Replies to This Discussion

Permalink Reply by Beverly Cibulsky on July 19, 2011 at 12:37pm

Jeff... well you are the best!!! Did you sing at a closing this week?

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Permalink Reply by Kevin Hardin on July 19, 2011 at 3:30pm

Jeffrey,

When we consult licensed agents in our firm, in the context of fees, the question is about "What role are you playing?" You see, in AZ, the idea that the Agent is just a sales person results in the idea that "Hey, I am just selling the home, listing the home, negotiating etc etc" In other words, "Where is my commission?" They are attempting to portray that they are a professional, but they are not advising the client whether they should or should not purchase, or should or should not sell. So, to charge a fee up front, any fee, the question, even under RESPA, is what is the service you are providing? So, to your point, if you are advancing monies for Signs, advertising, lock box etc etc then charging an upfront fee is very appropriate, but what if the upfront fee is for "advice" that is answering the question of whether you should or should not purchase, or should or should not sell? 

This begins a slippery slope that is catching up agents down the road. Did the Agent advise that the particular home was a "Great Investment" and it turned out not to be? The issue is where does the commission end for a salesperson and fee income begin for a professional advisor? If you are charging a fee for advisement, negotiation of a debt obligation (Short Sale) have you left the role of salesperson? If you have moved out of the role of salesperson, have you moved outside the confines of your license? If you are advising under the confines of the license in your state, do you accept the fiduciary that come along with it? 

I just don't think most agents that take the stance you refer to have thought it through and truly valued their role and responsibility. I don't think the real question is "Can I charge an upfront fee?" I think the real question is "If I charge the upfront fee, assuming they are legal in my state, what service am I providing for that fee?"

Jeffrey Burnham said:

It amuses me how so many agents take the "high and mighty approach." Even if you go to a free clinic they charge a fee.

Many say... "oh, I would NEVER charge a fee." Even when you devote hours to a client that you can SAVE from foreclosure, keep them in the house for several months RENT FREE while the banks and HOAs "review" the info you have to send UMPTEEN times??  You can SAVE the client from a Deficiency Balance pursuit... how much did THAT save your client?

How many hours do we spend, sending the SAME information when the bank tells you "we never got your file- can you FAX all 97 pages AGAIN, because we don't ACCEPT emails?!"

While we're spending all this time working for FREE, the short sale Seller is also living MORTGAGE FREE. Is it that fair? We're expected to wait MONTHS to get a dime, play the paperwork game all for FREE?? Then, if it's a HAFA eligible situation, the Seller can even walk with a $3,000 bonus?"

Oh yeah, we can pay for the sign, pay our MLS dues so we can put the property out for grabs with other agent's Buyers, prepare nice color flyers pay for the ink and paper and spend the time preparing a good flyer, MARKET the property thru whatever means necessary-pay for that marketing, spend hours gathering paperwork, input that same paperwork multiple times into the bank's system, prepare a CMA or BPO to send to the bank. Then if we get an offer we can negotiate with the Buyer and their agent, we can update the Buyer and their agent continually throughout the process, for FREE of course.

Then when approval day comes, the bank will decline any Brokerage fee (if your broker charges this....which is NORMAL for MOST agents that are part of a National Franchise, which I am not.) (Funny, nobody baulks at the marketing fee they pay for having the Franchise Name on their business card!) But when the Brokerage fee is declined, guess who gets to pay that?

It's amuzing that so many agents have this "I would never charge for advance fees" attitude. If I were to go to a doctor, I wouldn't go to the doctor that was FREE just because he was FREE. I would go to the PROFESSIONAL that could resolve my ailment. The doctor I could trust to keep me updated and informed throughout the proceedure. The doctor I thought had the necessary skill to properly help me.  Price would be secondary to the results. If price were the only factor, there would still be Yugos (or whatever country Yugoslavia is these days) roaming the streets of America. Do you buy your car based ONLY on price? When you're in the grocery aisle do you get the cheapest cheese? Or the one with the quality ingredients? Different folks make different choices. Price is not the only factor in the world. For this reason, Dillards and Nordstroms have little fear of Walmart,KMart or Sears (who MAY be going away shortly.) There's a saying I've heard from many professionals.. "I have no problem with my competitor having a cheaper price~~~he know's the value of his product."

