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NAR & DOJ Finally Make Friends

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 Hot Off The Press!

In a press release just out, it was revealed that NAR and the DOJ reached a settlement today after three years of litigation over the display of listings from the MLS on Virtual Office (VOW) Site.  According to NAR, the final order validates their IDX policy and strengthens the rules governing multiple listing services.

President Dick Gaylord was quoted as saying “This is clearly a win-win for the real estate industry and the consumers we serve. Today I can say with clear knowledge, underscored by DOJ’s settlement compromise, that the real estate industry is dynamic, entrepreneurial, and fiercely competitive.”

The final order expressly provides that NAR does not admit any liability or wrongdoing, and will make no payments in connection with the settlement. And, according to NAR, the terms of the agreement vindicate the NAR position that the MLS is a broker to broker tool intended to serve real estate professionals who list or sell property.

Laurie Janik (one of my personal heroes) was quoted as saying “This will ensure that MLSs are used for what they were originally intended to do, which is help real estate professionals find buyers for people who want to sell their homes”.

Mark Lesswing pointed out that the new policy (which has to be adopted by MLSs and local associations to implement the amended VOW policy within 90 days of the court’s approval of the final order) comes at a time when brokers appear to be moving away from the VOW business model ,”..because consumers can find sites thoughout the Internet on which to gather information without having to register their name and contact information”.

So all in all , I think we can chalk one up for the good guys!

Read DOJ/NAR Settlement-PDF

Bill is an unusual blend of Old & New - The CEO Century 21 Advantage Gold (Philadelphia's Largest Century 21 company and BuzzBuilderz (a Social Media Marketing Company), He is a Ninja CEO, blending the Web 1 and 2.0 world together in a fashion that stretches the fabric of the universe. You can follow him on twitter @Billlublin or Facebook or LinkedIn.

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56 Comments

56 Comments

  1. Jim Duncan

    May 27, 2008 at 1:05 pm

    I’ll leave the same comment here as I did at Inman:*

    “The Department said the settlement will enhance competition in the real estate brokerage industry, resulting in:

    more choice, fine.
    better service, dandy
    and lower commission rates for consumers.What in the world is the government doing seeking to lower (or raise) prices on any private enterprise???

    I can’t wait to see the actual settlement and the various interpretations thereof.

    *but the html should stick here. 🙂

  2. Russell Shaw

    May 27, 2008 at 1:07 pm

    This is a real scoop – not to mention good news. Inman doesn’t even have this yet on their site (other than a link back to AG for this post).

    Thank you, Bill, for being so completely connected.

  3. Benn Rosales

    May 27, 2008 at 1:15 pm

    Jim, I’m with you- they can’t do a flippin thing about 10 billion in oil profits, but they would eagerly jump into my tiny wallet- wtf ever. They (doj) had better get their flipping eyes on the ball and stop chasing bs. They’ve wasted everyone’s time, tax payer money to tell us what we already knew- deep breath, counting backwards 10 9 8….

  4. Bill Lublin

    May 27, 2008 at 1:18 pm

    Jim its not over ’til its over, but Laurie Janik and the rest of the staff do an awesome job! And I agree DOJ needs to allow the market to do what the market does. Their thinking must be a little flawed if they thought for anything over a nanosecond that real estate is not incredibly competitive.

    Russell -You know, that’s why the call us Geniuses 🙂 I’m honored by your attention – Nice of Inman to link back – Aw Shucks and stuff.

  5. Jim Duncan

    May 27, 2008 at 1:26 pm

    Laurie and the rest do a tremendous amount of work on our (Realtors’) behalf. Here’ a big “thank you!” to them.

    How can we go about getting an accounting of how much it cost us – the taxpayers – for the DOJ to pursue this suit?

    I’ve said it before – I’d really like to see same level of transparency and accountability found (now) in real estate to the health care system. At least I know what my services and fees are. (Health care providers have no clue)

  6. Barry Cunningham

    May 27, 2008 at 1:48 pm

    Whoa guys….Bill quoted the NAR press release. Good spin but this may not be as portrayed.

