UNDER FTC MARS RULING, REALTORS CANNOT NEGOTIATE SHORT SALES WITHOUT BEING IN COMPLIANCE ($11,00 penalty per day)
This new ruling (16 CFR Part 322) came in under the regulatory framework of the FTC and very people or organizations seem to be aware of it. Please read the ruling. Footnote 126 directly refers to the NAR requesting an exemption for Realtors and the FTC denying such. IF YOU ARE NEGOTIATING A SHORT SALE, YOU MUST BE IN COMPLIANCE WITH THE RULE which is burdensome. I am presenting the first seminar today to a Realtor group and shall hopefully 1)make it out of the seminar alive, 2)provide a process for Realtor compliance so they can continue short sale negotiations. If not, who will handle the negotiations? (most attorneys are overburdened and not knowledgeable in the daily negotiation process).
WHERE WAS OUR REPRESENTATION TO INFORM US OF THIS NEW RULING? Just curious!
126: As a general matter, the Final Rule is notintended to apply to the marketing of services to
assist consumers in selling their properties to third
parties. The Final Rule, however, does specifically
cover the marketing of services involving the sale
of properties to third parties if those services are
designed or intended to assist consumers in
averting foreclosure, e.g., through a short sale or
deed-in-lieu of foreclosure. One commenter urged
the Commission to exempt licensed real estate
professionals from the Final Rule. NAR at 1–2. The
commenter argued the Rule would restrict real
estate agents in helping consumers with the process
of selling their homes through short sales. Id. The
Commission concludes that an exemption for real
estate agents is not necessary. Real estate agents
customarily assist consumers in selling or buying
homes and perform functions such as listing homes
for sale, showing homes, and finding desirable
homes for consumers. The Commission is aware
that real estate agents may perform these functions
when properties are bought or sold through a short
sale transaction, but does not consider these
services to be MARS.
Replies to This Discussion
-
Permalink Reply by Wendy Rulnick on
-
Todd - Have you received a response from your email to NARS yet?
Todd J Sullivan J.D. said:
Yep. I'm still shocked at NAR. In my research, I found the NAR letter to the FTC which tried to exempt Realtors from the Rule. To my limited knowledge, I can't find any more information or effort on the part of NAR. Regardless, there has been no direction or information from NAR to state or local associations on this subject. NAR has 1.2 Million members who are active (dues paying) Realtors. How many are doing short sales? How many are "potentially" liable under this Rule and why weren't we notified.
Maybe I'm just steamed because I had to pay my yearly dues.....
I attached the NAR letter to the FTC if anyone's interested.
I'll be emailing Scott Rinn at [email protected] who is the Senior Regulatory Policy Representative and
Ken Trepeta at [email protected] for some clarification on this issue.
Everyone, Please feel free to email the above. Clarity would certainly help in this matter.
Thanks for listening!
tjs
-
Permalink Reply by Richard Zaretsky on
-
Michael Schneider said:Bryant,
The solution to this is to go out on a limb only for things you don't want. Eg, "Man, no way is the Investor going to waive the deficiency for $3,000".
That way, you get to feel really good, when you are wrong.
Thanks for posting this, it's a good read.
Bryant Tutas said:Hi guys. Here's the response from Richard Zaretsky, Esq. He's the attorney I use on Florida for all things short sale.
I guess I was wrong. I hate it when that happens!!
-
-
I decided to delve into this with my own Article which is now posted on ActiveRain. I think I took a different approach than Mr. Sullivan - but ended up more or less in the same place. See the link in the first sentence.
-
Permalink Reply by Lisa Henderson on
-
Wow! A lot of information and I am quite confused. May I ask a (maybe) simple question regarding this?
I am in California and here short sale negotiators charge 1% of the selling price for negotiating the short sale. To me that is outrageous, and I can do as good a job, or better, myself.
When I take a listing, I do my own negotiations. I only charge a regular 6% (3%/3%) selling commission. I do the negotiating for free, I guess. In other words, I consider this a part of my "Listing Agent Obligation".
I absolutely will not get involved in loan modifications at all. I honestly tell my clients that they need someone more knowledgeable than I am.
1. Am I in violation of anything?
2. What records should I keep? Or, in other words, Why would I not keep records of what transpired in the short sale?
3. What disclosures should I give to the Seller?
You know, I came here to find out opinions about Arms Length Transactions, and haven't even looked there yet. I LOVE this site! Really, not being facetious. But I'm kind of freaked out about this issue (that I knew NOTHING about until I came here), and just have to know!!