Now, before I get the tons of hate mail from you "High & Mighty" agents.. we all make our own business decisions. Just like I'm sure you will claim.. my clients are always EXTREMELY satisfied with me and my results. I have to buy all the items I mentioned above. My clients understand this and seldomly baulk at a modest advance fee to cover the sign, electronic lockbox, flyers and time to offset the hours spent just preparing the short sale. This is MY decision. You're free to make your own. Baskin Robbin's has 31 flavors of ice cream...since there are so many points of view. I will say this, the one thing I encourage all my short sale sellers (and Buyers for that matter) is to talk to other agents. They should work with who they think will do the best job. The PROFESSIONAL that will get things done.

Charging for advanced costs is NOT illegal in Nevada where I live. (It may be where you live?)

I would suggest that you consult your attorney when making your decision and that they review your documentation if you adopt a policy to charge for advance fees. (Although I doubt they'll do this for FREE.)

As my soapbox is really creaking, I'll step down now.  I wish you all good luck in your business and (IN MY OPINION) taking care of your clients should NOT mean taking food off your own table.

 

 

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Permalink Reply by Arlene Garcia Hanner on July 19, 2011 at 6:27pm

To Harry,

 

I am a real estate broker from California.  Are you stating that short sale "consultant" is the same as real estate agent or broker?

 

Arlene

Harry Clay said:

Charging up front fees for short sale services not yet performed is against the law here in CA.

 

http://www.car.org/legal/foreclosure-short-sale-folder/short-sales/

 

Q 19.  Can a licensed short sale consultant collect an advance fee?

A  No.  An advance fee is a fee charged upfront for services not yet performed.  An advance fee is defined to include a fee claimed, demanded, charged, received, collected before fully completing the service the licensee contracted to preform.  The services to be performed cannot be separated or divided into components for the purpose of avoiding the law.  A licensee cannot write a limited-service contract for any type of loan negotiation or sale of notes.  (Cal. Bus. & Prof. Code § 10026.)   A real estate broker cannot get paid in advance to solicite lenders on behalf of borrowers in connection with loans secured by residential one-to-four unit real property until the borrower becomes obligated to complete the loan. (Cal. Bus. & Prof. Code § 10085.5.) 

Advance fees are prohibited for loan modifications (Cal. Civ. Code § 2944.7, Cal. Bus. & Prof. Code § 10085.6). 

Furthermore, if a Notice of Default has been recorded against a property involving one-to-four owner occupied residential units, an advance fee is prohibited for foreclosure-related consulting services under the foreclosure consultant law (Cal. Civ. Code § 2945 et seq.).    

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Permalink Reply by Jeffrey Burnham on July 19, 2011 at 7:05pm

I'd like to be clear in the fact that I NEVER make a decision for a client. (To me if you owe $300k on a home that is currently worth less than $130k the decision SHOULD be clear, but irregardless, I NEVER suggest to a client to NOT pay their mortgage and to short sell their home. Conversely, I do remind them that NOT paying their mortgage WILL have an impact on their credit rating.  I suggest they call their attorney, their accountant and the IRS directly to see what options they have.

 

To answer a few more responses: the ONLY guarantee I make on a short sale, is that I CANNOT guarantee the lenders/ servicers response to our short sale proposal. It could make perfect financial sense... but it MAY be declined irregardless.

 

What are the "advanced fees?". Preparing a market analysis (um, I THINK the BANKS THEMSELVES still pay agents to do BPOs, no?) , posting a sign, providing an electronic lockbox, inputting all the listing info into the MLS, preparing promotional materials, taking pictures, collecting all the documentation and submitting it to all the lien holders for consideration (with, again no guarantee of their agreeing to allow the short payoff.) These services are due when they are performed and completed. So... I am not charging for my "opinion." I'm charging for these specific actions and functions which I DO provide (as I'm sure all of you do as well.) My opinion is irrelevant. In fact the first question I ask is ..."Do you want to keep your home?"  (Believe it or not a loan mod DOES sometimes make sense... like a terminal patient I assisted last year.)  I am being paid for a service (and to some extent, materials at that point.) As we all know, only well presented, but more importantly, complete Short Sale requests are accepted and completed. I can show tangible SPECIFIC functions I have performed... do I get a commission if it closes? Yes. Is it unfair to ask to be minimally compensated- reimbursed for the time, effort I do on the front end? Obviously, I think think so. It would be nice if everyone else did as well. But as I stated earlier, we all have our own take on this issue.

Kevin Hardin said:

Jeffrey,

When we consult licensed agents in our firm, in the context of fees, the question is about "What role are you playing?" You see, in AZ, the idea that the Agent is just a sales person results in the idea that "Hey, I am just selling the home, listing the home, negotiating etc etc" In other words, "Where is my commission?" They are attempting to portray that they are a professional, but they are not advising the client whether they should or should not purchase, or should or should not sell. So, to charge a fee up front, any fee, the question, even under RESPA, is what is the service you are providing? So, to your point, if you are advancing monies for Signs, advertising, lock box etc etc then charging an upfront fee is very appropriate, but what if the upfront fee is for "advice" that is answering the question of whether you should or should not purchase, or should or should not sell? 