    You may want to read the actual Final Judgment here! DOJ v. NAR Final Judgment

    It’s not at all the nicely spun happy ending NAR would like you to believe. You need to step outsode the NAR press release and read the court doucment.

  7. Jim Duncan

    May 27, 2008 at 1:53 pm

    Whoa yourself, Barry – NAR spins???

  8. Barry Cunningham

    May 27, 2008 at 1:57 pm

    Jim..READ the Final Judgment..did you ACTUALLY read the final judment or the flowery statement from the NAR. C’mon Bill it’s not the rosy picture they paint and I am sure they expect most realtors not to go further than drinking the kool-aid of the swiftly issued press release.

    So…my question remains..did you actually READ the Final Judgment in its entirety?

  9. Matthew Rathbun

    May 27, 2008 at 2:05 pm

    Barry, can you read it to us? Maybe with a nice fireside rocking chair, old yeller sleeping in the corner and some hot coco? 🙂

    Here’s the thing. It doesn’t matter what the NAR of DOJ say. IT matters what challenges come up later and what courts interrupts the agreement to say.

    I’m happy that NAR’s legal team was fighting this – not because of the issue, but because DOJ needs to go after real issues and leave free trade as just that OR go lower my gas prices!

    I have a choice about fees for Realtors, but I am totally screwed when it comes to gas.

  10. Daniel Rothamel, The Real Estate Zebra

    May 27, 2008 at 2:06 pm

    Barry,

    I read the Proposed Final Judgement. I’m not really seeing any NAR spin, here. It seems to me that the settlement does what I thought it would do, enforces changes to the rules that had already been made. From what I can see, it also makes more explicit the ability of brokers/agents to have custom MLS searches that offer more data than what is already available from public MLS feed (see page 4, paragraphs A & B).

    Am I missing something?

  11. Barry Cunningham

    May 27, 2008 at 2:15 pm

    C’mon Daniel….

    “It really does free brokers generally to engage in whatever they feel is the most efficient and effective way to compete,” Deputy Assistant Attorney General Deborah A. Garza of the Justice Department’s antitrust division told reporters.

    She said the settlement “should lower the cost of the transaction for buying a house.”

  12. Jim Duncan

    May 27, 2008 at 2:38 pm

    Barry –

    1) I was ribbing with my comment
    2) Both sides spin as they both have to justify their conduct, goals and intent.
    3) Should NAR’s trademark police go after the DOJ for not capitalizing “REALTOR” in the judgment? 🙂

    In all seriousness, DOJ should focus on less competitive industries and go after true monopolies – and I still would like to have the time to see how to go about determining just how much this cost taxpayers – via a FOIA request and whether it is/was “worth it.”

  13. Daniel Rothamel, The Real Estate Zebra

    May 27, 2008 at 2:43 pm

    Barry,

    Oh, okay, you are talking about quotes. I am talking about the meat of the settlement agreement.

    To your point– I agree with Jim: when did it become the business of the DOJ to attempt to lower the cost of anything for anyone? Now, if that is a secondary outcome, fine. Although, in this situation, I’m not really sure that it will be. It is certainly possible that the cost of the transaction will go down for some people who use some brokerages, which would serve to lower the overall average, but I don’t know that it will have some sort of major sudden effect on anything.

    The agreement just seems to serve to put things in writing from and give them the force that comes with a legal ruling. The rules that lead to the suit were addressed long ago. If this will serve to prevent future issues, then I’m all for it.

    For me, personally, if the paragraphs that I cited in my comment above mean what I think they mean, than that is the most important development I see coming out of the whole thing.

  14. Robin Lee

    May 27, 2008 at 2:46 pm

    This is definitely good news, however I do agree with Jim, in what is the government doing trying to raise or lower prices for us agents? I thought this was a capitalist market. Oh well. I also am interested in the actual settlement.

