Foreclosure in Richmond>Question Details

Ty Dwyer, Real Estate Pro in Richmond, VA

This is for all Realtors that have done a HUD home sale in the past 24 months.

Asked by Ty Dwyer, Richmond, VA Wed Dec 22, 2010

So in the past when I have sold a HUD home and HMBI was the vendor, the process although a bit confusing was understood, and the confusion was par for the course. Now that HUD has let HMBI go, and is using a new group of vendors to sell their HUD homes i have a question.

When I did a HUD home sale back in 2009 the buyer's agent was offered a 5% commission and the listing broker often times did not get paid a commission, instead they worked for a flat fee when listing HUD homes. Because of the 5% the buyer's agent did both the listing broker's job and their own job in order to help their buyer get the home.

Now in 2010/2011 with the new vendor HUD is using, and the new HUD rules the listing and selling brokers both get 3%. With that said it seems understandable that the listing broker of the HUD home should now perform all the duties that a traditional listing agent is resposible for because they are getting half of the commission now. Does that make sense to fellow realtors?

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Ty Dwyer, I totally agree with you. At 5%, I'm happy to do both jobs; at 3%, it's ridiculous. Additionally, listing agents have long been getting by wih extortion particularly when a selling broker let his/her NAID number lapse; 5% in those cases quickly went to 2.5% and still the buyer's agent pulled the entire load. Finally, isn't this arrangement a bit in conflict with the Realtor's Code of Ethics and most Board & MLS rules? Just asking...
Mike Curley, Broker (36 years), Richmond VA
0 votes Thank Flag Link Fri Dec 24, 2010

I spoke to a prominent listing broker here in CA recently and he was very helpful, but in his listing, he still had the disclaimer that HOA docs, delinquency rates, etc were the responsibility of the buyer and the buyer's agent to research. He shared how the process goes and where to register to be able to show HUD homes. With that said, he was definitely the most proactive HUD listing agent I've ever spoken to.
0 votes Thank Flag Link Wed Dec 22, 2010
Thanks for the clarification Felix...

I am hoping a HUD listing broker reads my post, or a HUD listing agent.

The overall process has changed, if the process changes should parties involved in the process think things should stay the same and they should not handle their role in the process differently.

I think the new process is just way too new to be addressing it right now. But I'm annoyed that the listing agent is contacting me to find out when the thing will close (so he can get his commission,) That is of course my speculation on why he's needing to know that.

I apologize to any gentle readers if my directness and terseness over this seems over the top. I just get a little impassioned over fairness and duty. Thanks!
0 votes Thank Flag Link Wed Dec 22, 2010

Like I said, I agree with you...but I don't see that happening unless the HUD vendor pushes the issue here. I understand your question and the way you put it. but doesn't change how I think things will happen. Unless it is a graded item, MOST of these listing agents don't really care. Just because they get 3% doesn't mean they'll do the work. I agree - they should but I don't think they will. That was the point I was making.

Web Reference:
0 votes Thank Flag Link Wed Dec 22, 2010

I disagree for a couple reasons. Yes I know a HUD home is a government foreclosure and is for the most part the same as a bank foreclosure. They are the same, however. Here's where I bring issue.

The Status Quo for how listing agents of HUD properties up until this month made sense, listing agents were (as far as it has been explained to me in the past) paid a flat fee for listing HUD homes. I have purchased HUD homes and represent Buyers purchasing HUD homes. I've gone through the process and understood it enough to know that listing agents with the old process basically place it in the MLS and get a hud knob lock on it. I was fine with that. I can also be fine with the new process where the listing agent doesn't usally lift a finger to help the buyer's agent collect HOA docs and essentially manage/field questions from the buyer/buyer's agent. I agree they may paint or do other things to make sure property shows well. But that's that.