This begins a slippery slope that is catching up agents down the road. Did the Agent advise that the particular home was a "Great Investment" and it turned out not to be? The issue is where does the commission end for a salesperson and fee income begin for a professional advisor? If you are charging a fee for advisement, negotiation of a debt obligation (Short Sale) have you left the role of salesperson? If you have moved out of the role of salesperson, have you moved outside the confines of your license? If you are advising under the confines of the license in your state, do you accept the fiduciary that come along with it? 

I just don't think most agents that take the stance you refer to have thought it through and truly valued their role and responsibility. I don't think the real question is "Can I charge an upfront fee?" I think the real question is "If I charge the upfront fee, assuming they are legal in my state, what service am I providing for that fee?"

Jeffrey Burnham said:

It amuses me how so many agents take the "high and mighty approach." Even if you go to a free clinic they charge a fee.

Many say... "oh, I would NEVER charge a fee." Even when you devote hours to a client that you can SAVE from foreclosure, keep them in the house for several months RENT FREE while the banks and HOAs "review" the info you have to send UMPTEEN times??  You can SAVE the client from a Deficiency Balance pursuit... how much did THAT save your client?

How many hours do we spend, sending the SAME information when the bank tells you "we never got your file- can you FAX all 97 pages AGAIN, because we don't ACCEPT emails?!"

While we're spending all this time working for FREE, the short sale Seller is also living MORTGAGE FREE. Is it that fair? We're expected to wait MONTHS to get a dime, play the paperwork game all for FREE?? Then, if it's a HAFA eligible situation, the Seller can even walk with a $3,000 bonus?"

Oh yeah, we can pay for the sign, pay our MLS dues so we can put the property out for grabs with other agent's Buyers, prepare nice color flyers pay for the ink and paper and spend the time preparing a good flyer, MARKET the property thru whatever means necessary-pay for that marketing, spend hours gathering paperwork, input that same paperwork multiple times into the bank's system, prepare a CMA or BPO to send to the bank. Then if we get an offer we can negotiate with the Buyer and their agent, we can update the Buyer and their agent continually throughout the process, for FREE of course.

Then when approval day comes, the bank will decline any Brokerage fee (if your broker charges this....which is NORMAL for MOST agents that are part of a National Franchise, which I am not.) (Funny, nobody baulks at the marketing fee they pay for having the Franchise Name on their business card!) But when the Brokerage fee is declined, guess who gets to pay that?

It's amuzing that so many agents have this "I would never charge for advance fees" attitude. If I were to go to a doctor, I wouldn't go to the doctor that was FREE just because he was FREE. I would go to the PROFESSIONAL that could resolve my ailment. The doctor I could trust to keep me updated and informed throughout the proceedure. The doctor I thought had the necessary skill to properly help me.  Price would be secondary to the results. If price were the only factor, there would still be Yugos (or whatever country Yugoslavia is these days) roaming the streets of America. Do you buy your car based ONLY on price? When you're in the grocery aisle do you get the cheapest cheese? Or the one with the quality ingredients? Different folks make different choices. Price is not the only factor in the world. For this reason, Dillards and Nordstroms have little fear of Walmart,KMart or Sears (who MAY be going away shortly.) There's a saying I've heard from many professionals.. "I have no problem with my competitor having a cheaper price~~~he know's the value of his product."

Now, before I get the tons of hate mail from you "High & Mighty" agents.. we all make our own business decisions. Just like I'm sure you will claim.. my clients are always EXTREMELY satisfied with me and my results. I have to buy all the items I mentioned above. My clients understand this and seldomly baulk at a modest advance fee to cover the sign, electronic lockbox, flyers and time to offset the hours spent just preparing the short sale. This is MY decision. You're free to make your own. Baskin Robbin's has 31 flavors of ice cream...since there are so many points of view. I will say this, the one thing I encourage all my short sale sellers (and Buyers for that matter) is to talk to other agents. They should work with who they think will do the best job. The PROFESSIONAL that will get things done.

Charging for advanced costs is NOT illegal in Nevada where I live. (It may be where you live?)

I would suggest that you consult your attorney when making your decision and that they review your documentation if you adopt a policy to charge for advance fees. (Although I doubt they'll do this for FREE.)

