Foreclosure in Northville>Question Details

Carol, Home Buyer in Michigan

When a listing says subject to third party approval and brokerage fee, who pays the broker?

Asked by Carol, Michigan Sun Nov 4, 2007

If the bank expects me to pay, I don't need to buy their pre-forclosure property>

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What we've been seeing in Metro Detroit is REO agents that get coached, or went to a seminar of an agent that showed that they can make extra income (at least 30k per year) by charging an REO compliance fee, etc... to the buyers of their properties even if those buyers are not there own clients. I list Bank Owned properties and never try to charge a fee to buyers as it can hurt the sellers bottom line and violate the Realtors code of ethics, a direct violation of Michigan law in my opinion. If I am representing the buyers I put language in the offer as to the seller paying sellers agent fee. Most of the time the sellers (bank) have no clue of the fee. Still waiting on the decisions of "I would have bought you're property if it wasn't for the fee", that most banks don't know exists on their properties. I represent all my buyers at no charge except for a $195 buyers agent compliance fee paid at closing.
2 votes Thank Flag Link Sun Nov 4, 2007
Point of clarification: I have since been advised by CAR counsel on a couple of issues regarding an "investor" purchase when a Notice of Default (NOD) has been filed. No, you as a selling agent representing an investor do NOT have to back out of the deal if you are currently in escrow and THEN a Seller defaults on a loan. Secondly, if the Seller has abandoned the property, moved out and is living in another property (beign thorough here!) you DONOT need to use the referral agreement contract. It is best to get an affidavit SIGNED by the Sellers stating they have moved out of their residence.
Lastly, those listing agents using "Subject to 3rd Party Approval" are to be avoided!! They are the same schmucks who are charging the aditional fees to the Seller. It is one way to avoid the selling agens from noting it is actually a "Short-Sale" as most MLS sysems have this as a recognizeable term in a search.
1 vote Thank Flag Link Fri Jan 4, 2008
The fee is built into the transaction. Legally the listing contract is with the seller. The "Subject to 3rd Party" Language means that the seller must agree or disagree withyou and your offer but even if the seller agrees with it, the bank has to approve what they would get out of the deal after all sales expenses are calculated.

Even if the bank for some odd reason gets you and or your agent to believe that you have to pay, (Deduct that amount from your offer) *Which is the next best thing to them actually paying. Elizabeth has no idea what she is talking about (Sorry Elizabeth) but the listing agreemeng is between the seller and the listing company NOT the buyer and seller. Putting any language in a purchase agreement for that reason carries not legal or contractual weight.

BOB on the other hand brings up an entirely different factor that you did not ask about but is correct. There are compliance fees all around. That is mainly because there is more work than the standard listing for a pre-foreclosure/foreclosure. That is why you are beginning to see listing agents charge these fees. What is the reasoning behind a "Buyers Agency Compliance fee" I don't know. It almost seems as if they want to gouge the buyer for a fee that they think they can get away with because their fee has already come from the seller and a buyer may not notice it or complain about it. ? . ?
Web Reference: http://www.CarloGobba.com
1 vote Thank Flag Link Fri Jan 4, 2008
Carol,

Typically the bank pays. If it is listed that is the case. I would carefully review the bank's addendums with your Realtor so that you understand everything, especially any fees or costs to you.

The brokerage fee might be something like a few hundred dollars. I am seeing that more often right now.
Web Reference: http://miOaklandCounty.com
1 vote Thank Flag Link Sun Nov 4, 2007
Maureen Fran…, Real Estate Pro in Birmingham, MI
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Carol,