-
Permalink Reply by The Trent on
-
Lisa,
I agree with you on doing the negotiations yourself, but I don't think it is your obligation as an agent. Are duties are not that in a regular sale. We basically get paid the same or less to do more work than we should. In some cases, so some agents should not do their own negotiating because they are terrible at it!
I do my own negotiating, and negotiate for other agents who don't want to or like to. If they will pay me 1% to do a great job for them, I think it is worth it for them. My goal is to help homeowners, period.
I commend you for doing your own negotiating!
I would just cover my rear end on this whole MARS issue as it only take a few more paragraph in your disclosures. Better to be safe than sorry.
I do not expect NAR to do anything for me. It it my opinion that they are on more of the side of the lenders than with agents when it comes to short sales anyways, but it is just an opinion.
Trent
Lisa Henderson said:Wow! A lot of information and I am quite confused. May I ask a (maybe) simple question regarding this?
I am in California and here short sale negotiators charge 1% of the selling price for negotiating the short sale. To me that is outrageous, and I can do as good a job, or better, myself.
When I take a listing, I do my own negotiations. I only charge a regular 6% (3%/3%) selling commission. I do the negotiating for free, I guess. In other words, I consider this a part of my "Listing Agent Obligation".
I absolutely will not get involved in loan modifications at all. I honestly tell my clients that they need someone more knowledgeable than I am.
1. Am I in violation of anything?
2. What records should I keep? Or, in other words, Why would I not keep records of what transpired in the short sale?
3. What disclosures should I give to the Seller?
You know, I came here to find out opinions about Arms Length Transactions, and haven't even looked there yet. I LOVE this site! Really, not being facetious. But I'm kind of freaked out about this issue (that I knew NOTHING about until I came here), and just have to know!!
-
Permalink Reply by Todd J Sullivan J.D. on
-
Hi Wendy,
I received an immediate response from one of NAR co-authors of the application for exemption letter that was submitted March of 2010. His response was, in essence, a disclaimer that it was not his normal position. He did state that the subject matter was in the hands of NAR's Chicago attorneys. In my request for information letter, I requested information by 2-1-2011. If I do not receive information tomorrow, I will post the letter. Nothing earth shattering, but I am just trying to get a response from NAR and some direction on how they will assist or direct their membership.
To be frank, I'm pissed that I spend so much in dues and I find myself (and others - thank you!) trying to inform the Short Sale Realtor community of the potential risk everyone is running.
tjs
Wendy Rulnick said:
Todd - Have you received a response from your email to NARS yet?
Todd J Sullivan J.D. said:
Yep. I'm still shocked at NAR. In my research, I found the NAR letter to the FTC which tried to exempt Realtors from the Rule. To my limited knowledge, I can't find any more information or effort on the part of NAR. Regardless, there has been no direction or information from NAR to state or local associations on this subject. NAR has 1.2 Million members who are active (dues paying) Realtors. How many are doing short sales? How many are "potentially" liable under this Rule and why weren't we notified.
Maybe I'm just steamed because I had to pay my yearly dues.....
I attached the NAR letter to the FTC if anyone's interested.
I'll be emailing Scott Rinn at [email protected] who is the Senior Regulatory Policy Representative and
Ken Trepeta at [email protected] for some clarification on this issue.
Everyone, Please feel free to email the above. Clarity would certainly help in this matter.
Thanks for listening!
tjs
-
-
Hi Lisa,
I have been trying to "raise the flag" on this issue as NAR has completely let the membership down and exposed us to major liability. The key issue with the FTC MARS ruling is fairly simple: if you negotiate or refer a short sale client to a negotiator, you must be in compliance with the MARS requirements. As of today, there are no more "up front fees" allowed. As Realtors, we do not (most of us) take any up front fees so that should not be an issue. The second part of the Rule was implemented December 29, 2010 and that has a variety of disclosure, disclaimer, recordation requirements. Because it's the government, it's a hassle. There are potential fines up to $11,000 per day for violations. However, download the Rule that I referenced in one of the first post and read the last 6 pages. It will provide some of the answers you are looking for. I'm hoping to post a very simple guide to compliance within the next several days.
Take care,
TJS
The Trent said:Lisa,
I agree with you on doing the negotiations yourself, but I don't think it is your obligation as an agent. Are duties are not that in a regular sale. We basically get paid the same or less to do more work than we should. In some cases, so some agents should not do their own negotiating because they are terrible at it!
