Entry by Judi Bryan

The dilemma of working Short Sales on a "Consulting" basis


We just had a question from an agent who's been working with short sales and wondering how the ACRE consulting model might (or might not) fit in.  Below is his question ... and my response. We encourage YOU to take part in this discussion ... what are your thoughts, concerns, and experiences when dealing with short sales, and do you apply the same or similar options with them as you would with the "normal" transaction.


I handle alot of short sales and have a question for you. When doing a short sale you cannnot charge a fee for you "extra" services. Not only is it illegal, it is unethical in my opinion.  However, within the ACRE program I am wondering if you/me/we or someonewere to get a license with DFI, would that make it legal and ethical??


My understanding of the laws passed on this subject were designed to prevent predatory practices by scam artists who promised to help folks keep their homes, modify loans, etc.  That being said, however, people doing legitimate short sales are in hardship already ... they generally don't have the funds to pay anyone any fees.  And while license law may not preclude the charging of fees for specific services provided, chances are the lenders in question would.  Fees paid to brokers are required by RESPA to appear on the HUD1, and, of course, the bank gets copies of estimated HUD1 during the process.  And as for getting paid for services rendered being "unethical"...I definitely disagree.  Realtors assisting short sales are at compounded risk of not getting paid for their time and expertise...they are at the mercy of decisions by people who are NOT their clients.  In the mean time, they are investing considerably more time and resources in transactions for which the odds are still (until banks get better resourced to respond promptly...and favorably) they will not get paid.  Fees for services could help take some of the sting out of that prospect...but chances are, very few short sellers would be in a position to offer such payments.  And if they COULD, odds are the bank would want to know why THEY are not getting that money instead. 

Bottom line, this is a question you'll want to take up with your broker and your state licensing authority before taking any such action with short sales in particular.



This should open up a great dialog. Especially since there is such a volume of this business.

BTW, many new graduates are using the Question or Comment facility on the public website to post great questions and the rest of us are missing the dialog. It would be valuable to all if posted on the Exchange. That's what we are here for ... generate timely, important dialog so everyone benefits.

Interesting topic Judi. I've done lots of short sales and spoke with the negotiator regarding consulting rather than commission. The response was the same until I pointed out that it was ok to hire an attorney to represent you. Why is it that an attorney can get paid but we can't?

As discussion progressed along this topic, this particular negotiator who was with GMAC really liked the idea, but couldn't get the higher ups to go along with it. Alot of the problems depend on who the investor is, Fannie Mae, Freddie Mac, FHA, etc.

We still need to try though because in most cases from what I've found anyway, sellers who are going through a short sale may not be able to pay the mortgage payment, yet they still pay other bills and they run their credit cards up for other purchases. So it's not a matter of they don't have the money, they just don't have enough to pay an exhorbitant mortgage payment. In addition, if you are 3-4 mo's behind (for example) you can't just pay ONE mortgage payment, they will send it back. They want the entire past due balance.

Just my .02 on the subject. Let's band together and figure out a way for this to happen for the consumer.

Here in Chicagoland, where nearly all of our transactions include real estate attorneys, in the Shorts I've been involved with, the seller's attorney is paid out of proceeds, just as the agents. They've not been paid "outside of closing"

I understand that MOST states don't work with attorneys as a matter of routine, so how attorneys work in all those other states, if they are involved in a short, may be totally different than here, though.

Thanks for your input, Paula. I think this is an important topic for us all to share input on.

Florida rarely uses attorneys, use closing agents. On short sales though, they either get paid outside of closing or it shows on the HUD and banks don't have problem with it.
More research needed, as laws vary from State to State, but one day we shall prevail!

This page contains a single entry by Judi Bryan published on January 30, 2011 1:55 PM.

A Consulting Niche That's Growing was the previous entry in this blog.

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