The 3rd party is the bank/investors who actually own the lien on the property. They pay the agent's commissions. The brokerage fee is probably the listing agent and/or listing broker trying to make a few extra dollars on a transaction, usually a few hundred dollars. Remember, everything is negotiable.
0 votes Thank Flag Link Fri Mar 2, 2012
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0 votes Thank Flag Link Sat Dec 17, 2011
I know how you feel about being told you have to pay an REO, brokerage or whatever compliance fee almost every buyer feels the same way in fact I feel, as the buyers agent, where the listing agent is trying to shake down my buyer. I don't understand why a listing agent takes on a client like the bank where they feel they aren't being paid enough, why don't they charge more if they have to do more work?
I always offer my buyers the option to put in the purchase agreement that the seller (ultimately the bank) is to pay the compliance fee because it is usually the listing agent asking for it not the bank in fact the bank may not even know their agent is charging the buyer a fee. Usually the buyer wants the home bad enough to pay the fee especially in a multi offer situation. One client said to me they felt like it was a bribe to make sure the agent presented the offer. I told them it would be an ethics violation not to present all offers. Some agents are getting really greedy and are charging around $300 and I've had buyers opt not to view those homes.
So Carol you have those options; ask the bank to pay the fee as a concession, choose not to see homes with fee's or if you want the home bite the bullet and pay it.
0 votes Thank Flag Link Wed Feb 2, 2011
It really does depend on the Buyers Agency agreement you sign with a Realtor. If there is a brokerage fee, you only must pay that if you sign an addendum agreeing to the terms and conditions of a brokerage fee.
Web Reference: http://www.AndrewDaily.com
0 votes Thank Flag Link Wed Feb 2, 2011
If the brokerage fee is not refundable, do not pursue. That is my recommendation.
0 votes Thank Flag Link Wed Feb 2, 2011
0 votes Thank Flag Link Sat Oct 30, 2010
As a buyer you are (should be) under an agreement/contract to your "buyers broker" not to the listing/ selling broker and therefore you don't have to agree to pay the Listing Brokers fee. When I represent a buyer and there is a listing broker fee to the buyer I add, in the purchase agreement, that the bank is to pay the listing broker fee. The banks might not know the broker is charging a fee unless they see it on the PA. My feeling is that if the bank doesn't pay the listing broker what he wants then don't take the listing!! If REO agents stop taking listings where the bank doesn't pay them enough the banks will have to start paying more. Personally I would charge the bank at least 7% and split 50-50 with any selling broker but the banks won't pay that until nobody will take their foreclosed property listings.
0 votes Thank Flag Link Wed Aug 18, 2010
The seller or bank pays the broker. Make sure in the contract you state at what percentage the broker gets paid.
0 votes Thank Flag Link Tue Nov 6, 2007
Carol, I'm assuming you have not signed a "Buyer-Broker Agreement" when I respond. When you write an offer on this listing the offer you submit should have an addendum stating, "The acceptance of this contract is subject to approval of lender(s) of record as to a "Short-Sale". Many states now have separate addendums for this particular transaction. And yes, the brokerage fee is PAID by the Seller as the "Short-Sale" will no doubt spell out the lender will take a certain "Net" number and the overage goes to pay some seller costs and usually the brokerage fee. The fee in our area, Northern California, is hovering around 3,4-6%. I would be very wary of a "Short-Sale" as many agents don't have a clue as how to approach these and it can be a total waste of time. You are NOT locked into this "subject to lender" contract but need to reflect this if you write any/all offers on OTHER properties. To be running around writing up offers and presenting them without telling a seller is fraud (unless it is your intent to buy ALL the properties you are writing offers on!). Your offer is also contingent upon all your reports and due-diligence starting upon the "Written approval" of the short-sale!! With all the inventory out there--go find one that's NOT in foreclosure!! Also, remember, in the greatest state of California, if you are an investor attempting to buy an OWNER OCCUPIED home in foreclosure your selling agent CANNOT be involved in the process. This will happen even if you are IN ESCROW and THEN the Seller defaults!!! Be aware of this!
I call "Short-Sales" my pro-bono work or the payback for all the great times I've had in real estate. I belive the consumer needs all the protection they can get now adays!
0 votes Thank Flag Link Sun Nov 4, 2007
Carol, Maureen has more experience than me but, one of the things to look for in the contract is a per diem payment if you are late closing. If that is in the contract, make sure you verify with your lender, who will be responsible. If you need further clarification your Realtor or a real estate attorney would be logical choices. Good luck
0 votes Thank Flag Link Sun Nov 4, 2007
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