The Market Dictates
Prior to 2006 Realtors seem to be in a constant fight with the lender to get loan packets to the closing table in time for the settlement. Now it’s an issue of getting permission for short sales. In either case responsiveness of the lender has always been an issue. The new twist however, is that they are not only ignoring you as an agent, but stealing your money as well.
Agents have established their commissions, regardless of flat fees or percentage based fees for their services, based on what a majority of the market would bear for these skill sets. Now, at a time, when purchasers are much harder to find, clients are far more demanding the need for highly skilled practitioners is greater than it’s been in a generation, the Lending industry has decided to take your money to offset the damages of their poor investments.
Before I went on staff as an Education Director I was working with a large number of listings, many of which were short sale and near foreclosure clients. My wife inherited these clients as she moved from assistant to primary agent. In watching her; working with other agents and teaching on distressed property sales I have heard the story over and over again about Loss Mitigation officers cutting the commissions when negotiating the short sale.
The agent works themselves to death, the Seller swallows their pride and somewhere in the process, a buyer emerges. The buyer is not likely to pay the asking prices of yesteryear for a home today, because the chances of equity being available in the next few years is low. The offer to purchase is ratified by the principals and then sent to the Lender to review and permission to sell. If you’re lucky to get an answer from the lender it usually involves a cutting of the commission. The agents then have a huge dilemma – they can violate their fiduciary responsibility to the client and go without any money, or accept the theft of the Lender and salvage some money.
Being Left On Hold
Recently my wife had a seller loose a purchaser because the lender took over seven weeks to tell her absolutely nothing. In this case the purchaser made their offer and it was ratified. They forwarded to the 1st Trust, CIT Group, who promptly told her to send it to the 2nd Trust. That was the last prompt thing that was done. The entire point of being the First Trust is that you are in the driver seat. To send it to the second for review was a huge waste of time. She did however get 2nd Trust’s answer in a reasonable amount of time and ensured the 1st trust had a complete packet. She called diligently almost every day and was denied access to the “decision maker” who had the file on her desk. At one point (3 weeks later) she was told that they were still awaiting the BPO. She happened to know the BPO agent and was shown that it was sent in 3 weeks prior. Extensions were made by the buyer, who eventually walked away from the deal, as there were many other options available to the purchaser. My wife spoke to a “manager” two days ago, who was going to look into it. No one has called back and she still has no answer about the permission to sell the home.
Yeah, thanks for taking the seller’s house off the market for two months and loosing the only buyer they had; had in eight months. Way to serve your employer, Ms. “Loss” Mitigation officer.
Giving You A Pay Cut
If you’re lucking to get a lender rep to review the file, one of the first places they go is your wallet. Evidentially they think it’s OK to take your money. Why? There isn’t much you can do. Yes, you can say “no” to what avail? If you do, the transaction dies, your clients hate you and will re-list with a more willing participant. And isn’t it your responsibility to put the clients needs above your own? It’s a mess and there is no great answer. So, I suppose your children don’t get to eat, so that the Loss Mitigation Officer can look better to their bosses.
A Few Questions
1. Since the contract for compensation (the listing agreement) is with the Listing Broker and Seller, who the heck is the Lender to require the commission be split? Wouldn’t this be tort interference in any other instance? (I am not an attorney, so I’m really asking)
2. How would the Loss Mitigation Officer feel if their employer gave them their check and it was 33% of what their promised salary was? How long would they stay at their job, if the Lender explained that the 66% decrease was due to the employer trying to limit their damages for the Lender’s poor risk taking practices?
3. For the Buyer Brokers… Why are YOU cutting your commission, didn’t the Listing Broker offer you a commission in MLS? Did the MLS commission offering, stipulate that you would be required to take less than promised, if they had to?
4. Why are agents working twice as hard for an almost guaranteed reduction in fees for their hard work only to act shocked and surprised that this was happening. Every time an agent comes to me shocked and bewildered that the commission was cut by the lender, I have to ask why they were involved in a listing that they were obviously not trained or experienced enough to handle.
5. Let’s take the lender out of the equation for second. If the Seller wasn’t getting enough money to sell their home and cover their cost, wouldn’t they reject an offer less than what is necessary to cover their financial commitments? Wouldn’t the buyer be required to increase their price if they wanted the house? Why in short sale situations, isn’t the answer to simply tell the buyer, if you want the house; you’ll need to increase your offer price. Your offer simply doesn’t cover the Seller’s bills….
For the Brokers
I can’t think of a better time for Principal Brokers to establish company policies that limit the number of Short Sale listings an agent can carry and to define that only well trained and capable agents be able to handle these special (actually becoming the norm in many markets) situations. How many Listing Brokers want to accept a listing where they may be paying a Buyer Broker more in commission than they are getting in total? Why aren’t Listing Brokers adding clauses to the Listing agreements that if the Seller fails to make timely mortgage payments, or agrees to work with the lender in a short sale, that the listing agreement becomes void?
If the Lender isn’t going to allow payment to an agent for working diligently to reduce the Lender’s loss, by at least getting a buyer for the short sale, than why are agents still taking on these clients?
It’s A Mess
Whereas I am usually careful to try and see all options, I am not immune to the fact that these are troubled times for many markets around the U.S. But in this case the Seller’s are usually paying for poor financial decisions, the Lenders are are paying for loose lending practices; and the agent is the paying for???? I know that some agents could have done a better job of educating the buyer of their options and such when they originally bought, but most agents had nothing to do with the purchase when it comes time to list. So, why exactly is it, that the agent has to pay such a price for the loss of the lender?
( I don’t think I’ve ever used so many question marks in a blog post…)