Up Front Fees
Can any share with me the documentation they are using for upfront fees for short sale transactions? Fee range?
I appreciate your help,
Kimberly Sherrod
Replies to This Discussion
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Permalink Reply by Eric Mieles on
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Interesting take Bryant. I have to be honest and say I never had thought of that. You are correct in stating "We have a habit of projecting our own thoughts" also we ALL sometimes have a habit of going with the flow and the norm and the norm is to "Not Charge Upfront" however if we do take a second and look at this from a business perspective how do some businesses/brands command more money or charge more for their services than others?
If you confidently know your commited to saving sellers from foreclosure, providing tremendous value and working a ss as it should be worked then that confidence allows you to know in your heart you may be justified and asking for compensation.
The conflict comes from anybody and everybody charging an upfront fee and knowing they may not be doing the work that's required to get GREAT results and just focused on the collection of money. We then tend to see that and project a feeling of "Oh no way, that's not good to do, we can't charge"
Interesting and made me think. Thanks!!
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Permalink Reply by Stephen B. McWilliam on
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Bryant, a Short Sale is considered under law a form of a loan modification (see below) which requires licensing under both the Federal SAFE Act and FL s.494. Long before the MARS Disclosure requirements were imposed by the FTC (this FTC "requirement" has only been around about 3-4 months) the law specifically prohibited advance fees. Also, the Florida AG has cited FL s.501.1377 which prohibits advance payments for services to assist a homeowner in foreclosure avoidance. Don't confuse the FTC saying it's rules do not apply to REALTORS any longer with the mistaken belief that has created a law that permits charging advance fees. Plain and simple, it is totally unlawful - in fact, in Florida it is a 3rd degree felony, to charge ANY FEE that specifically is charged for short sale processing unless one is a Florida admitted attorney and/or licensed under FL s.494.
FL s.494.001(14) “Loan originator” means an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain. The term includes the activities of a loan originator as that term is defined in the S.A.F.E. Mortgage Licensing Act of 2008, and an individual acting as a loan originator pursuant to that definition is acting as a loan originator for purposes of this definition. The term does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks, including quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of a prospective borrower.
MARS short sale disclosure rules canceled for Realtors
WASHINGTON – July 15, 2011 – In a move the National Association of Realtors® calls “a substantial victory for Realtors,” the Federal Trade Commission (FTC) announced that it will not enforce most of the provisions of the Mortgage Assistance Relief Services (MARS) rule against real estate licensees.
As a result of the stay on enforcement, real estate licensees who provide short sale services will not have to make the disclosures required by MARS as far as the FTC is concerned. However, the FTC announcement also gave Florida Attorney General Pam Bondi the ability to overrule the FTC within the State of Florida.
Florida Realtors has contacted Bondi’s office, but an official answer isn’t expected before next week at the earliest. In the meantime, Florida Realtors Law and Policy department recommends that Realtors continue to use the MARS disclosures until further notice.
The FTC stay on MARS rules enforcement applies only to real estate licensees and defines them as ones who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sale of their homes.
The stay does not apply to real estate licensees who provide other types of mortgage assistance relief services, such as loan modifications. It also does not give real estate licensees permission to use any unfair or deceptive practices banned under MARS.
NAR has been working with the FTC for several months to minimize the potential impact on real estate professionals who help financially distressed clients obtain short sales.
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Permalink Reply by Nate Gerard on
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There are two kinds of fees up for discussion:
One is a fee to initiate a short sale for a seller with a hardship. I see the intent behind these fees. An agent works diligently for 6 months to list and negotiate a sale only to have the seller decide not to sell (for one of the myriad of reasons sellers make this decision) leaving the agent out of luck. Some can rationalize this type of fee. To me it seems unethical. We take ALL our listings on the prospect of getting paid when we sell. Why should this be any different? If you don't like the reduced likelihood of closing don't take short sales, or pre-qualify the sellers better.
The second fee is a Broker closing fee that the bank won't pay. I charge this to all of my clients (traditional & short) with some exceptions. If the seller has no job and they are still in the process of getting their life back on track I pay it out of my commission. One of the reasons I began doing short sales is to help people and that seems a perfect opportunity. Of course, if the sellers have good jobs yet still can't keep the house (like in divorce) I charge the fee. It goes to my Broker anyway, not me.