As my soapbox is really creaking, I'll step down now.  I wish you all good luck in your business and (IN MY OPINION) taking care of your clients should NOT mean taking food off your own table.

 

 

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Permalink Reply by Arlene Garcia Hanner on July 19, 2011 at 7:45pm

Of course, agents can charge an upfront fee!  Is that not what some discount brokerages do; charge for marketing, etc... up front?  Why does the possibility of the property being sold as a short sale make it any different?

 

I am not advocating for or against charging an upfront fee.  That is purely a business decision to be made by individual brokerages.

 

I think some are stretching the meaning of MARS way too far, as regards to when, what, and how a real estate brokerage charges their fees.

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Permalink Reply by Bryant Tutas on July 20, 2011 at 12:35am

Kevin. You make the point I have been trying to make. We CAN charge upfront fees when listing and selling short sales. BUT, in Florida, it can't be the compensation for handling the short sale. It sounds like AZ is very similar. 

There may also be laws prohibiting charging an upfront fee when dealing with foreclosure rescue services. However as you well know not all short sales are in foreclosure.

So there are ways to be able to charge an upfront fee in a short sale transaction.

The issue I have is when someone steps in and states flat out that upfront or advanced fees are illegal in every state. Because that's just not true. in most States we CAN charge an upfront fee. We just have to know how.

What say you?

 

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Permalink Reply by Jeff Payne on July 20, 2011 at 1:03am

I might, have 3 this week!  Better get tuned up I guess

Beverly Cibulsky said:

Jeff... well you are the best!!! Did you sing at a closing this week?

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Permalink Reply by Terri Barrow on July 20, 2011 at 5:12am

I don't think that is legal!  

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Permalink Reply by Jeff Payne on July 20, 2011 at 7:43am

Jeffrey, I get what you are saying.  You charge an upfront "admin or marketing fee" that has nothing do with the short sale, it is for your adminstrative and marketing time.   Do you have the seller sign a disclosure to that affect?  Is is refundable if you do not sell their home?  I think that you have an interesting way to handle this and would like to know more.  From a business standpoint, how much do you charge?  How many listings do you anticipate closing?  I would think that I would need to look at my business plan and charge accordingly.  $500 per seller looks pretty good, I am on track to close 75 to 80 sellers this year. 

Jeffrey Burnham said:

I'd like to be clear in the fact that I NEVER make a decision for a client. (To me if you owe $300k on a home that is currently worth less than $130k the decision SHOULD be clear, but irregardless, I NEVER suggest to a client to NOT pay their mortgage and to short sell their home. Conversely, I do remind them that NOT paying their mortgage WILL have an impact on their credit rating.  I suggest they call their attorney, their accountant and the IRS directly to see what options they have.

 

To answer a few more responses: the ONLY guarantee I make on a short sale, is that I CANNOT guarantee the lenders/ servicers response to our short sale proposal. It could make perfect financial sense... but it MAY be declined irregardless.

 

What are the "advanced fees?". Preparing a market analysis (um, I THINK the BANKS THEMSELVES still pay agents to do BPOs, no?) , posting a sign, providing an electronic lockbox, inputting all the listing info into the MLS, preparing promotional materials, taking pictures, collecting all the documentation and submitting it to all the lien holders for consideration (with, again no guarantee of their agreeing to allow the short payoff.) These services are due when they are performed and completed. So... I am not charging for my "opinion." I'm charging for these specific actions and functions which I DO provide (as I'm sure all of you do as well.) My opinion is irrelevant. In fact the first question I ask is ..."Do you want to keep your home?"  (Believe it or not a loan mod DOES sometimes make sense... like a terminal patient I assisted last year.)  I am being paid for a service (and to some extent, materials at that point.) As we all know, only well presented, but more importantly, complete Short Sale requests are accepted and completed. I can show tangible SPECIFIC functions I have performed... do I get a commission if it closes? Yes. Is it unfair to ask to be minimally compensated- reimbursed for the time, effort I do on the front end? Obviously, I think think so. It would be nice if everyone else did as well. But as I stated earlier, we all have our own take on this issue.

Kevin Hardin said:

Jeffrey,

When we consult licensed agents in our firm, in the context of fees, the question is about "What role are you playing?" You see, in AZ, the idea that the Agent is just a sales person results in the idea that "Hey, I am just selling the home, listing the home, negotiating etc etc" In other words, "Where is my commission?" They are attempting to portray that they are a professional, but they are not advising the client whether they should or should not purchase, or should or should not sell. So, to charge a fee up front, any fee, the question, even under RESPA, is what is the service you are providing? So, to your point, if you are advancing monies for Signs, advertising, lock box etc etc then charging an upfront fee is very appropriate, but what if the upfront fee is for "advice" that is answering the question of whether you should or should not purchase, or should or should not sell? 

