Rehabber · Syracuse, NY · Member since 2012 · 29 posts · 7 votes
Received phone call from my realtor (dual agent), he tells me his broker isnt going to sign off on the transaction due to an issue with their commission. Im not sure what terms were negotiated between the broker & bank. Anyway, we were two days away from closing and my realtor drops this on me. What are my options if the broker and bank cant agree on the rate of commision that is owed? I have threatened to take legal action against my broker & the seller (bank).
Investor · Sacramento, CA · Member since 2011 · 87 posts · 56 votes
12y
Often, the bank will tell the listing broker that if they (bank) accept an offer below their net requirement, the listing agent's commission will be reduced to cover the difference (not to exceed 50% of total commissions) Short sale commissions often total 5% (2.5 to each side). In this case, the bank knows your agent's broker is double ending it. The bank is probably taking all of the buyer's side (some don't honor a double end) and half of the listing side, leaving your agent's broker with 1.5%. Your agent and his broker split that based on their own office contract. The broker is probably telling the bank that they are contractually obligated to pay a minimum of 50% of all commissions, which technically means both sides for double ending it (i.e. a total of 2.5% commission). To close, the commissions are paid out at escrow. Without that pay out, you can't close. If it can't be resolved (assuming there is a legal dispute not actionable by you), have your lender do an escrow hold back for the amount in dispute. Someone will have to write a check for it. Either your agent or his broker (or you or anyone with proof of funds). It won't be cashed for the time allowed (I've seen a month ish), but the deal will close.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
It looked like the bank caught them doing a double ending. If the bank has a policy, no double ending then there is nothing you can do if the bank wants to sell. The bank could hold the EM until it is resolve, and I disagree on the lender hold any money, and If they did the bank want to sign off on the HUD to clear the deed bad advice Craig.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Oscar, I PM'd you. Check your in box. I'll try to help you, as I do short sales and this broker should be hung by his balls if he tries this. It's just wrong.
Oscar, the broker has no choice, and isn't required to sign off on the deal. His only recourse would be to seek any shortage from the owner, which the addendum to his listing agreement may, but probably doesn't, allow. The broker would likely lose his license if he were to actually manage to kill this sale due t this.
Craig, close, but not exactly.
Banks don't adjust their commission payments based on the Net. Each Investor, the one that actually owns the loan, has their own preset commission structure, I.e. two different brokers5 or 6%, one brokerage office, two different agents 4%, same agent for both sides 3%. Sometimes agents, closing attorneys, title co.s, etc. will cut their fees in order to help meet a Net though. Sometimes agents, including myself, will have an agreement up front with a buyer that states they will pay the difference to the buying agent, should the bank cut the commission.
This should not be a surprise to the agent. If they try to hold your deal hostage, start calling the local Board of Realtors first, then the state agency regulating agents. Also contact the title co. handling your closing. Holding back a disputed amount from the closing is NOT a viable solution. If the shorted lender does not receive the required Net in the Approval Letter, they will not accept the proceeds, will not release the mortgage, and the sale will be voided-as it did not meet the requirements of the Approval Letter.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Wayne,
You forgot to say the seller (bank) can kill the deal if they think something is crooked going on and nothing you can do about it but move on. Reporting on a broker's license could come back to haunt you unless you have proof, there are wrong dealings.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Joe, yes a bank can kill a deal if they suspect there is not an arms length transaction, or any undisclosed issues. That doesn't seem to be at issue here. There is no liability in making a complaint, particularly a good faith complaint, against a broker, even if it turns out the broker did nothing wrong. But, holding a deal hostage because the party isn't happy with the fee, should not be tolerated. I see this happen with 3rd party short sale negotiators all the time when they tried to "extract a fee" on the HUD, then it didn't work, then they start trying to squeeze the buyer, agents, etc. My response is to cut them off at the knees.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
That doesn't seem to be an issue here, just an agent looking for extra commission (I assume that's the intent, even though Oscar didn't say they were asking for it) due to the agent's ignorance about how much commission would be paid in this particular situation. This agent/broker must not be very familiar with short sales, or worse, knew this was coming and just decided to wait til the last minute to squeeze the buyer, since they are so close, have invested this much time, and just want to get it done.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
No, banks cutting commissions on short sales is an ongoing, heated battle with agents. Dual agency is where it shows up the most, as most loans(all GSE's, FHA, VA, most privates) have agreed to 6% across the board where two different brokers are involved. Some still only pay 5%, but une should know that going in.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Yep, on Chases's portfolio loans, about 18% of what they service, it's 6% with two different agents, 4% dual agency. The commission rates are actually set by the loan investors, most at 6/3, or 6/4.