MARS is simply regulation created to force unethical people to do what ethical ones already know. I don't like being told to do it a specific way so I'm happy they suspended enforcement for Realtors, however good agents (like the ones we have as members of this site) should already abide by the Golden Rule anyway.
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Nate, good post. However, in Florida (I know that you're in MN) it is unlawful to collect a fee in advance and/or at closing that is separately charged specifically for processing the Short Sale unless one is an attorney and/or licensed as a mortgage loan originator. I suspect it may be possible that MN has a similar law whereas all states were required to adopt the Federal SAFE Act in their state laws.
Again, the requirements under MARS only related to a disclosure requirement. It didn't impose any additional law that didn't already exist.
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Permalink Reply by Bryant Tutas on
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Stephen. I totally disagree with you. The SAFE Act does not apply to real estate licensees as long as:
(f) A person who performs only real estate brokerage activities and is
licensed or registered in this state under part I of chapter 475, unless the
person is compensated by a lender, a mortgage broker, or other loan
originator or by an agent of such lender, mortgage broker, or other loan
originator. The term “real estate brokerage activity” has the same meaning
as in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008Are you really implying that we must have a mortgage license to negotiate short sales? Surely you know better than that. That is a myth and scare tactic used by attorneys to get our business. It is 100% wrong.
FL s.501.1377 does NOT prohibit upfront fees. It does have require certain disclosures. It also requires that the duties related to the fee be in writing and be performed.
As a real estate broker in Florida I can charge upfront fees in my business. It's all about the disclosure and what I am charging these fees for. You have yet to post anything that would contradict this.
Bryant, a Short Sale is considered under law a form of a loan modification (see below) which requires licensing under both the Federal SAFE Act and FL s.494. Long before the MARS Disclosure requirements were imposed by the FTC (this FTC "requirement" has only been around about 3-4 months) the law specifically prohibited advance fees. Also, the Florida AG has cited FL s.501.1377 which prohibits advance payments for services to assist a homeowner in foreclosure avoidance. Don't confuse the FTC saying it's rules do not apply to REALTORS any longer with the mistaken belief that has created a law that permits charging advance fees. Plain and simple, it is totally unlawful - in fact, in Florida it is a 3rd degree felony, to charge ANY FEE that specifically is charged for short sale processing unless one is a Florida admitted attorney and/or licensed under FL s.494.
FL s.494.001(14) “Loan originator” means an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain. The term includes the activities of a loan originator as that term is defined in the S.A.F.E. Mortgage Licensing Act of 2008, and an individual acting as a loan originator pursuant to that definition is acting as a loan originator for purposes of this definition. The term does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks, including quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of a prospective borrower.
MARS short sale disclosure rules canceled for Realtors
WASHINGTON – July 15, 2011 – In a move the National Association of Realtors® calls “a substantial victory for Realtors,” the Federal Trade Commission (FTC) announced that it will not enforce most of the provisions of the Mortgage Assistance Relief Services (MARS) rule against real estate licensees.
As a result of the stay on enforcement, real estate licensees who provide short sale services will not have to make the disclosures required by MARS as far as the FTC is concerned. However, the FTC announcement also gave Florida Attorney General Pam Bondi the ability to overrule the FTC within the State of Florida.
Florida Realtors has contacted Bondi’s office, but an official answer isn’t expected before next week at the earliest. In the meantime, Florida Realtors Law and Policy department recommends that Realtors continue to use the MARS disclosures until further notice.
The FTC stay on MARS rules enforcement applies only to real estate licensees and defines them as ones who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sale of their homes.
The stay does not apply to real estate licensees who provide other types of mortgage assistance relief services, such as loan modifications. It also does not give real estate licensees permission to use any unfair or deceptive practices banned under MARS.
NAR has been working with the FTC for several months to minimize the potential impact on real estate professionals who help financially distressed clients obtain short sales.
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Bryant, I understand how and why you believe this to be the case. Unfortunately, I must respectfully disagree. Yes, I am stating that in order to collect a separate short sale fee one must be licensed as a mortgage loan originator (f/k/a mortgage broker) and/or a Florida admitted attorney. Also, contrary to your statement regarding FL s501.1377 it most certainly does prohibit advance fees by those even authorized to charge (ie. mortgage loan originator):
501.1377(3)(b) Solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services before completing or performing all services contained in the agreement for foreclosure-related rescue services.