This begins a slippery slope that is catching up agents down the road. Did the Agent advise that the particular home was a "Great Investment" and it turned out not to be? The issue is where does the commission end for a salesperson and fee income begin for a professional advisor? If you are charging a fee for advisement, negotiation of a debt obligation (Short Sale) have you left the role of salesperson? If you have moved out of the role of salesperson, have you moved outside the confines of your license? If you are advising under the confines of the license in your state, do you accept the fiduciary that come along with it? 

I just don't think most agents that take the stance you refer to have thought it through and truly valued their role and responsibility. I don't think the real question is "Can I charge an upfront fee?" I think the real question is "If I charge the upfront fee, assuming they are legal in my state, what service am I providing for that fee?"

Jeffrey Burnham said:

It amuses me how so many agents take the "high and mighty approach." Even if you go to a free clinic they charge a fee.

Many say... "oh, I would NEVER charge a fee." Even when you devote hours to a client that you can SAVE from foreclosure, keep them in the house for several months RENT FREE while the banks and HOAs "review" the info you have to send UMPTEEN times??  You can SAVE the client from a Deficiency Balance pursuit... how much did THAT save your client?

How many hours do we spend, sending the SAME information when the bank tells you "we never got your file- can you FAX all 97 pages AGAIN, because we don't ACCEPT emails?!"

While we're spending all this time working for FREE, the short sale Seller is also living MORTGAGE FREE. Is it that fair? We're expected to wait MONTHS to get a dime, play the paperwork game all for FREE?? Then, if it's a HAFA eligible situation, the Seller can even walk with a $3,000 bonus?"

Oh yeah, we can pay for the sign, pay our MLS dues so we can put the property out for grabs with other agent's Buyers, prepare nice color flyers pay for the ink and paper and spend the time preparing a good flyer, MARKET the property thru whatever means necessary-pay for that marketing, spend hours gathering paperwork, input that same paperwork multiple times into the bank's system, prepare a CMA or BPO to send to the bank. Then if we get an offer we can negotiate with the Buyer and their agent, we can update the Buyer and their agent continually throughout the process, for FREE of course.

Then when approval day comes, the bank will decline any Brokerage fee (if your broker charges this....which is NORMAL for MOST agents that are part of a National Franchise, which I am not.) (Funny, nobody baulks at the marketing fee they pay for having the Franchise Name on their business card!) But when the Brokerage fee is declined, guess who gets to pay that?

It's amuzing that so many agents have this "I would never charge for advance fees" attitude. If I were to go to a doctor, I wouldn't go to the doctor that was FREE just because he was FREE. I would go to the PROFESSIONAL that could resolve my ailment. The doctor I could trust to keep me updated and informed throughout the proceedure. The doctor I thought had the necessary skill to properly help me.  Price would be secondary to the results. If price were the only factor, there would still be Yugos (or whatever country Yugoslavia is these days) roaming the streets of America. Do you buy your car based ONLY on price? When you're in the grocery aisle do you get the cheapest cheese? Or the one with the quality ingredients? Different folks make different choices. Price is not the only factor in the world. For this reason, Dillards and Nordstroms have little fear of Walmart,KMart or Sears (who MAY be going away shortly.) There's a saying I've heard from many professionals.. "I have no problem with my competitor having a cheaper price~~~he know's the value of his product."

Now, before I get the tons of hate mail from you "High & Mighty" agents.. we all make our own business decisions. Just like I'm sure you will claim.. my clients are always EXTREMELY satisfied with me and my results. I have to buy all the items I mentioned above. My clients understand this and seldomly baulk at a modest advance fee to cover the sign, electronic lockbox, flyers and time to offset the hours spent just preparing the short sale. This is MY decision. You're free to make your own. Baskin Robbin's has 31 flavors of ice cream...since there are so many points of view. I will say this, the one thing I encourage all my short sale sellers (and Buyers for that matter) is to talk to other agents. They should work with who they think will do the best job. The PROFESSIONAL that will get things done.

Charging for advanced costs is NOT illegal in Nevada where I live. (It may be where you live?)

I would suggest that you consult your attorney when making your decision and that they review your documentation if you adopt a policy to charge for advance fees. (Although I doubt they'll do this for FREE.)

As my soapbox is really creaking, I'll step down now.  I wish you all good luck in your business and (IN MY OPINION) taking care of your clients should NOT mean taking food off your own table.

 

 

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