Have a scenaro-
An agent that works for me, K , is working with a buyer, has a contract on a short sale.
Short sale is listed with another office, agent B. They use a negotiation company/attorney/closing company handling their short sale process.
The buyer is financing, conventional, they are purchasing it as a Vacation home. They told K they want this house really badly-
The buyers lender called K yesterday and asked her for an addendum to reflect the 3% seller contribution.
K was confused and said What 3% seller contribution? ( As that was not part of the contract, or any documetns she had)
Buyers lender said they saw it on the HUD.
K got a copy of the HUD, and it was on it, but here was what was also on there:
HUD on Sellers side said that seller ( or Short sale lender) is contributing 3% back to buyer. (About $5,430)
On buyers side of HUD it shows buyer will be credited that 3% amount.
THEN on the next page of HUD, it shows fees for attorney and negotiator which comes to same amount credited to buyer $5,430.00, and it shows that buyer is paying those fees. Plus he gets a survey coming out of these fees paid.
When K called the other agent B, and contacted the short sale negotiating company, they both said You're buyers have to sign an addendum, and everything is fine, and it will close. The other agent B, said this is how we have been doing it at my company all the time now- this negotiator company works for all the agents here at our company. Isn't is great that your buyer does not have to pay anything, and gets a free survey?
The negotiator company swiftly sent addendums to the seller who signed them, then over to K, to get the buyer to sign them. One addendum says seller is contributing 3% to buyer for closing cots. The second addendum says buyer agrees to pay this attorney and negotiator those fees (equal the 3%, minus a survey)
The negotiator company sent K an email, saying isn't it great this does not cost anything to your buyer and they get a free survey. Please get the addendums signed.
K, brought this to my attention, she does not feel right about it and is unsure what to do in regrads to buyer and addendums..
I called FAR hotline, they said sounds like fraud. FAR attorney said to have buyer get with an attorney, and we should Not suggest either way for buyer to sign or don't sign these addendums.
I had K call an attorney, to get an opinion, wating on his response.
Buyer is out of state, we already know he is going to defer to K and ask what they should do.
Your thoughts please?
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So let me see. The listing side took it upon themselves to spring a surprise on the buyer at the last minute even though they knew all along this was going to happen. AND they tried to let it slide by by pitching the advantages of a free survey.
Anyone that says this is not fraudulent needs to go back to to real estate school or talk to an attorney.
The transaction itself may not be fraudulent. The fact that this was not presented to the buyer PRIOR to signing a contract and done without their prior knowledge IS fraud.
Fraud is all about the intent to deceive. That's exactly what this is.
They waited until the buyer was on the hook and then used that to spring this last minute surprise.
If it wasn't done to deceive then why not just make it part of the contract? Oh wait they can't because then they would actually have to disclose it to the short sale lender who may or may not approve it.
They should have simply had the buyer sign a contract hiring the negotiator and then ask the seller for concessions on the contract to cover the costs. All up front at time of contract. That way the buyer could have made an informed decision on whether or not to participate in this transaction.
Instead they chose to complicate a simple transaction by using a trick and a scheme in order to deceive.
Sometimes it's all about the presentation. and their's sucks :)
Bryant, The sellers lender has nothing to do with it, because they are not being charged. If done correctly, it is a great way but this attorney was very unethical to pull this at the last minute.
"They should have simply had the buyer sign a contract hiring the negotiator and then ask the seller for concessions on the contract to cover the costs. All up front at time of contract. That way the buyer could have made an informed decision on whether or not to participate in this transaction." This is exactly how it should be done, but I do not promise a credit. If we get one it goes to buyer who can do whatever they want with it.
The seller's lender does need to approve the 3% in concessions. According to the post this was not a part of the contract. So why is on the HUD? Because the listing side placed it there without making the buyer aware of it. I would venture to say this is far more than just unethical.
They are effectively charging the buyer for a service that not only did they not agree to pay but they were not even made aware of it until well after the transaction was being worked.
Would the listing side continue towards closing now if the buyer refused to pay the negotiator? I doubt it. since this intrinsically affects the transaction it should have been disclosed and agreed to at time of contract.
If it weren't intentional the agent would not have stated:
If they do this "all the time" then the agent should have known this going into the deal.
I could also argue that the buyer should have been given the option to pay for the negotiator as a closing costs out of pocket instead of financing into their mortgage and paying interest on it for the next 30 years. Very similar to why the old YSP was an issue.
So they either made a mistake and are scrambling to cover their rear ends OR thy knew well in advance this was going to be sprung on the buyer at the last minute. If the latter is true then it is fraudulent activity. They would have intentionally withheld this information from the buyer.
And what's with an addendum stating the buyer will pay the negotiator? This is not a purchase contract term or condition. It's a contract between the negotiator and the person paying them. There is no need for this to be in the contract at all.
What they are doing is not fraudulent. How it was done is.
Bryant is ultimately right. It all comes down to disclosure.
I think you both are ultimately saying the same thing. Bryant is just FURTHER explaining, what we all did. In essence, had it been done properly, it's not fraud, but I think we all are in agreement, that it wasn't handled properly AT ALL and should have been disclosed way up front.
Someone definitely messed up..
IT IS NOT FRAUD in any way, shape, or form. The closing credit is actually paid to the buyer, and not to any other party. The negotiator charges the buyer as a separate line item. If all is disclosed on HUD, there is no issue....HOWEVER....This was done incorrectly by the negotiator. There should have been full disclosure and signed agreements at time of offer. Those who try to add this at the last minute are unethical, but not illegal. Further, the buyer's lender must be made aware of any charges or credits to buyer and have underwritten their loans accordingly. Adding these at last minute is asking for a delayed closing.
www.ssprocessors.com
It's not illegal as Fannie Mae actually outlines how to pay short sale negotiators that way in their guidelines,(it has to be treated as a sales concession) BUT it all SHOULD have been done up front and disclosed WAY before the buyer even signed the PNS. Sounds like someone messed up somewhere and they are trying to scramble after the fact.
Smitty can you link us? Because I could definitely use an EXTRA 3%!
https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel012711.pdf
Bottom of page 204 runs into page 205
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