  15. Barry Cunningham

    May 27, 2008 at 2:57 pm

    Daniel…the quotes were meant to summarize for those who don’t read it. I am on the air and will write back soon enough but suffice it to say that this was not a glorious day for the NAR!

    The consumer wins and online real estate wins..I guess we can agree on this

  16. Daniel Rothamel, The Real Estate Zebra

    May 27, 2008 at 3:07 pm

    Barry,

    Oh yeah, you ARE ON THE AIR right now.

    What dedication! I would expect nothing else from a Blue-Hen!

    We can certainly agree that the consumer and online real estate win in this one. Of course, the smart agent/broker wins, too. 🙂

  17. Jim Duncan

    May 27, 2008 at 3:12 pm

    I love this

    Glenn Kelman, chief executive of Redfin, an online real estate brokerage based in Seattle that operates in 20 large metropolitan areas, said the settlement came as a relief for executives at the company, which bills itself as a lower-cost alternative to traditional real estate agents.

    However, Kelman said he was concerned about a piece of the settlement that lets sellers’ agents block Internet users from making comments on listings. Such comments, common on retail Web sites such as Amazon.com, are “just part of how today’s consumers make decisions,” Kelman said.

    Start your own MLS, or your own Amazon, for Pete’s sake.

    I’d like to see a summary of –

    1) What’s changed in the Realtor/online/MLS space since the suit was started
    2) a Summary of exactly how this will affect Realtors – NAR’s Public Affairs email guide reads like it was written with the intent of being sent directly to the press.

  18. Benn Rosales

    May 27, 2008 at 3:17 pm

    I’ve added the agreement to the post.

  19. Barry Cunningham

    May 27, 2008 at 3:25 pm

    Thanks for doing that Benn…too many won’t read it..that is what is needed. But I could be wrong..we had 200 downloads in the last hour!

  20. Jim Duncan

    May 27, 2008 at 3:28 pm

    Michael Wurzer at FBS blog has a great first pass at the impact of the settlement. Of particular note is this:

    The DOJ also appears to have won the other major issue in the litigation: referral fees. Section III(11) of the Agreement says, “An MLS may not prohibit, restrict, or impede a Participant from referring Registrants to any person or from obtaining a fee for such referral.” This was the big argument raised by RE/MAX, Realogy and others, namely that they didn’t want to provide their data to a web company only to have it sold back to them in the form of a referral fee. As Dave Liniger is often quoted as saying, this is “like the guy who shows up at a pot-luck dinner bringing only a fork.” RE/MAX even went so far as to say that they’d advocate withdrawing from MLSs if selective opt-out was not allowed, and that ultimately gave rise to the ill-fated ILD policy and the DOJ litigation.

  21. Benn Rosales

    May 27, 2008 at 3:40 pm

    No problem Barry…

    Here are my thoughts:

    Arguing over whether the red herring was a win or not is a lot of fun until you realize it was in fact a red herring…

    My only issue is this line:“When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates.”

    All Americans should be angry at that statement. It implies that NAR profits on a transaction which is doesn’t, small businesses do, and attempting to control the free market is just wrong (especially with 10 billion in profits at exxon). Stick to defending competition, and you may just see the price go up per transaction- she going to have an issue with that?

    The DOJ allowed the major oil companies to devour the small independents and what we have now is a new oil cartel rising up under her nose all while chasing a red herring- fine the DOJ wins… whatever.

  22. Michelle DeRepentigny

    May 27, 2008 at 3:44 pm

    I have really mixed feelings on this development. Although I’m glad to see an agreement reached it appears this forces “our” Association to force ammended rules down our throat, finger us as non-compliant if we don’t adopt the new policies, and take away a membership benefit (insurance) if we don’t. I’m all for free trade and fairness, but no monopoly was proven and yet here we are settling for increased oversight from the DOJ.

