Is this half full?
ADVANCE FEES
UPDATE – Notice on December 1, 2010 the Federal Trade Commission issued the Final Rule concerning the Mortgage Assistance Relief Services which bans advanced fees
Short Sales
Can I charge an advanced real estate commission on a short sale? Yes.
Advance Fee Listings/Buyer Broker Agreements.
NRS 645.004 “Advance fee listing” declares that an advance fee listing is a brokerage agreement promoting the sale of real estate for an advance fee. An advance fee can be paid to a real estate broker provided it is in accordance with NRS 645.322 – 333 – 324. All commission payments still go through the broker, Prudential, Americana Group, REALTORS®, in accordance with NRS 645.280. There may be no separate or distinct payment or compensation for performance of activities defined as loan modification, foreclosure consulting or providing of covered services outside of a real estate transaction. Remember, a real estate transaction is, “assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property, or the sale, exchange, option or purchase of a business,” per NRS 645.005.
Can I keep the commission if the short sale does not close? DEPENDS. The Nevada Real Estate Division has verbally expressed a desire that funds accepted during the Short Sale processs, should not be retained, but returned. My interpretation of the law is that an “accounting” must occur and then the monies can be retained. I have asked the NRED to comment as of December 8, 2010.
Accounting of use of advance fee collected.
If you charge an advance fee you must, within 3 months after the charge or collection, furnish to your client an accounting of the use of that money.
Can I charge a flat fee and a percentage together at the same time? Yes.
Federal law instructs that a real estate broker’s fees may only be charged if the broker is engaged independently and the fees are reasonable and customary. See HUD Handbook 4155.1 for additional information. All charges to sellers and buyers by real estate brokers and agents for their services in listing and selling the home (“commission”) must be disclosed on Line 700 of the HUD-1 settlement statement. Although RESPA regulates how the commission is disclosed, RESPA does not prescribe how a real estate broker or real estate agent determines the charge for his or her services in any contract with a seller or buyer. The commission may be determined using a flat fee, a percentage of the sale price, or a combination of those methods. See U.S. Department of Housing and Urban Development. January 22, 2010 Letter.
Is there an advanced fee listing form from the NRED? Not yet.
Nevada law says that the Nevada Real Estate Division may require a form of brokerage agreements which include provisions for the payment of advance fees to be used. However, this form has not been written by the NRED. So, of course, I wrote one. You can get a copy from your managers as of December 7, 2010. It will be on Ameriforms and Zip on week of December December 13, 2010.
This is part of my short sale series listed below in alphabetical order:
Addendum to Short Sale Listing
Charging for negotiating short sales/Negotiators
Foreclosure and the One Action Rule in Nevada
HAMP the Federal Shortsale Program coming April 2010
Income Taxes & Foreclosures/Shortsales
Lender Short Sale Approval Addendum
Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale
Seller Being Released From Liability Language in Shortsale
Seller Liability After Short Sale
Short Sale Addendum to Purchase Agreement October 2010
Short Sale Wallet Size Answer Sheet
IRS PUBLICATIONS shortsales/foreclosures:
IRS publication on how 1099 taxes are calculated, exempt, etc.
IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.
Ten Facts about Mortgage Debt Forgiveness
Questions? Call me. Darren Welsh, Esq. 702 245 1787 email me darren@dwelshlaw.com or drop me a TPS by filling out this form.
December 30, 2010 at 11:54 am
Darren,
How does the new FTC ruling disallowing ALL advance fees for short sales affect us? I am thinking we need to be VERY cautious, since the Feds have taken a position in the matter.
December 31, 2010 at 11:24 am
Persons holdings NRS 645 real estate licenses would not appear to be covered by the FTC ruling, taking into consideration the October 2009 NRED position paper . Per the NRED, there can be no advance fees paid to a real estate broker except in accordance with NRS 645.322 – 324 , there may be no separate or distinct payment or compensation for performance of activities defined as loan modification, foreclosure consulting or providing of covered services outside of a real estate transaction, and should the transaction not close and thus no commission is paid, no separate or other payment is allowed for services that are defined as loan modification, foreclosure consulting or providing covered services. An advance fee listing in Nevada can only be, “for assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property, or the sale, exchange, option or purchase of a business… ” and “means a fee contracted for … an advance fee listing … to sell … property, issued for the purpose of promoting the sale … of … real estate … to … real estate brokers or salespersons… ”
What is not clear in Nevada is what the Advance Fee accounting should look like per NRS 645.322 . For example with trust accounts in Nevada per NRS 645.310 , NAC 645.806 , the Nevada Real Estate Division issued form 546, the Trust Account Reconciliation . NRED also issued Trust Fund Accounting And Record Keeping For Nevada Brokers .
As stated above, an advance fee can be paid to a real estate broker provided it is in accordance with NRS 645.322 – 324 . The FTC’s 12.29.2010 Rule addresses only mortgage lenders. The California Department of Real estate on October 11, 2009 ruled that the all advance fees for Loan Modification and/or similar services are unlawful unless a “no objection” letter has been issued. Nevada does not yet have such a ruling. On December 8, 2010 my office asked of the Honorable Nevada Attorney General and Administrator of the Nevada Real Estate Division to issue a position similar to the October 15, 2009 Position Paper further clarifying the N.R.E.D.’s position as to advanced fees. Specifically clarifying what the accounting should entail, if the Prudential, Americana Group, REALTORS(r) suggested form is approved and finally if there is interest in setting up a task force to address this issue, I am willing to volunteer my time to attempt to create a form that can assist the Nevada real estate licensee community to address this issue and/or to assist in preparing the position paper.
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