One of the agents in my office has been working like a dog to sell a so-so property in a so-so location in Key West. The property is a short sale. The buyer and seller agreed to the price and my fellow agent has been shepherding the short sale through the Bank of America short sale service center.
A couple of days ago he received this e-missile from BofA:
I got the notes from customer service that you will not reduce the commission to 4%. I'm sorry but per our revised matrix this loan falls under the 4% commission. I am unable to give you anything more then that. We do not offer 6% commissions, the most we give out is 5% but this loan does not fall into that category. I'm very sorry, but please revise the HUD and send it in. If I don't receive it within 72 hours the correct way the file will be closed out for non compliance."
The average mls offer of compensation is 3% of the sales price to a buyer's agent. Sometimes the split is higher and sometimes it is lower. For the past few years many lenders have refused to pay the real estate commission offered in the mls offer of compensation and instead refused to approve short sales unless the commission was reduced to an amount lender was willing to pay.
The National Association of Realtors complained and in March 2009 Fannie Mae issued this directive to loan servicers (the companies that process loan payments and make decisions on the approval or disapproval of short sales):
Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.
Maybe the lady at BofA didn't get the memo that it is not okay to screw Realtors and threaten not to approve a short sale unless the Realtor take a cut of his commission so that BofA can repay the bank bailout money (and pay bonuses and retention payments to worthy employees). Or maybe BofA is so big that it doesn't have to obey any little policy.
I worked my rear end off last summer on a very difficult deal. Countrywide (now part of BofA) was the lender and it approved the short sale but only permitted a commission of $50,000 even though the earned commission was much higher. I've had similar situations with other lenders that demand Realtors share in the misery of a short sale by reducing their commission. The Fannie policy was supposed to address those wrongful practices and stop them.
I don't have a dog in the fight over my fellow agent's battle with BofA over the commission he earned but will not receive. But I know there are plenty of other agents that are experiencing the same treatment from BofA and other lenders every day. Some real smart trial lawyer is going to come along and create a class action lawsuit against the lenders and servicers that are violating the rules. I welcome that. In fact I have a lawyer I showed property to a few weeks ago that filed a very famous class action lawsuit. Are you reading this, Tom?