  23. Barry Cunningham

    May 27, 2008 at 4:13 pm

    Michelle you and Ben are correct. So you have to imagine where things were headed if the settlement did not take place. It’s obvious that they (DOJ) had the NAR up against the wall. Most attorneys can read the proposed judgment and see that. You have towonder if the NAR would not have fared better if they had just decied to fight this ting to the mat.

  24. Bill Lublin

    May 27, 2008 at 4:20 pm

    Barry – I’m on the West Coast and I was at lunch when you responded so I apologize for seeming silent (though Jim, Daniel, Benn did a great job of responding without my two cents)

    As Jim Duncan points out every group makes the announcement in a way that makes them look good. I would not have expected the DOJ to say “We wasted three years and millions of dollars, and thousands upon thousands of man hours to reach an accomodation that is essentially where we were when we started” Nor do I think you can fault NAR for saying that the impact of the agreement is not detrimental to its members and is a succesful conclusion to this unwarranted attack on our industry and the members of NAR.

    I did read the judgement and I think you’re into selective editing in your comments above. I don;t get why you have so much of a chip on your shoulder about NAR that you need this to appear as if they didn’t accompish something that benefits their members. For a guy that proclaims how much of a capitalist he is, you seem to be lining up with “the other guys” on this issue. When did real estate professionals ever need the government to become more competitve? And as far as helping consumers, judging from the way they’ve helped the consumer with gas prices and the earnings of the oil companies these days……

    There is nothing in the court documents that impacts our industry or its players in any negative manner. It may aggravate you that NAR did such a great job, and that they have avoided the additional cost of litigation (which impacts us twice – we pay through NAR for our defense, and we pay for the expense of the DOJ’s offense through our tax dollars). The bottom line is that the agreement really has no negative impact on the members of the association and our trade association did a magnificent job of acting as a bulwark against government interference in the open market, and in the final analysis, protecting its members for the interference

  25. Benn Rosales

    May 27, 2008 at 4:21 pm

    I’m looking at the longterm, and oversight does settle the natives- the bottom line is that it’s political, we may never really know what in the hell this was ever really about- I tend to feel a lot like Michelle on this one, but then again, I still feel like something else is missing in all of this.

  26. Bill Lublin

    May 27, 2008 at 4:27 pm

    Although I’m glad to see an agreement reached it appears this forces “our” Association to force ammended rules down our throat, finger us as non-compliant if we don’t adopt the new policies, and take away a membership benefit (insurance) if we don’t.

    Michelle:
    All MLS already agree to be compliant, with the rules that are passed by the Multiple Listing Issues and Policies Committee – the additional ability of DOJ to assure that compliance is pretty much a non-issue since NAR already requires that compliance,

  27. Bill Lublin

    May 27, 2008 at 4:28 pm

    Benn – Thanks for posting the agreement – It wasn’t available when I posted. 🙂

  28. Matthew Rathbun

    May 27, 2008 at 6:20 pm

    So… at what point does interpreting the agreement in public forum cross the line into practicing law without a license? …just saying…

    I’m not an attorney, but I have to say that the agreement has points that concede the ground on both sides of the camp, but isn’t a compromise always going to have some level of give and take?

    I think Barry has done a good job showing that it’s not 100% to NAR’s side. I am actually ok with this, as I don’t think that any trade association should have so much power that they can bully DOJ.

    As much as I agree with Barry I also agree with Jim (and you know how crazy agreeing with so many people makes me) in that I don’t want my tax dollars going toward forcing any industry’s ability to make as much money as the consumer is willing to pay (aside from gas, simply because I have no say or options but to pay this fee). The availability of competitive pricing between real estate professionals was already there, despite the large amount of money that DOJ poured into this issue.

    The simply fact is that DOJ “took on” NAR because they were an easy target. Not too many voters or tax payers will defend Realtors, because of the inherently bad reputation they posses.

