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Is selling Short Sales by auction in anyones best interest?
Recently while talking to my Realtor peers they asked me how I felt about Nations Star and Auction.com joining forces to market Short Sales. At first I was thinking it had to be a mistake and here is the reason why. To legally advertise you have to be a licenced Broker in the State of California. For two Brokers to be doing the same thing seems, well just bizarre. I believe there is an implied exclusivity to selling the home. There is a required form established in Ca. Law, it is called the Agency Disclosure. (see copy of form, <a href=”http://shortsalenurse.com/?attachment_id=193” rel=”attachment wp-att-193″>AD-1 – Disclosure (1) Regarding RE Relationship (Listing Firm to Seller)</a> It is the first from that is provided to the “Seller or the Buyer” It notes the quality of “representation” and gives it a legal label, and quality, that being a fiduciary duty. What is an auction companies duty and to whom? Is it to the BANK? Is this an interesting question for the Department of Real Estate. How do you take a commission for selling a property without making and upfront declaration of your Agency?
Let me paint a picture or a possible situation. The listing broker “Realtor”, advertises the home, accepts an offer and presents it. The terms are acceptable to the Seller and they sign the contact to sell the home, with the “Buyer.” At the same time the Auction company is offering the home for sale and someone bids for the home and is the winner? Do we now have two Buyers? Who do we give the property to?
Most Real Estate Brokers charge 6% Commission when doing short sales. 6% is the total allowed commission for a HAFA short sale. It appears that Auction.Com charges another 5%. Now with two Brokers involved you could – will have inflated the commission to a total of 11 percent. Most buyers would balk at this. Also this system could make it so that FHA and VA loan buyers would not have the money to buy this home. How wise is it to eliminate these buyers from the market? Will this not suppress property values and limit investor returns. Does this meet the Fair Housing Standards that most Brokers adhere to? I don’t know but I bet someone asks that question soon.
Is it possible, I am not the only one that thought this way? According to business week.com (see link) some investors are suing Nations Star for using Auction.com. This interested me so I ran a search on Auction.com and found this consumer comment (see link) I think it is fair to say this person is not impressed with the system that they use.
As best I could tell and I welcome you to view the Auction.com’s site. But first you bid and then you see their contract. I could not find a copy of the “winning bidders contact” at their site. At least in California if my client wants to see a draft copy of any contact before signing or bidding on a home, it is their’s to view ASAP. In fact I go over the contract with buyers before they even start shopping, as do all of my peers.
I know I am repeating myself but the elephant in the room has to do with “Fair Housing.” If the Buyer pays the commission of 5% are we not hurting veterans and those meeting FHA loan requirements. In markets with limited inventory are we cutting them right out of the ability to buy? I bet this will have to be resolved before any major Bank uses an Auction Company for short sales. How fair is it to cut V.A and FHA buyers out of the ability to buy. Most of these people are struggling to obtain the down payments necessary to buy let alone pay an auction company 5%. Why would a major Bank do this? Well, frankly I have not seen it happen yet, but it is being rumored Bank of America is considering it.
Any questions or comments on this evolving story please send them to me. I want to follow this.
<a href=”http://shortsalenurse.com/?attachment_id=13” rel=”attachment wp-att-13″><img alt=”kw_stack_color” src=”http://shortsalenurse.com/wp-content/uploads/2013/01/kw_stack_color-300×202.jpg” width=”300″ height=”202″ /></a> <p style=”text-align: center;”>George Kenner, Broker Associate Keller Williams Realty</p> <p style=”text-align: center;”>2060 Otay Lakes Road, Suite 200, Chula Vista, Ca. 91915</p> <p style=”text-align: center;”>619-723-5714 — <a href=”mailto:email@example.com”>firstname.lastname@example.org</a></p>