Yvonne Baker

My understanding is the same as Bruce's. I attended a conference on the topic of "lease w/option to buy" given by an attorney, and he did not recommed it. If lease options are attempted, the documents need to be drafted by an attorney. Realtors should stay clear of this type if transaction. There are too many pitfalls. Either do a lease or do a purchase, do not attempt to combine them.

Yvonne Baker, Real Estate Consultant http://www.urhomebase.com
ycbaker@kw.com - Tue Sep 16 2008, 14:38

There has been some very interesting discussion on this issue. My two cents worth:

My take on this is that this would not be negotiating a commission with a purchase agreement. The agents are not parties to the purchase agreement. Instead, this would be negotiating a modification of the brokers agreement regarding commission between agents with listing agent attempting to make a unilateral modification.

If a listing agent places a listing in the MLS stating 3% to the selling agent, and listing agent is aware that the bank may only pay a 5% commission total on this transaction, listing agent is obligated to take 2% and give 3% to selling agent. This "bait and switch" tactic is unethical at the very least, and undermines the very fabric of the trust and cooperation between agents.

Moreover, listing agent contracts with seller for a 6% commission ("Listing Agreement"). Listing agent advises seller, and seller agrees, that listing agent may pay a cooperating agent 50% of that commission. Listing agent then enters into an agreement with selling agent to split commission. During a short sale, lender advises listing agent it will only pay 5% commission. The fact that the listing agent renegotiated his commission with lender does not provide listing agent with the privilege to unilaterally modify broker agreement to pay selling agent 3% after selling agent has performed under the broker agreement. This is contracts 101.

Lenders have listing agents by the "short hairs" when it comes to short sale transactions. Without a mutual agreement, listing agent cannot pass some of his loss to the cooperating broker even though the lender has passed some of its loss to listing agent. Listing agent has two options: (1) refuse to accept modification of the listing agreement he had with seller to change commission from 6% to 5%, and walk away from the transaction (of course this option will be a detriment to the seller who will probably be facing eminent foreclosure); or (2) accept the modification of 5% commission, giving 3% to the cooperating agent and taking 2% for himself, if the broker agreement and MLS stated 3% to selling agent. The second option is the best and most ethical option for all parties, buyer and seller; listing agent and selling agent.

Fighting these lenders on the issue of modification of commission during a short sale is like fighting city hall. There are no winners. The lender is in all probability taking a large hit in discounting the amount of money owed on its loan. What the lender is attempting to do is to re-distribute its loss among the parties by lowering the commission to brokers. In the current climate, this can merely be viewed as a "cost of doing business."

I also do not believe it would be ethical for a selling agent to agree to a modification of his commission from 3% to 2.5% or 2%, and then try to collect the difference from his buyer unless the buyer has agreed to pay this difference.

Yvonne Baker, Real Estate Consultant http://www.YvonneBaker.com
ycbaker@kw.com - Sat Sep 13 2008, 15:24

Hi J.D.... You are lucky the bank and its negotiators even responded to your offer. I lost several perfect homes my buyers wanting to buy at short sale because I could not get the bank to respond to our offer, either by acceptance or counter. This created problems with my buyers because they were not expecting to have to wait months to get through the offer/acceptance phase of the transaction.

Lenders also provide laundry lists of hoops and things buyers are obliged to jump through to complete the sale. Now, when researching properties for my buyers, my first question to listing agent - "is there anything going on with this property that will prevent a quick sale, ie., are sellers in pre-foreclosure." If listing agent answers "yes," I suggest my buyers keep looking. Such are the times in which we live.

Yvonne Baker, Real Estate Consultant http://www.YvonneBaker.com
ycbaker@kw.com - Fri Sep 12 2008, 08:53

Hi Kimberly... Due to the current climate of the real estate market, lender guidelines have become very strict. The ding to your credit by the late payment, while serious, is not as bad as your debt to income ratio. Your best bet at the present time would be to put yourself on a serious budget and pay off some of your credit card loans and, if possible, your car payment loan before you consider purchasing. Good Luck.

Yvonne Baker, Real Estate Consultant http://www.YvonneBaker.com
ycbaker@kw.com - Fri Sep 12 2008, 12:25

Hi Evelyn... Once you have completed the process of purchasing your home and you have taken possession of your house, you may apply for whatever credit limit you qualify for. Agents usually advise their clients not to apply for any credit or buy any large ticket items during the purchasing process. However, after you close, this restriction no longer applies. You just want to make sure your debt does not exceed what you would be confortable in paying.

I hope this was helpful.

Yvonne Baker, Real Estate Consultant http://www.YvonneBaker.com
ycbaker@kw.com - Fri Sep 12 2008, 11:36

Hi Kim... you would first start by identifying the market you would like to buy in (i.e., city and state). Then you would locate a realtor in that city to assist you in finding the type of property you would be interested in purchasing. Your realtor will connect you to a mortgage broker/lender to see how much house you would be able to afford, and then guide you seamlessly through the process to closing.

If San Antonio, Texas, is one of the markets you would be interested in, please contact me. My contact information is as follows:

Yvonne Baker, Real Estate Consultant http://www.YvonneBaker.com
ycbaker@kw.com - Fri Sep 12 2008, 11:26