50/50. We usually end with an 8% position to split. Naturally you can charge as little as much as you want in our state as long as all parties agree and I don't suggest that because we do this that everyone should do it (in the spirit of non price fixing). We also don't let commissions get in the way of closing a deal even if we have to take less from both parties.

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Replies

  • Wayne Brooks January 30, 2013 at 2:49pm

    Can someone else please read FS 501.1377 and tell me how this remotely relates to short sale negotiating fees?

    Can someone tell me how my quotes above (where I wrongly referred to it as FS 501.212) possibly refer to short sales?

    • Bryant Tutas > Wayne Brooks January 31, 2013 at 4:28am

      Another thing to remember is that most of these laws and rules apply to "foreclosure rescue services". Not all short sales are in foreclosure.

  • Smitty January 30, 2013 at 1:23pm

    Dave, this was written in 2008.  Is there anything that is sooner?

     

    This does not address, negotiation fees charged to the buyer. It does not address loan originator or attorney. It definitely address "UP FRONT" fees which the FTC has already addressed.  I don't see where a negotiator cannot charge a fee for negotiation a transaction to be paid at closing.

    • DAVID REEVE > Smitty January 30, 2013 at 1:59pm

      I agree with giving the best service for a job well done.  Regarding all the questions about negotiator fees.....the OFR in the State of Florida has been out there in real estate broker's office's for whom they are charging negotiation fees since they classify a short sale as a loan modification.  They have been auditing and bringing charges against licensed Real estate brokers.  Unfortunately this is a true fact and I bring this to your attention first hand.  That is probably all I can say on a public blog. That is why I brought the attorney general letter that was sent to our licensing agency.

      • Smitty > DAVID REEVE January 31, 2013 at 3:06am

        Ok, Sorry, but I feel like we keep having the same discussion over and over again.  This topic was brought up last year by someone in FLA too and I think back then we determined it had nothing to do with charging negotiation fees.

         

        considering the law you posted has nothing to do with short sale negotiating, how about you post back the licened RE brokers and the cases where they are being brought up on charges?  I know in my state if you bring a licensee up on charges you can read about the case.  Would you please post back the cases as this info you posted doesn't relate to short sale negotiations.

      • Smitty > DAVID REEVE January 30, 2013 at 2:07pm

        Wait so all agents negotiating a short ale are classified as doing a loan modification?

  • Wayne Brooks January 29, 2013 at 9:40am

    t

    Oaky, I'll chime in. I've read FS 501.212 before, and I don't believe it says what everyone keeps attributing to it, specifically that only attorneys and mtg brokers can charge a fee.

    FS 501.212 deals with a "Foreclosure Rescue Consultant" and a "Foreclosure Rescue Transaction"

    A "Foreclosure Rescue Transaction" (Definitions(2) (d) (1) ) "By which residential real property is conveyed to an equity purchaser and the homeowner maintains a legal or equitable interest in the residential property conveyed...".

    This does not apply to a short sale.

    A "Foreclosure Rescue Consultant"(Definitions (2) (b) "Means a person....foreclosure rescue services. The term does not apply to:

    1. A person excluded under s. 501.202"

    6. Licensed mtg broker

    7. An attorney

    s. 501.202 (6)  Includes any licensed real estate agent under FS 475

    So, first of all a short sale is not a "foreclosure rescue transaction"

    Secondly, real estate agents are specifically excluded from application of the statute.

    IMO, not an attorney, this ain't no legal advice.

    • Wayne Brooks > Wayne Brooks January 30, 2013 at 2:44pm

      Sorry guys, my retarded brain-to-typing-fingers connection went awry.

      The reference above to "FS 501.212" is actually from FS501.1377.

      The reference to FS501.202 within the body os FS 501.1377 is correct though.

  • Sam January 29, 2013 at 9:10am

    Here is my "Devil's Advocate" if you will...

    My concern would be that the extra 2% would either be extra earned commission for negotiating/handling the short sale thus in violation of FS 501.1377, or it would simply be an unearned fee/commission charged to a buyer, thus in violation of RESPA.

    I would think that in order to (with a straight face) say that it is both an earned fee, but not earned due to short sale activity, you would need to charge 8% commission on all your listings by requiring the buyer pay the extra 2% as you state...if that were the case, then your short sale commissions would  be the same as your non short sale commissions so the fee structure would not imply extra fee for short sale activities, it would simply be your firms normal commission structure.

    Those are just my thoughts based on my understanding for what it is worth, which should not be confused with a legal opinion because it is not.

    Good luck to you and I think in these areas, the most important thing is to under promise and over deliver so all your parties (buyers and sellers) on short sales are satisfied with your results.  That along with making sure they get sound legal advice regarding the deficiency and tax issues (up front and through the process) and you have satisfied clients that had their problems solved.  I don't believe the attorney generals have any desire to apply vague and conflicting statutes on a witch hunt unless someone has been harming the public intentionally or unintentionally.

     

  • Sam January 28, 2013 at 4:41pm
    Not sure of the statue you cite, but it would be pretty obvious to me, and I am sure most anyone, that the extra 2% would be compensation for the negotiation of the short sale you claim you cannot charge a fee to negotiate, unless you are an attorney or loan officer.

    If you disclose and claim the extra 2% is for negotiating short sale then I would think you are charging it as a SS negotiating fee regardless of whether it is called commission. And if you say it is just "extra commission" because it is a short sale, but not for compensation of negotiation such, would that not constitute unearned fee and RESPA violation?

    Again, I do not know the statute you cite and whether it is real or not, but assuming it is, I would be very hesitant to promote the "work around" you cite. But that's just me...

    The whole SS issue is a huge grey area in many states with conflicting state consumer protection laws, state real estate and mortgage laws, HUD RESPA laws and federal safe act laws that it is almost impossible for anyone to be 100% sure they are in compliance if you study and apply them all independently.
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