Now this month, this process has now changed, one way it's changed is HMBI no longer is the liason between the buyer/buyer's agent and HUD. Now the liason is a new vendor, in fact several new vendors. Not only has the vendor/liason officially changed but(and I don't know the exact new guidelines) the commission paid to both the buyer's agent and listing agent has also changed. Now the listing agent and buyer's agent split a standard 6% commission. Before the buyers agent got 5% and the listing agent zero %. Now with this new commission split, although it could still be compared to a bank foreclosure where the listing agent does very little once the buyer/buyer's agent submits the offer, I still think HUD listing agents do owe more of a duty to assist on the listing side of a HUD foreclosure because they are now splitting a standard 6% commission.

The only problem with my personal opinion is that the process has changed but does HUD now require it's listing agents to provide a higher level of service because they are getting a normal commission. I don't know. My gut feeling is HUD listing agents likely still want to treat the process like the old way, and I just don't think that is the way it should be handled. IMHO that is all.

My originial question was based on this information should listing agents of HUD homes feel more obligated with the new process. I the buyer's agent is doing all the work, my 5% commission has been reduced to 3% and the listing agent is getting 3% for what? listing the HUD home?

I am looking for input from realtors that have represented buyers in the old HUD process and are starting to go through the new HUD process.

The settlement attorney that is handling all the HUD transactions in my area is not even aware of the new process and how things have changed, and as I go through the new process I have been having to explain the process to the HUD settlement attorney.

If I bring an offer for a HUD home I expect the HUD listing agent to give me more duty because they are getting the same amount of commission I am.

Others thoughts on this?
0 votes Thank Flag Link Wed Dec 22, 2010

A HUD home is still a foreclosed one. You'll get the same treatment for HOA docs or asking questions. Should they do more? I think so...will they? Nope. It's not an item on their grading scale so it's not something they spend too much time worrying about.
Web Reference:
0 votes Thank Flag Link Wed Dec 22, 2010
I understood the question, and as I stated I agree, but I feel it is the same as any bank foreclosure. The listing agents do just that......List the property. Sure you have some that will go the extra mile to get it sold, such as; have a "actual" conversations with the selling agent, some even have the properties cleaned and painted. But what does HUD require of the agents? Is there any incentive for them to provide service?.....Better question is WHY do agents need incentives to provide this service....isn't it a listing like anyother, especially now that they get 3%?
0 votes Thank Flag Link Wed Dec 22, 2010

I understand what you are saying about investors having to wait, it's an entirely subjective point of view, HUD believes that if someone is going to live there then no matter the condition of the property, owner/occupants should be given a shot first. Investors have usually always had to wait a month before bidding. That is understandable.

Ryan, I know what you are talking about with out of town agents but to be honest I list properties out of my area all the time, I belong to multiple MLS systems throughout Virginia, and know areas outside of my area, I list them because I have the connections and know how to get them sold even though I live 2 hours away.

Although I am talking about HUD homes here both of you did not address the question I proposed. I am looking to discuss the new HUD process and determine if listing agents of these HUD homes should start taking on more responsibility on the listing side than they did before the new process was put in place at the beginning of December.

I do wish there was a section on Trulia they separated Government Foreclosures from Bank Foreclosures. That would be a good start.
0 votes Thank Flag Link Wed Dec 22, 2010
It make a lot of sense to me, but with so many agents listings homes outside of their area, how can they? My other issue is why does it take soo long for an investor to bid on these properties......all of us know there are some properties that homebuyers are not going to look at because of the competition.
0 votes Thank Flag Link Wed Dec 22, 2010
It makes no sense to me either and tell me why agents from Northern Virginia are listing properties in Richmond, I'm sure they are going by the listings every two weeks to check on them...
0 votes Thank Flag Link Wed Dec 22, 2010
Maybe they are not getting the money. Maybe the new agency is keeping it??????
0 votes Thank Flag Link Wed Dec 22, 2010
HUMOR HERE: no matter how to make money I am extremely happy. ... answer you question yes

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Wed Dec 22, 2010
Please note that the reason for the question is, upon asking the listing agent for a copy of the HOA docs they never responded. In the past I would expect this, because of the compensation situation but now with the new 3% they also receive I feel it equalizes the amount of work both brokers are responsible for.

What are everyone else's thoughts.
0 votes Thank Flag Link Wed Dec 22, 2010
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