    Right now, I think they could easily take on the big oil companies and have more backers than taking on NAR.

  29. Frank Jewett

    May 27, 2008 at 6:32 pm

    Is NAR spinning this story to help you, their members, or to make themselves (leadership and permafrost staff) look better? One doesn’t have to favor the DOJ to find fault with NAR’s approach.

  30. Barry Cunningham

    May 27, 2008 at 7:00 pm

    Bill..I was looking at the judgment objectively. Not thru the eyes of a NAR press release. No I am not practicing law but I can read..however there is more between the lines that none of us can see.

    Bill many online agents have been met with scorn and malice. This judgment puts things in place to ENSURE NAR compliance and has given the DOJ the ability to come back in if need be. That wasn’t there before. So now, for the next 10 years, the Court retains jurisdiction to modify the order if need be.

    And you think everything is as it was before? I’m sorry, di the NAR have a Final Judgment filed against it mandating compliance and giving the DOJ the right to come in and spank them harshly if they did not comply before today?

    You don’t think it impacts anything. Ok..here’s a picture. Before today, somebody says the NAR isn’t playing nice, their alternative was to either sue or pound sand and the NAR as much could tell them that exactly.

    After today should the NAR not play well with others, a phone call gets placed, the DOJ hawks investigate and if NAR is found culpable what do you think happens?

    It’s a lot different today than yesterday.

  31. Greg Broadbent

    May 27, 2008 at 7:37 pm

    I think a lot will download it but how many will read the entire thing. I am not a fan of government officials who are already against us, judging us.

  32. James Malanowski

    May 27, 2008 at 8:07 pm

    First glance it appears that not much will change as the required changes for the most part were already enacted. For those of you wanting to know how much it cost – do you really? Remember, those of us that are NAR members have paid for both sides of the fight … Dues and taxes. I think I’d rather just keep working.

    – James

  33. Broker Bryant

    May 28, 2008 at 6:31 am

    I guess I need to take the time to read through the judgement. But I will say NAR and the MLS are still here and it sure doesn’t look like anything happened that will affect my business one iota. Now maybe I have a short memory but, Barry, didn’t you write recently how the DOJ was going to take NAR down? Well…..it didn’t happen.

  34. Bill Lublin

    May 28, 2008 at 11:54 am

    Barry;
    I really don’t think you read the judgement objectively – I think you were reading it with an eye towards reinforcing your point of view, which seems to be that NAR can’t do anything right. I will hasten to point out that my interpretation is also subjective, but I didn’t think the DOJ had a good position when it started, and I don’t think, millions of dollars later, that they accomplished anything.

    After today should the NAR not play well with others, a phone call gets placed, the DOJ hawks investigate and if NAR is found culpable what do you think happens?

    Barry, that’s just not true. I’m not a lawyer either, but I have some experience with our legal system. What happens is that we all go back to court (read paragraph VIII). The agreement does not provide immediate authority for the DOJ to act as some sort unilateral “sheriff”. They would need to go back to federal court and seek enforcement of the agreement through normal legal channels. And as far as their oversight, they have always had the ability to subpeona any information they wished to obtain, so that’s sort of a non-issue as well.

  35. Barry Cunningham

    May 28, 2008 at 12:53 pm

    Bill..I read the judgment for what it is..not what a NAR member hopes it could be.

    Read the reports today from the major news organizations and economic experts. Of course you are not going to read it that way..be objective and step outside of your box.

    My point of view of the NAR as being a useless organization has nothing to do with my review of the judgment and understanding of others who have legally and economically reviewed it as well.

    “C’mon Bill…retaining jurisdiction for the modification of future order is what you are holding out for as a safeguard? Of course it does not provide for “unilateral” enforecement ..but what in the world do you think will happen if they have to drag the NAR back into Court.

    C’mon put the KoolAid pitcher away.

    Other than the NAR and a few select agents and brokers..is ANYBODY calling this as being a good deal for the NAR..ANYBODY????

