Co-op Commissions on Short Sales
All MLS Participants and Subscribers are reminded that all offers of cooperative compensation offered through the MLS are unconditional. Compensation must be stated as a percentage of the gross sales price, or as a flat fee. The overarching rule is that the buyer's broker has a right to know what his/her commission will be before submitting an offer on the property. The one exception for short sales is found in MLS Rule 5.0.1 which states:

"Participants must disclose, in the appropriate data field, potential short sales when reasonably known to the listing participant. When disclosed, the listing participant may, at his/her discretion, advise other participants whether and how any reduction in the gross commission established in the listing agreement, required by the seller's lender(s) as a condition of approving the short sale, will be apportioned between the listing and cooperating participants. Such communication regarding the commission must be made in Agent to Agent remarks." (Emphasis added.)

The rule is very clear: in a short sale, the only potential difference from what is stated in the co-op field is any potential reduction made by the seller's lender. Any compensation offer that deducts any other fees (such as negotiator or attorney fees) is a violation of the cooperative compensation rules.

Using Negotiators
It's vitally important that all licensees, and especially brokers, who are dealing with short sales understand the limitations on unlicensed assistants, and the licensure requirements for third parties providing services between sellers and their lenders.

The Real Estate Division has been diligent is setting out its position on this issue in two key publications: its Position Statement and more recently in an Open House newsletter article. To quote from that article, "If dealing with anyone other than the owner/seller or lender, it is incumbent on the agent to ensure that the person with whom the sale is being negotiated is, in fact, licensed by the Mortgage Lending Division."

REALTOR® may direct questions about these issues to the Division (486-4033) or the Legal Answerline (1-800-748-6999).

Fannie and Freddie HAFA
As a reminder, Fannie Mae and Freddie Mac each has its own HAFA short sale program which go into effect August 1, 2010. There are a few crucial differences in eligibility requirements, mainly that the seller must be reviewed for a modification through HAMP (Home Affordable Modification Program) before entering HAFA. Documents and forms for both Fannie and Freddie's programs are available in the Short Sale and Foreclosure Resource Guide.

HAFA and Divorce
Generally speaking, the borrowers whose names appear on the mortgage note must sign all HAFA documents. Questions have arisen when the borrowers are in the process of a divorce. Here is guidance straight from the Treasury's HAFA Directive:

"Unless a borrower or co-borrower is deceased or a borrower and a co-borrower are divorced, all parties who signed the original loan documents or their duly authorized representatives must execute the HAFA documents. If a borrower and a co-borrower are divorced and the property has been transferred to one spouse in the divorce decree, the spouse who no longer has an interest in the property is not required to execute the HAFA documents. Servicers may evaluate requests on a case-by-case basis when the borrower is unable to sign due to circumstances such as mental incapacity or military deployment."

The complete Directive is available in the Short Sale and Foreclosure Resource Guide.