Is selling Short Sales by auction in anyones best interest?

shortsalenurse.com/?attachment_id=193 rel=attachment wp-att-193>AD-1 Disclosure (1) Regarding RE Relationship (Listing Firm to Seller) It is the first from that is provided to the Seller or the Buyer  It notes the quality of representation and gives it a legal label, and quality,  that  being a fiduciary duty.  What is an auction companies duty and to whom?  Is it to the BANK?  Is this an interesting question for the Department of Real Estate.  How do you take a commission for selling a property without making and upfront declaration of your Agency?

Let me paint a picture or a possible situation. The listing broker Realtor, advertises the home, accepts an offer and presents it.  The terms are acceptable to the Seller and they sign the contact to sell the home,  with the Buyer.  At the same time the Auction company is offering the home for sale and someone bids for the home and is the winner?   Do we now have two Buyers?  Who do we give the property to?

Most Real Estate Brokers charge 6% Commission when doing short sales.  6% is the total allowed commission for a HAFA short sale.   It appears that Auction.Com charges another 5%.   Now with two Brokers involved you could will  have inflated the commission to a total of 11 percent.  Most buyers would balk at this.  Also this system could make it so that FHA and VA loan buyers would not have the money to buy this home.  How wise is it to eliminate these buyers from the market?  Will this not suppress property values and limit investor returns.  Does this meet the Fair Housing Standards that most Brokers adhere to?  I dont know but I bet someone asks that question soon.

Is it possible, I am not the only one that thought this way?  According to business week.com  (see link)  some investors are suing Nations Star for using Auction.com. This interested me so I ran a search on Auction.com and found this consumer comment (see link)   I think it is fair to say this person is not impressed with the system that they use.

As best I could tell and I welcome you to view the Auction.coms site.  But first you bid and then you see their contract.  I could not find a copy of the winning bidders contact at their site.  At least in California if my client wants to see a draft copy of any contact before signing or bidding on a home, it is theirs to view ASAP.  In fact I go over the contract with buyers  before they even start shopping, as do all of my peers.

I know I am repeating myself but the elephant in the room has to do with Fair Housing.  If the Buyer pays the commission of 5% are we not hurting veterans and those meeting FHA loan requirements. In markets with limited inventory are we cutting them right out of the ability to buy?  I bet this will have to be  resolved before any major Bank uses an Auction Company for short sales.   How fair is it to cut V.A and FHA buyers out of the ability to buy.  Most of these people are struggling to obtain the down payments necessary to buy let alone pay an auction company 5%.  Why would a major Bank do this?  Well, frankly I have not seen it happen yet, but  it is being rumored Bank of America is considering it.

Any questions or comments on this evolving story please send them to me. I want to follow this.

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George Kenner, Broker Associate Keller Williams Realty

2060 Otay Lakes Road, Suite 200,  Chula Vista, Ca. 91915

619-723-5714    g.kenner@yahoo.com

November 14, 2012

Fannie Mae Cuts the MARKET SHARE by Refusing to Pay Closing Costs. REALLY?

You will find Fannie Mae Servicing Guide Announcement SVC 2012-19 in  the PDF Attachment below which supports this statement.    On page 6, you will see  under the sub heading Unacceptable Short  Sale Transaction Costs. and I quote buyers discount points or mortgage loan origination costs.

This means that if your shopping for a new home and the loan is held by Fannie Mae. you can not ask for the Traditional  closing costs credit even if you exceed the asking price of the home.   This will cut the NUMBER of people who can buy the home.    At least to me this lacks some logic.   Do we and when I say WE  I mean the Tax Payers who still control Fannie Mae and Freddie  Mac, want to limit the number of people who can buy a home before it goes into foreclosure?    The old saying that Common Sense is not that common just keeps rushing into my mind.    Who did the math on this and compared the facts that FHA and Fannie Mae policy should be in alignment.   What is even more odd is,  Fannie Mae will  allow for this type of closing cost credit on the loans they still invest in everyday in the  marketplace.   Really!   I just called a Bank and confirmed that this is still the policy.

The complexity of short sales transactions is growing.  Dealing with professionals that know where the rules are and how to apply them is very important to achieve success. You dont want to spend a few months waiting to  find out  Fannie Mae will not allow for Traditional closing cost consideration, as is standard in a FHA Transaction.  Will this rule change?  I sure hope so!  Realtors talking about this rule impact will / could change it.   Fannie can you hear us?