New regulation governs short sales

Question: We want to do a short sale of our Mesa home. We are licensed real-estate agents in the state of Wisconsin, and we would like to list and sell our home ourselves. A real-estate agent in our community advertises "experience as short-sale negotiators." We have never done a short sale, and we would like to hire this real-estate agent to handle the short-sale negotiations. When we contacted her, however, she said that she could only do the short-sale negotiations if she gets the listing on our home. Why can't we hire this real-estate agent to do the short-sale negotiations, and list our home ourselves?

Answer: The Federal Trade Commission enacted a rule effective Jan. 29, 2011, regulating "mortgage assistance relief services" (MARS) such as short sales and loan modifications. There are numerous disclosures and other requirements imposed by MARS. A real-estate agent can list and negotiate the short sale of a home, provided that there is compliance with the MARS requirements and the real-estate agent receives no additional compensation for negotiating a short sale. In other words, a real-estate agent cannot charge the seller a 7 percent commission and a $2,500 fee for negotiating a short sale. If the real-estate agent does not have a listing for the short sale of the home, however, the real-estate agent can only receive compensation for short-sale negotiations if, in addition to compliance with MARS requirements, the real-estate brokerage firm has a loan-originator (mortgage broker) license.

A MARS provider cannot receive any advance compensation, and cannot receive any compensation at all unless the seller and seller's lender agree on the terms of the closing of the short sale. Unfortunately, this MARS rule illustrates the maxim of "locking the barn door after the horse has bolted." Several years ago there were numerous firms receiving upfront fees of $2,500-$5,000 based on deceptive advertising, and not doing anything to assist owners of distressed homes. Due to consumer awareness and the threat of criminal prosecution, almost all of these firms are now out of business.

by Christopher Combs Arizona Republic Jul. 6, 2011 12:00 AM




New regulation governs short sales