Bryant, trust me on this one. As a real estate instructor I'm currently drafting a course for FREC approval on this specific issue. However, please call the FAR Legal Hotline tomorrow and they are very well versed on the subject. You can also fax a request to them. One of the attorneys will call you back usually within a few hours.
This is a very serious issue that can be very costly to a licensee. Please take the time to call these attorneys.
Bryant Tutas said:Stephen. I totally disagree with you. The SAFE Act does not apply to real estate licensees as long as:
(f) A person who performs only real estate brokerage activities and is
licensed or registered in this state under part I of chapter 475, unless the
person is compensated by a lender, a mortgage broker, or other loan
originator or by an agent of such lender, mortgage broker, or other loan
originator. The term “real estate brokerage activity” has the same meaning
as in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008Are you really implying that we must have a mortgage license to negotiate short sales? Surely you know better than that. That is a myth and scare tactic used by attorneys to get our business. It is 100% wrong.
FL s.501.1377 does NOT prohibit upfront fees. It does have require certain disclosures. It also requires that the duties related to the fee be in writing and be performed.
As a real estate broker in Florida I can charge upfront fees in my business. It's all about the disclosure and what I am charging these fees for. You have yet to post anything that would contradict this.
Bryant, a Short Sale is considered under law a form of a loan modification (see below) which requires licensing under both the Federal SAFE Act and FL s.494. Long before the MARS Disclosure requirements were imposed by the FTC (this FTC "requirement" has only been around about 3-4 months) the law specifically prohibited advance fees. Also, the Florida AG has cited FL s.501.1377 which prohibits advance payments for services to assist a homeowner in foreclosure avoidance. Don't confuse the FTC saying it's rules do not apply to REALTORS any longer with the mistaken belief that has created a law that permits charging advance fees. Plain and simple, it is totally unlawful - in fact, in Florida it is a 3rd degree felony, to charge ANY FEE that specifically is charged for short sale processing unless one is a Florida admitted attorney and/or licensed under FL s.494.
FL s.494.001(14) “Loan originator” means an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain. The term includes the activities of a loan originator as that term is defined in the S.A.F.E. Mortgage Licensing Act of 2008, and an individual acting as a loan originator pursuant to that definition is acting as a loan originator for purposes of this definition. The term does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks, including quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of a prospective borrower.
MARS short sale disclosure rules canceled for Realtors
WASHINGTON – July 15, 2011 – In a move the National Association of Realtors® calls “a substantial victory for Realtors,” the Federal Trade Commission (FTC) announced that it will not enforce most of the provisions of the Mortgage Assistance Relief Services (MARS) rule against real estate licensees.
As a result of the stay on enforcement, real estate licensees who provide short sale services will not have to make the disclosures required by MARS as far as the FTC is concerned. However, the FTC announcement also gave Florida Attorney General Pam Bondi the ability to overrule the FTC within the State of Florida.
Florida Realtors has contacted Bondi’s office, but an official answer isn’t expected before next week at the earliest. In the meantime, Florida Realtors Law and Policy department recommends that Realtors continue to use the MARS disclosures until further notice.
The FTC stay on MARS rules enforcement applies only to real estate licensees and defines them as ones who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sale of their homes.
The stay does not apply to real estate licensees who provide other types of mortgage assistance relief services, such as loan modifications. It also does not give real estate licensees permission to use any unfair or deceptive practices banned under MARS.
NAR has been working with the FTC for several months to minimize the potential impact on real estate professionals who help financially distressed clients obtain short sales.
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Stephen. You keep altering what you are saying. I have never said anything about charging for short sale services. I can charge for my BROKERAGE services anyway I choose. AND as a real estate broker I can negotiate short sales. I do not need a mortgage broker's license or any other license except my real estate license to handle all aspects of the short sale process from listing, to selling, to negotiating, to closing. Is this a statement you disagree with?
And again I can charge an upfront fee for my brokerage services. As part of those brokerage services I can handle short sales.