  36. Bill Lublin

    May 28, 2008 at 2:02 pm

    Barry;
    I think if they go back to court, Laurie Janik and her staff will do what they have done for years. Do the right thing for the real estate industry and the members of the association.

    It not about what I want it to be, its about what it is, an agreement that ends the expense to the members and does not actually impact the way business is being done. I think its a reasonable agreement and is neither a home run nor a shut-out for anyone – As I said earlier, I think the DOJ was wasting their time when they started, and I think its a good thing that its done.

    And for the record, I don’t drink Kool-Aid – May I have a diet coke instead? No Ice thank you – 🙂

  37. Frank Jewett

    May 28, 2008 at 3:42 pm

    DOJ got schooled, Barry. You better recognize! 😉

  38. Jonathan Dalton

    May 28, 2008 at 5:16 pm

    > It’s obvious that they (DOJ) had the NAR up against the wall.

    No, it’s really not. Settle and both sides walk away happy (or unhappy.)

    The market’s already taken care of the issue itself without help from the DOJ. All that’s left are the folks who were waiting for the DOJ to slap NAR around on a variety of issues – almost none of which had anything to do with the suit.

    At this point, the litigation’s more or less a non-issue. NAR already had adjusted their policy in the middle of the litigation and everything else was handled in the free market.

  39. Barry Cunningham

    May 28, 2008 at 5:42 pm

    I realize that I am in the Lion’s den, and that’s okay. The response here is to be expected. Of course it is, it’s your profession. Nothing other than what is being said here was expected.

    It’s just not what world respected columnists , legal experts and economists are saying. So I am not here to convince anybody otherwise. I am sure the 40 or so who commented here are representative of the opinion of the majority of experts who have reviewed the settlement agreement. Not!

    But that’s okay. Maybe Broker Bryant and Bill are right, this won’t affect your business at all. Here’s hoping.

    Meanwhile we are getting ready to exploit the settlement for all it’s worth. We prepared for this and now katy bar the door.

    But as I said earlier and never received any response to…Other than the NAR and a few select agents and brokers..is ANYBODY calling this as being a good deal for the NAR..ANYBODY????

    While I will add to that…have any of you seen the opinions and reviews from world respected columnists , legal experts and economists?

  40. Jay Thompson

    May 28, 2008 at 5:56 pm

    Barry – rather than continued baiting with questions like, “While I will add to that…have any of you seen the opinions and reviews from world respected columnists , legal experts and economists?” why don’t you just link to them? From what I’ve read, opinions are all over the board.

    I’m not a respected columnist, legal expert or economist. I’m just a real estate broker. I do know that the VOW referenced repeatedly in the proposed settlement is all but dead, and has been for some time. This seems to be conveniently ignored by many, including yourself.

    Will this settlement change my business? I don’t think so. Do I know that for fact? No, and neither do you. Am I worried about it? Not in the least. Why? Because I think if I continue to offer what I offer my clients that I’ll still be able to feed my children. If I have to adapt to some new rules, oh well, I’ll adapt. Those that don’t, will fade away. That’s their problem.

    “I am sure the 40 or so who commented here are representative of the opinion of the majority of experts who have reviewed the settlement agreement. Not!”

    Uhm, 9 of those “40 or so comments” came from you.

  41. Barry Cunningham

    May 28, 2008 at 6:12 pm

    Hey jay…I am not baiting..I would think that realtors would take the time to seek out info themselves. But if you want me to I will…

    As for the amount of comments..take away those 9 and now you’re down to 31 so it’s even less of a representative sample.

    I congratulate you on your business, I have seen your new site and it looks great. You obviously are prepared.

    I am sure there are many who are prepared. I am also sure that there are probably more who aren’t.

    The fact that those who read this blog are more than likely in the “prepared” sample group so it’s a lot like preaching to the choir.

  42. Jay Thompson

    May 28, 2008 at 6:30 pm

    We’ll just have to agree to disagree on whether or not you’re baiting Barry.

