Massachusetts Realtors are hailing a new Fannie Mae guideline that keeps banks and mortgage lenders from shortchanging them on most short sales.
But the Massachusetts Bankers Association says Realtors should have no beef with local bank practices – because they simply don’t do them.
Bruce Spitzer, spokesman for the Massachusetts Bankers Association, claims his members don’t engage in short sales – a term for when a lender allows a distressed property to be sold for less than the outstanding mortgage value, in order to avoid foreclosure.
“I’ve never heard of it happening once with one of our members,” Spitzer said.
Nonetheless, Realtors in the Bay State and across the country say they’ve been getting the short end of the stick from lenders. They say the new Fannie Mae rules for loan servicers will downgrade the short sale process from horribly painful to simply protracted.
Fannie Mae now prohibits servicers from forcing Realtors to reduce their commission in order to make a short sale go through on properties with Fannie-backed mortgages. Previously, Realtors assert, banks and other mortgage lenders had been letting real estate agents do months of legwork leading up to the closing, and then at the 11th hour demanding the agents slash their commissions or the deal would come undone.
Gary Rogers, president of the Massachusetts Association of Realtors, said Fannie Mae made the change after most Realtors stopped taking on short sales because of the huge hassle. Rogers said servicers used “cutthroat tactics” on agents who had worked for months, only “to pretty much be blackmailed.”
“Fannie Mae clearly has recognized that the short sales … process is bad enough not knowing if the professional gets paid,” Rogers said. “I know they had lots of feedback from Realtors, saying this is the reason why we’re really leery to work on short sale work.”
‘All For Naught’
Laureen Donovan, an agent at Coldwell Banker’s Waltham office, said she’s had banks force down her commission on short sales. The real slap in the face, for her, is that short sales require much more work than a normal transaction. To get shortchanged at the end of the long, arduous process is simply insulting.
“It’s at the end of all this hard work, months of work, and all of a sudden your fee’s not going to be paid, and it was all for naught,” said Donovan.
Donovan said the reduction was as much as 3-4 percent, cutting the total commission by half – or more.
“It is a significant amount, and not always does only one agent get the final [fee],” Donovan said. “The fee is split, agency to agency.”
Linda Kody, an owner/broker at Kody and Co. of North Andover, said she had been burned in the past by banks on short sales, which is why she decided to focus her business mainly on foreclosures. When she does handle a short sale, she does it hand-in-hand with a lawyer.
Kody said, in her experience, when a property has a home equity loan or a second mortgage, those lenders will try to negotiate down. She regards this change as a positive step toward Realtors gaining the respect they deserve for the work they do to make the real estate business work, but said it was unlikely to be a catch-all.
“[Fannie Mae] is understanding that the professionals in the transaction need to get paid, or else the transaction won’t get done,” she said. “Every time Fannie Mae, Freddie Mac, or FHA come out with something like this … others will follow suit. But you’re always going to have the ones who try to get every nickel they can.”
Donovan said despite the hope that Realtors will be fairly compensated, short sales are still unattractive, because even in the best of circumstances, lenders involved in short sales are difficult to deal with.
“I’m more optimistic now than I was [before] the change, but not all banks are with Fannie Mae,” she said. “The banks want everything done quickly once they agree upon things, but they’re slow to agree. They sit on the offers. They go like the turtle when we’re supposed to go like the hare.”