You're playing semantics. And taking legal opinions as law. I have called the legal hot line. Depending on what attorney you speak with and how you frame the question you will get different answers. In fact when I called about MARs they didn't even know what I was talking about. They had never heard of it!! Until well after it was put into affect. Attorneys give opinions. And my experience is they are wrong quite often. Show me a case law where a real estate brokerage has been penalized for charging an upfront fee for their services. I bet you can't.
Fee for service is a valid and completely legal form of real estate brokerage. And handling short sales is a perfectly legal part of real estate brokerage.
Stephen there is nothing wrong with you wanting to err of the side of caution. We all should. This is all about having the proper disclosures and not harming the public.
All agents reading this thread need to consult an attorney about how to be compliant based on your state's laws. The FTC ruling is quite clear about the FEDs stance. Just read it.
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Nate. You said: "We take ALL our listings on the prospect of getting paid when we sell."
This is not a true statement. There are many brokers that charge for their services upfront and these charges are not conditioned on the transaction closing. And there are brokers that charge a combination of fee for service and commission at time of closing. How much we get paid and how we get paid is 100% between the broker and their client/customer.
Nate Gerard said:There are two kinds of fees up for discussion:
One is a fee to initiate a short sale for a seller with a hardship. I see the intent behind these fees. An agent works diligently for 6 months to list and negotiate a sale only to have the seller decide not to sell (for one of the myriad of reasons sellers make this decision) leaving the agent out of luck. Some can rationalize this type of fee. To me it seems unethical. We take ALL our listings on the prospect of getting paid when we sell. Why should this be any different? If you don't like the reduced likelihood of closing don't take short sales, or pre-qualify the sellers better.
The second fee is a Broker closing fee that the bank won't pay. I charge this to all of my clients (traditional & short) with some exceptions. If the seller has no job and they are still in the process of getting their life back on track I pay it out of my commission. One of the reasons I began doing short sales is to help people and that seems a perfect opportunity. Of course, if the sellers have good jobs yet still can't keep the house (like in divorce) I charge the fee. It goes to my Broker anyway, not me.
MARS is simply regulation created to force unethical people to do what ethical ones already know. I don't like being told to do it a specific way so I'm happy they suspended enforcement for Realtors, however good agents (like the ones we have as members of this site) should already abide by the Golden Rule anyway.
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Permalink Reply by Jason Yacoub on
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Arizona State law will not allow us to charge any fees with out a Mortgage Loan Originator License and you can charge a fee over and above the commission and banks will pay it at close usally its $1500 to process the short sale and should be diclosed on HUD1.
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Eric. There are many ways to look at an issue. It's easy to look at the common way and think it's the only way. Discussions like this help us to think outside of the box. There are many ways to skin a cat. As long as they are legal there is no right or wrong way. Just different ways.
Eric Mieles said:
Interesting take Bryant. I have to be honest and say I never had thought of that. You are correct in stating "We have a habit of projecting our own thoughts" also we ALL sometimes have a habit of going with the flow and the norm and the norm is to "Not Charge Upfront" however if we do take a second and look at this from a business perspective how do some businesses/brands command more money or charge more for their services than others?
If you confidently know your commited to saving sellers from foreclosure, providing tremendous value and working a ss as it should be worked then that confidence allows you to know in your heart you may be justified and asking for compensation.
The conflict comes from anybody and everybody charging an upfront fee and knowing they may not be doing the work that's required to get GREAT results and just focused on the collection of money. We then tend to see that and project a feeling of "Oh no way, that's not good to do, we can't charge"
Interesting and made me think. Thanks!!
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I agree with everything you just stated. HOWEVER, you cannot charge a SEPARATE fee that is specifically for Short Sale processing. Additionally, you cannot charge an upfront BROKER fee if the property is subject to a foreclosure action. You can charge an upfront BROKER fee if the sale of the property is not to avoid a foreclosure. One that is licensed as a Mortgage Loan Originator (f/k/a mortgage broker) can lawfully charge a separate short sale fee but ONLY if the Short Sale is accomplished.
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Permalink Reply by Beverly Cibulsky on -
Mr. McWilliam,
I am excited to know that you are a member of Short Sale Susperstars! I have read so much of your advise and help on the Floirda REALTOR site! Thought I recognized your name!
