Short sales are unquestionably becoming a viable option for most homeowners and are rapidly becoming popular in our country today. The Federal Trade Commission (FTC) recently cancelled rules set by the Mortgage Assistance Relief Services (MARS). Their reasoning was they did not want to “inadvertently discourage real estate professionals from helping consumers with these types of transactions.” The rules that were cancelled for those trying to assist consumers in obtaining approval of a short sale from their lender or servicer were required disclosures, recordkeeping requirements, and the legal option to charge upfront fees. However, there has been a huge debate on whether it is fair for brokers to charge upfront fees to homeowners who are pursuing a short sale.
*Email received from staff in the Bureau of Consumer Protection:
The FTC’s stay means that the mars rule does not prohibit real estate professionals who assist consumers in obtaining short sales from charging advance fees. However, the mars rule does not preempt state law. This, in turn, means that if a state law bars such advance fees, real estate professionals who operate in that state continue to be prohibited from charging them.
The basic premises of the debate amongst Realtors are:
Is it wrong for them to charge a small upfront fee for their legitimate services? Some realtors claim that they had sellers who were excited for the upfront fees and hired them because of it. The upfront fee establishes a commitment in a transaction that is a prolonged process and requires many hours of effort dealing with banks/servicers, sellers, and buyers.
What is your opinion on this matter? Do you believe upfront fees are justified and even beneficial for the short sale or is it unethical for Realtors to charge prior to closing a short sale because of the detriment it may have on the homeowner in case of failure. Homeowner’s opinions are greatly encouraged.
Our team of agent’s stance is to not charge an upfront fee for any given short sale transaction.
Peter
*Agents/brokers, your comments on my blog are very welcome!! Thank you
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