Can an agent represent him/her-self in a short sale transaction?

Question

I understand a shortsale must be an arms length transaction but I do not see why an agent can't represent himself and collect a commission at closing?

I am going through a situation right now with my short-sale closing.  Apparently there is an affadavit that states seller or purchaser cannot receive any funds from the commission. What if the purchaser is also an agent?  Are they taking that into account or can this be an exception to that rule?

I've talked with my attorney and other agents, I am getting mixed responses.

I should of had a specialized short-sale attorney for this transaction.  My attorney seems like he just outsources a paralegal to get these things done and has no idea what is going on.

Mike R. · Answer

Susan, I'd be careful.  Although it is true that you are allowed to negotiate shorts while acting in the capacity of your license, recent laws that have passed may be able to construe other motives. (Personal opinion only as I'm not an attorney disclosure here!)  It would also probably depend on what your goals are.  Are you flipping?  Buy & Hold?  Owner occupant?  In todays liberal law-suit happy society, someone could point a finger at you and say you didn't act in the seller's best interest while negotiating the short.  Would the listing agent even allow you to do that and could they open themselves up by doing so considering their fiduciary relationship is to their client and none exists between you and the seller?  Check out this NJ law that was just passed:  http://www.njleg.state.nj.us/2010/Bills/AL11/146_.PDF

Lenders aren't going to allow a commission be paid to an agent that has an interest in the property as has already been mentioned.  They also disclose that in a lot of their REO listings.  One way around it could be if you are buying in an entity such as an LLC and representing the entity itself.  I'd still be careful though.  Another thought... would the listing agent be open to taking both sides and you negotiating a bigger referral fee than usual?  Could you have another agent in your office put their name in as the buyer agent but you do all the work with the agreement the commission is yours?  There are other solutions that could work but make sure you carefully read any affidavit that is put in front of you at closing to make sure there is nothing in there that could harm you.  I'd make sure to have an attorney with me too.

I'm not far from you as I'm in South Jersey.  But, let me ask you this... what if you could get it approved in 30-60 days without you nor the listing agent having to go through all the hassle of negotiations?  What if the seller could get the deficiency waived, have it reported on their credit as satisfied instead of a short sale and have the 1099 waived?  What if you didn't have to have countless BPO's conducted where you cannot understand how the price came in so high for a distressed property?   All this while you and the listing agent also get your full commissions.

Yup, sounds too good to be true doesn't it?  However, if you can believe it possible give me a shout and I'll tell you more.

Susan Winderman · Answer

I have a question that's kind of related to this. I'm an investor who is starting to do short sales. How do I represent myself to the bank when conducting a short sale? If I'm the buyer, can I also be the processor? Thanks.

Townsend Derick · Answer

I like to keep things simple. Why not just call the bank and ask them directly and get the info from the horse’s mouth. If they say no then say "why not"? If the answer is still "no", then it comes down to you personally, are you willing to let a house go with a steep discount and possibly a large sum of equity over 2.5%? I think either way you will be a winner and if they let you get a commission your a double winner. I went to buy a REO and the bank told me I would not receive a commission and I told them "OH, OK" hung up and continued my search. I don’t see it as a conflict of interest. It would be different if you were trying to short sale your own property. You are a willing and able buyer but you happen to be an agent that’s your benefit. I’ve learned in RE everything is negotiable.

Account Closed · Answer

I think the issue is it isn't an arms length transaction.  With that said I was just reading about an agent and his dad working together to buy short sales on the cheap.  The son "represented" the dad in the purchases.  Of course now they are in the newspaper and BUSTED.

Aaron Ram · Answer

I think I should of been a bit clearer.

I am representing the sale side of the transaction.  I am not the listing agent or know the seller in any way.  I will be receiving 2.5% or half of the total commission (usually in a short-sale).

I do not see the conflict of interest?  I just so happen to be a realtor and purchasing a short sale.  Why should't I be able to represent myself?

Chris Masons · Answer

It is probably a conflict of interest on some level somewhere.

I guess it's kind of a slap in the face to the bank also. Here let me take this non performing asset off your hands at 50 cents on the dollar, and while your at it pay me 5% commission on the deal too  lol

Mark H. · Answer

The lender isn't going to cut you a commission check on your own short sale.

Many lenders won't allow a commission to be paid to a buyer who is also an agent.

Some banks won't even review an offer that has a re agent as a buyer

too much fraud.