Imagine how bad short sales would be if banks had been allowed to enter real estate

Editor,

A few years ago, the lending institutions wanted to be able to get into the real estate market without having a license. Thanks to NAR and FAR and all the Realtors who wrote letters and petitions to our elected officials, their attempts were turned down by Congress. Can you imagine the mess we would have now if they had been allowed to mess up our profession more than they already have?
 
Well, they are still trying to mess up our profession! Let me start by asking the question, in what profession, other than real estate, can the public or a business like a bank adjust someone else’s paycheck? Could the lending institutions be using short sales to get even with the Realtors for not letting them get into the real estate business?
 
Let me give you a case in point. Mr. and Mrs. I. Gotta-Sell contact Joe Good Realtor and inform him that they would like him to put their house on the market. Joe puts the property on the market and about 30 days later, the Gotta-Sells are very anxious. This is when they inform Joe that they haven’t made a payment in three months. Because the market is soft and prices seem to be edging downward along with the 100-percent-plus financing that the lending institutions encouraged these people to put on their home, the mortgage balance will be much more than the sale price. Joe Good Realtor begins working with the Gotta-Sells and their lending institution on the short sale of their home.
 
Joe really has two contracts here. As a member of his local MLS, he has an agreement stating that he will notify any other Realtors about compensation if they should bring a buyer to contract on his listing. The amount of compensation is listed in the listing posted in the MLS. This posting in the MLS allows an agent that has a buyer to make a decision; sell this property and make next to nothing after expenses, or sell a comparable property and be able to pay their bills, including their mortgage at the end of the month.
 
About 84 percent of the buyers in today’s market are searching the Internet for potential properties. Mr. Bobby Buyer has been working with his Realtor, Suzzie Sells-a-Little, and he has spotted Joe’s listing for the Gotta-Sells. Bobby thinks he has found just the house for him, so he calls Suzzie and tells her all about it. Suzzie shows the property to Bobby and an offer is written. Joe had a statement in his listing saying that a lender would have to approve the short sale, which is understandable, because they want to control the amount of loss they will have at the end.
 
Remember now that Joe has two contracts; the first was with the MLS and the second is with the sellers, Mr. and Mrs. Gotta-Sells. The Gotta-Sells agreed to pay Joe a certain amount at closing if Joe or any other Realtor brought a ready willing and able buyer. Based on that agreement, Joe promised Suzzie a certain amount of what he was going to get paid. The lending institution is not a part of the listing contract between Joe Good Realtor and Mr. and Mrs. I. Gotta-Sell. The lending institution is not part of the contract between Bobby Buyer and Mr. and Mrs. Gotta-Sell; other than giving their approval to the amount of money that they will settle for full payment of the loan – loan that either they initiated or one of their fellow lenders initiated and they purchased. The Realtors had nothing to do with the loan approval or design of the loan that went bad.
 
Now it’s time for closing and the property was inspected by a home inspector, a termite inspector, and a surveyor. A title company wrote an owners title policy and the county needed to collect at closing 13 months worth of taxes because the escrow was short. The home inspector was paid his full fee. The termite inspector was paid his full fee. The surveyor was paid his full fee. The title company was paid its full fee plus processing fees. The county was paid the full amount of taxes due. On the closing statement, each Realtor’s commission was separately reduced by one third of its total amount. When the title company is asked about this, they promptly state that they were directed by the lending institution that took the loss.
 
When did it become “OK” for an outside party to be able to take control of a closing and make decisions on who was paid how much?
 
The only recourse that Suzzie Sells-a-little has is to go after Joe Good Realtor for the commission posted in the MLS! First she must file a complaint and take him to arbitration, but then that will cost both Realtors a fee charged by their association. So now the lending institution not only shorted the Realtors on their commission, they have the Realtors fighting with each other and giving up more of the shrinking commission in a market when the number of our sales is also shrinking.
 
If it was a worthwhile cause for the NAR and FAR and the local associations utilizing our RPAC funds to keep the lending institutions from working as unlicensed Realtors; why isn’t it important for them to make sure that the same lending institutions aren’t cheating the Realtors out of our commissions?
 
When did it become permissible for one entity to make a bad business decision, like approving marginal borrowers on loans they were destined to fail on, and then make innocent people pay or share in their loss? Why didn’t Enron make the rest of the stock market pay for their losses?
 
As strange as this may sound, I would like the lending institutions to reduce my gasoline bills, my grocery bills, my doctor bills, my taxes and my insurance by one third. I know that they can’t do any of those things and, because they can’t, they need to stop trying to determine how much I or any other Realtor gets paid.
 
Stub Munro
Century 21 Weinert Realty
Safety Harbor

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