Charging for negotiating short sales/Negotiators

As review you can see my blog from March 5, 2010 Short Sale Third Party Coordinators.

Here are some common questions and answers to these questions.

“What can you charge as a Nevada licensee in a short sale?”

ANSWER – A commission.  Period.  You cannot charge negotiating fee, a handling fee, only a commission.  As a Nevada real estate licensee you can earn a real estate commission under NRS 645 for selling real estate.  Specifically the law states that selling real estate means, “… sells, … or negotiates … the sale, … purchase, rental or lease of [real estate] …. the collection of an advance fee … in connection with … the sale … of …. real estate.”  That’s NRS 645.030.  Under NRS 645.323 you have to have a Nevada real estate license, to “accept an advance fee,” for selling.

“But what about all the loan negotiating I do in a short sale, is that OK?”

ANSWER – Well, first, remember, the only thing you can charge is a commission.  You can negotiate with the lender during the Short Sale phase, per the NRED, provided you follow certain rules.  As noted in the Nevada Real Estate Division Position Regarding Short Sales negotiations there may be no “separate or distinct payment or compensation for performance of activities defined as loan modification, … outside of a real estate transaction.”  Activities that by definition might include aspects of “Loan Modification Consultant,” “Foreclosure Consultant,” or “Provider of Covered Services” must be part of a real estate transaction and all commission payments must still go through the broker in accordance with NRS 645.280.  In other words, you can charge a commission for selling real estate and selling a short sale is real estate, so it’s OK.  But you may not offer as an independent menu choice to provide services defined as loan modification or foreclosure consultation.

“And what about getting a negotiating fee?”

ANSWER – No. Only commission.

“But short sales are time consuming, I need to charge extra money.”

ANSWER – Fine.  Charge a larger commission, but it is commission, must be disclosed as commission and paid as commission.  Do not change its name to hide what it is.  You have a real estate license, you have the privilege to charge a commission.  That is it.

“And what about getting paid an advance fee?”

ANSWER – It’s OK, but there can be no advance fees paid to a real estate broker except in accordance with NRS 645.322 – 324 and do not forget to follow all of the requirements of NAC 645.675 which states that the Advance Fee Agreement must declare that, “a full refund will be made to the customer if the services for which the advance fee is being received are not substantially or materially provided to the customer.”

“But what if I set up a separate company and charge for ‘assisting’ in the transaction?”

ANSWER – I would ask back, “if it’s a real business, do you have a business license?”  If you say, “yes I do have a business license.”  Well, “what services are you providing?”  NRS 645F says you are a loan modification consultant if you offer to assist a homeowner in changing the loan amount.  If you negotiate the settlement of the loan down from its current outstanding principal amount, it would appear you are changing the loan amount.  I do not see a legitimate way that such a business can charge a ‘fee’ in a real estate transaction without having an NRS 645F license.  The application for a NRS 645F license is located here.

“Can’t the Seller hire a Negotiating Company?”

ANSWER – Of course.  But, all loan negotiating companies in Nevada need to be licensed under NRS 645F (lawyers doing the actual negotiating are exempt.)  Here is the list of every single licensed loan modification company in Nevada.  There are thirty nine (39).  If you don’t see the company your Seller wants to use…then they are not licensed to conduct loan negotiations in Nevada.  Remember, attorneys are exempt from the provisions of Chapter 645F.  You can confirm if an attorney is licensed in Nevada by searching the individual’s name on the State Bar of Nevada’s Web site through the attorney search option.

“Where should the Negotiating Fee get placed on the HUD1?”

It does not matter what line it is shown on, either in the commission section or the other costs section but not hidden on page 6, for example, of the HUD1.  Remember also, a Listing or Selling Agent cannot typically be the “negotiator” as they can only charge a commission.  If an agent sets up an LLC to divert these negotiation fees they must be licensed under NRS 645F.  A legitimate negotiating company is easily fully disclosed on the HUD1 and they should be able to produce their license (or you can look them up).