    As for a “representative sample” of course you won’t find that here, or on any blog.

    Sadly, if it were possible to poll all 1.2 million (give or take) Realtors, I suspect tens, if not hundreds of thousands would respond with, “what NAR / DOJ law suit?”

    We (using that term collectively to include the prepared, “online” portion of Realtors) tend to be more in touch with things that are happening. When I worked in an office of roughly 50 agents, many of which were old school, I’d ask questions like, “What do you think of Zillow, Redfin, disintermediation, etc” and I’d be met with the same blank stare I get from my teenagers. They were *clueless*. Totally and utterly clueless.

  43. Barry Cunningham

    May 28, 2008 at 7:31 pm

    Jay..after reading your comment we agree on more than we disagree!

  44. A. Longo

    May 29, 2008 at 7:05 am

    Definitely a victory for us today…but…I still see much red tape to be thrown at us ‘innovators’ very soon.! Tread lightly.

  45. Jonathan Dalton

    May 29, 2008 at 10:04 am

    > It’s just not what world respected columnists , legal experts and economists are saying.

    Sorry I’m late … do you have these links, Barry? I’d be interested in reading these opinions.

  46. Barry Cunningham

    May 29, 2008 at 10:24 am

    Jonathan just google it

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Residential

Short sales: the top 3 title insurance troubles

Short sales are not without challenges, but knowing the answers to the most common obstacles and questions can aide in a less stressful transaction.

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The importance of title insurance

When my husband and I purchased our first home, I was very young and very green. At the closing, our agent passed us our title insurance policy and said, “Put this in a safe place, and do not EVER throw it away.” At the time, I had absolutely no clue about title insurance, why it was important, and how it could save you from a world of trouble.

Decades later, working short sales, it’s the title reports and those dreaded liens that seem to be what gets us into all sorts of trouble. In fact, most of the reader questions that I received this past week related to title woes.

Three common short sale questions

Question: When I run the Statement of Information for my seller, it comes up with a child support lien and a mechanic’s lien. My seller says that he is aware of those liens, but has no money to make good on those debts. What should I do?

Answer: In short sales, the first lien holder will authorize funds from the proceeds to pay off a variety of expenses associated with the sale. These include commission, settlement fees, title insurance fees, and other mortgage liens. However, it is extremely uncommon for the short sale lender to offer to pay off a seller’s personal debts. Before you spend months and months processing the short sale, I’d strategize to ascertain whether you will be able to help the seller make good on these debts prior to closing. Otherwise, you should probably run like the wind.

Question: I am dealing with the IRS on a tax lien that needs to be released prior to short sale closing, and the IRS won’t budge. What should I do?

Answer: First off, it’s always a good idea to get non-institutional liens released early. At the time that you take a short sale listing, work with the title company to run a Statement of Information on the property owners. That way, if something comes up (like an IRS lien), you have plenty of time to work it out.

Generally, the IRS and the state tax authorities have mechanisms in place to remove these liens from title at no charge, since there is no equity coming from the sale. A tax attorney can guide you through the process. However, ask your title officer or title representative if they can work with you on this problem. The good news is that some title companies can help agents and you can avoid working with the IRS.

Question: I have a second lien on title with Chase Bank. Yet, when I contact Chase Bank, they tell me that the loan has been charged off and I need to contact the company where they transferred the loan. However, they do not have a record of where it was transferred. I’m between a rock and a hard place. What do I do?

Answer: This kind of chaos happens all the time with short sales, and it is very frustrating. Generally, if you contact the executive offices at the bank where the loan was held originally (in this case, Chase Bank), they can have their research department obtain information about where to call.

Another option might be to ask the lender for a “zero demand”. If they charged off the loan and show a balance of zero, then maybe they will send a zero demand and not further short sale negotiation would be necessary for this lien. Hey… without a second lien on title, maybe this won’t even be a short sale any longer!

