One of the great drawbacks to a broker taking on a short sale listing is the fear and often the reality that the short sale lender will demand a reduction in the broker commissions. This has created all sorts of contraptions to make the broker whole.I have seen contracts that have inflated commissions designed to make the lender reduce it; I have seen deals to have the buyer guarantee the broker commission short fall. There are more and some not yet invented. But this summer a case was decided in Iowa (and reported by the NAR) where the appellate court said the short sale lender could NOT renegotiate the commission and it is worth noting.The case of Stewart v. All States Quality Foods decided May 29th has specific facts but I have seen this type of scenario several times and it is worth noting if you are a short sale broker.In simplistic summary (you can read the case by the link above and it is not too complicated to understand even on a first read!), the broker brought a contract to the lender and in the contract the lender knew that the seller was to get a commission of 10%. The lender said it needed more money and made a counter offer of a specific amount. The broker got that counter offer. Then the lender said it needed to net more and the broker offered to cut its commission to help get part of the way to that number. The lender balked and denied the sale.The broker sued on its contract for the commission based on bringing a buyer ready, willing and able who met the counteroffer price asked by the lender. The legal theory that won was interference with advangeous business releationship - the listing agreement.The key issue here is that the lender actively participated in the transaction by making the counter offer request and it being met. Also important is the knowledge by the lender of the existing listing agreement.In all short sales that we handle we provide a copy of the Exclusive Listing Agreement to the lender, so knowledge in our situations would be met. If the lender makes a counteroffer then the lender is bound to accept it or it has violated at least one legal theory - if you are in Iowa. However the law and doctrines cited by the Iowa appellate court are in comport with many other states caselaw, Florida included.Be aware of the rights and obligations of the parties to a short sale - especially when the lender oversteps its position as a lender and becomes an active participant.Copyright 2009 Richard P. Zaretsky, Esq.Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.See our easy to understand articles at:TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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