I do my own negotiating, and negotiate for other agents who don't want to or like to. If they will pay me 1% to do a great job for them, I think it is worth it for them. My goal is to help homeowners, period.
I commend you for doing your own negotiating!
I would just cover my rear end on this whole MARS issue as it only take a few more paragraph in your disclosures. Better to be safe than sorry.
I do not expect NAR to do anything for me. It it my opinion that they are on more of the side of the lenders than with agents when it comes to short sales anyways, but it is just an opinion.
Trent
Lisa Henderson said:Wow! A lot of information and I am quite confused. May I ask a (maybe) simple question regarding this?
I am in California and here short sale negotiators charge 1% of the selling price for negotiating the short sale. To me that is outrageous, and I can do as good a job, or better, myself.
When I take a listing, I do my own negotiations. I only charge a regular 6% (3%/3%) selling commission. I do the negotiating for free, I guess. In other words, I consider this a part of my "Listing Agent Obligation".
I absolutely will not get involved in loan modifications at all. I honestly tell my clients that they need someone more knowledgeable than I am.
1. Am I in violation of anything?
2. What records should I keep? Or, in other words, Why would I not keep records of what transpired in the short sale?
3. What disclosures should I give to the Seller?
You know, I came here to find out opinions about Arms Length Transactions, and haven't even looked there yet. I LOVE this site! Really, not being facetious. But I'm kind of freaked out about this issue (that I knew NOTHING about until I came here), and just have to know!!
-
-
"The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS."
Obviously, the Commission is not giving a real estate agent simply "permission" to list or sell" a home that happens to be a short sale. That's not the discussion of the document or even the question from NAR. They are specifically answering NAR's comment about agents assisting sellers with their short sales.
I do think the writer could have constructed his sentences better, so we don't have hoards of people trying to figure out what he means. It would be simpler to just call a representative from the commission and just ask them.
-
Permalink Reply by Bryant Tutas on
-
The issue with upfront fees being eliminated is that there are real estate companies that charge an upfront fee as part of their commission in ALL transactions regardless of whether or not it is a short sale. The FTC is now saying that they can't charge if the transaction happens to be a short sale. To me this is price fixing. Basically telling me how to and how much I can charge for my services.
-
Permalink Reply by Smitty on
-
Hi Wendy,
My lawyer interpreted it a different way:
"Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions
when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS."
So THESE functions refers to the previous section where it clearly defines 'normal' real estate services, but does not say anything of short sale negotiations.
The ruling clearly defines short sale negotiations as needing to be MARS compliant. Realtors were not exempt no matter how you look at it.
"The Commission is awarethat real estate agents may perform these functionswhen properties are bought or sold through a shortsale transaction, but does not consider theseservices to be MARS."
Wendy Rulnick said:
Obviously, the Commission is not giving a real estate agent simply "permission" to list or sell" a home that happens to be a short sale. That's not the discussion of the document or even the question from NAR. They are specifically answering NAR's comment about agents assisting sellers with their short sales.
I do think the writer could have constructed his sentences better, so we don't have hoards of people trying to figure out what he means. It would be simpler to just call a representative from the commission and just ask them.
-
-
Bryant, I NEVER thought of that. I completely agree.
Bryant Tutas said:The issue with upfront fees being eliminated is that there are real estate companies that charge an upfront fee as part of their commission in ALL transactions regardless of whether or not it is a short sale. The FTC is now saying that they can't charge if the transaction happens to be a short sale. To me this is price fixing. Basically telling me how to and how much I can charge for my services.
-
Permalink Reply by Michael Schneider on
-
This is not my read of the FTC Final Rule, Bryant.
If you take an upfront fee for the sale of real estate, to handle the sales process, then I think the Final Rule is probably silent on this, as the Rule deals with MARS activities only. How one, in practice, separates the fees for the sales versus the MARS portions of the service could be problematic. But, details, details, I suspect the FTC didn't really consider this aspect of the issue.
Also, for MARS activities, I don't think they are price fixing. They explicitly state that because the agreed upon fee is due only after the client approves the Servicer's offer, therfore they did not feel that fee caps were needed.
They are restricting the time when the fees is collected, not the actual fee for the service.
In my view, the restriction on up front fees for handling the restructing/resolution of debt for investment property is just mis-guided. Boneheaded, in short. And, frankly, if challenged, I suspect the attorney exemption would not stand up, but just my opinion.
© 2024 Created by Short Sale Superstars LLC.
Powered by
**********************************
like buttons