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Coaching

How to avoid short sale buyer frustrations

Minimizing the frustrations that come with a short sale is often seen as a mythical possibility, but with these simple tips, any short sale transaction can go more smoothly.

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stress

Short sale frustration all around

Representing a buyer in a short sale can often be very frustrating. Primarily, that’s because of the unknowns associated with the short sale transaction. For one, nobody knows how long it’s going to take to obtain short sale approval. Actually, you don’t even know if you will get short sale approval. Not only that, but you also have to wait a fairly long time to learn the approved terms of the purchase. It’s frustrating to wait and wait, and then learn that the direction of the short sale is not the direction that the buyer is interested in taking.

Good communication is the key to short sale success. It’s vital for short sale listing agents to make communication with the buyer’s agent a regular and systematic part of the week. No matter how insignificant the short sale task, it is important to communicate with the buyer and the buyer’s agent and let them know that there are baby steps towards short sale approval.

One significant step towards short sale approval often comes after the bank’s valuation (BPO) when the bank makes a counter offer. Depending upon the short sale lender, this counter offer can come via email (in an email message), via telephone, or through an online platform such as Equator.

And then there are the counter offers…

Buyer’s agents and buyers often request to see the counter in writing. However, depending upon the short sale lender, this is often just not possible. Bank negotiators have contacted the short sale agent via phone, reviewed the settlement statement, and alerted the short sale agent as to what they will approve and what minimum net they might take accept in order to move forward with the short sale.

Since these counter offers usually do not come in writing, it’s important for the buyer’s agent to set the buyer expectations accordingly. Make buyers aware that there is lots of ‘verbal’ back and forth during the process. Many times it is only the short sale approval letter, the document that allows them to close, which comes in writing.

If buyers are willing to wait and keep the faith and understand that this process is a little more challenging and unique then most, they may find that they are getting a great deal on a wonderful property—often in better condition than the abandoned REO down the street.

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Coaching

Short sale: are there situations when agents can’t earn a commission?

Short sale: are there actually situations where an agent would not get paid? There are some complicated situations when it comes to short sales, and we address one here today.

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A short sale listing agent recently reached out to me to ask whether an agent principal can earn commission in a short sale transaction. This agent, Agent Alice*, was told that there are certain situations where licensees cannot earn a commission when buying a short sale.

The question:

Agent Alice received an offer on her listing from Agent Alex. Agent Alex is both the buyer and the principal. Agent Alice wanted to know whether the bank would pay a commission to Agent Alex at closing, since he is both the buyer and a principal.

The answer:

All of the major lenders including Fannie Mae and Freddie Mac employ some sort of arm’s length affidavit in which the buyers, the sellers, and the agents acknowledge (often in front of a Notary Public) that none has a business or familial relationship with another party outside of the transaction. Between this affidavit and investor guidelines for short sale commission, it is uncommon for the short sale lender to permit a commission to be earned by an agent principal.

Agent Alice then asked me whether Alex’s Broker, Broker Bob, could represent Agent Alex and earn a commission. While I do not work for the short sale lenders and cannot predict each short sale lender’s response, I’d say that it would be best to avoid this scenario, since the two have a business relationship outside of the transaction.

My two cents:

When I recently posed these scenarios to a group of agents, many shared creative ways to obtain a commission for Agent Alex. Remember that any creative solution whereby Agent Alex earns commission must also show his commission on the HUD-1 that is approved by the short sale lender prior to closing. As such, it is highly unlikely that there is a legitimate workaround for this problem.

The solution:

The easiest and safest way for Agent Alex to purchase Agent Alice’s listing is to seek representation outside of his brokerage. Not only will this assure that the buyer’s agent earns a commission, but it will also assure that all parties comply with the requirements of most lender short sale addenda.

 

*The names of the agents and the brokers in this post are pure fiction. Any relation to real listing or buyer’s agents is merely coincidental.

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