Stephen B. McWilliam said:Bryant, I understand how and why you believe this to be the case. Unfortunately, I must respectfully disagree. Yes, I am stating that in order to collect a separate short sale fee one must be licensed as a mortgage loan originator (f/k/a mortgage broker) and/or a Florida admitted attorney. Also, contrary to your statement regarding FL s501.1377 it most certainly does prohibit advance fees by those even authorized to charge (ie. mortgage loan originator):
501.1377(3)(b) Solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services before completing or performing all services contained in the agreement for foreclosure-related rescue services.
Bryant, trust me on this one. As a real estate instructor I'm currently drafting a course for FREC approval on this specific issue. However, please call the FAR Legal Hotline tomorrow and they are very well versed on the subject. You can also fax a request to them. One of the attorneys will call you back usually within a few hours.
This is a very serious issue that can be very costly to a licensee. Please take the time to call these attorneys.
Bryant Tutas said:Stephen. I totally disagree with you. The SAFE Act does not apply to real estate licensees as long as:
(f) A person who performs only real estate brokerage activities and is
licensed or registered in this state under part I of chapter 475, unless the
person is compensated by a lender, a mortgage broker, or other loan
originator or by an agent of such lender, mortgage broker, or other loan
originator. The term “real estate brokerage activity” has the same meaning
as in the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008Are you really implying that we must have a mortgage license to negotiate short sales? Surely you know better than that. That is a myth and scare tactic used by attorneys to get our business. It is 100% wrong.
FL s.501.1377 does NOT prohibit upfront fees. It does have require certain disclosures. It also requires that the duties related to the fee be in writing and be performed.
As a real estate broker in Florida I can charge upfront fees in my business. It's all about the disclosure and what I am charging these fees for. You have yet to post anything that would contradict this.
Bryant, a Short Sale is considered under law a form of a loan modification (see below) which requires licensing under both the Federal SAFE Act and FL s.494. Long before the MARS Disclosure requirements were imposed by the FTC (this FTC "requirement" has only been around about 3-4 months) the law specifically prohibited advance fees. Also, the Florida AG has cited FL s.501.1377 which prohibits advance payments for services to assist a homeowner in foreclosure avoidance. Don't confuse the FTC saying it's rules do not apply to REALTORS any longer with the mistaken belief that has created a law that permits charging advance fees. Plain and simple, it is totally unlawful - in fact, in Florida it is a 3rd degree felony, to charge ANY FEE that specifically is charged for short sale processing unless one is a Florida admitted attorney and/or licensed under FL s.494.
FL s.494.001(14) “Loan originator” means an individual who, directly or indirectly, solicits or offers to solicit a mortgage loan, accepts or offers to accept an application for a mortgage loan, negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender, processes a mortgage loan application, or negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain. The term includes the activities of a loan originator as that term is defined in the S.A.F.E. Mortgage Licensing Act of 2008, and an individual acting as a loan originator pursuant to that definition is acting as a loan originator for purposes of this definition. The term does not include an employee of a mortgage broker or mortgage lender who performs only administrative or clerical tasks, including quoting available interest rates, physically handling a completed application form, or transmitting a completed form to a lender on behalf of a prospective borrower.
MARS short sale disclosure rules canceled for Realtors
WASHINGTON – July 15, 2011 – In a move the National Association of Realtors® calls “a substantial victory for Realtors,” the Federal Trade Commission (FTC) announced that it will not enforce most of the provisions of the Mortgage Assistance Relief Services (MARS) rule against real estate licensees.
As a result of the stay on enforcement, real estate licensees who provide short sale services will not have to make the disclosures required by MARS as far as the FTC is concerned. However, the FTC announcement also gave Florida Attorney General Pam Bondi the ability to overrule the FTC within the State of Florida.
Florida Realtors has contacted Bondi’s office, but an official answer isn’t expected before next week at the earliest. In the meantime, Florida Realtors Law and Policy department recommends that Realtors continue to use the MARS disclosures until further notice.
The FTC stay on MARS rules enforcement applies only to real estate licensees and defines them as ones who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sale of their homes.
The stay does not apply to real estate licensees who provide other types of mortgage assistance relief services, such as loan modifications. It also does not give real estate licensees permission to use any unfair or deceptive practices banned under MARS.
NAR has been working with the FTC for several months to minimize the potential impact on real estate professionals who help financially distressed clients obtain short sales.
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