Hi Folks. Richard Zaretsky wrote apost earlier this week titled SHORT SALE MARKET EVOLUTION - GMAC SOLUTION TO FALSE BUYERS If you haven't read it pop over and do so.
Richard's post spawned an article by Bill J Archambault titled Successful REALTOR Or Failed Social Reformer.
Bill's post got me thinking about this one. Funny how that works!
Here is the language GMAC wants if you have a short sale with them as the lender:
2-3% earnest money must be agreeable to buyer. Contingencies must be removed 14 days after we issue approval letter and earnest money becomes non-refundable. If buyer walks, buyer and seller must agree in writing that earnest money will be wired to GMAC.
GMAC is interfering with my listing agreement and interfering with a purchase agreement. This is, in my opinion***, Tortious interference. They are NOT a party to either of these contracts and have no right dictating the terms.
GMAC's new "deposit language" is interfering with my contractual right, as per my listing agreement, to a percentage of the deposit when a buyer walks. Why? I didn't do anything wrong. In fact, I spent time, effort and money during the pending status of the contract and have the right to be compensated if the deal kicks due to the buyer walking. GMAC wants to steal my money.
And what about the fully qualified buyer that doesn't have 2% to 3% to put up as a deposit? They could be purchasing the home using VA or USDA (100%) financing but may not be in a position to place 2% to 3% down as a deposit. Now due to this GMAC requirement they are blown out of the water. And of course these are exactly the buyers that are willing to pay a premium for a property.
Make no mistake about it this is just one more step towards banks dictating the real estate market.
Banks are now:
- Limitting how much I can charge for my services.
- Preventing me from being compensated for my time and effort.
- Dragging property values down even further by limitting the buyer pool.
You can be sure I will work the system to my advantage. BUT...dictating how I can charge for my services is a violation of anti trust laws. GMAC can certainly choose to not accept a short sale. That is their decision. How I get paid is my business and they are interfering with my contract. GMAC is not losing money. They are the servicer. They get paid whether payments are made or not. This new verbiage is not to lesson their losses it is to increase their profits.
I wonder if they pass the claimed deposit off to the investor? I doubt it.
Short Sales Suck and I Ain't Doin' Them!! Agent Training.
Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close. Want to find out more? www.CentralFloridaShortSales.com ***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio. Copyright © 2010 http://www.brokerbryant.com/ | All Rights Reserved
I am tired of all these Big Companies taking money out of our pocket.
Thanks for the information. I'm not working a short sale with GMAC yet. Good information to remember.
BB - The next thing you are asked to do is to bend over.... Yeah you. And I want to see what you respond to it.
Bryant,
If GMAC is demanding 2% in case of buyer default and you're demanding half, notify your buyer's agents that the minimum deposit must be at least 4%. You'll lose some buyers but you'll have 2% or a much more motivated buyer!
There is always more than one way!
Personally, I think once you know the conditions GMAC demands you should ether do it or let trouble sellers with GMAC loans deal with some one that will. I think I know you well enough that you would never hurt the seller/transaction! Let Bertha do the bitching!
Bill
I read, and re-blogged that post. I found it strange that he was so... removed from the seriousness of that verbiage. To me, it's just more greed, and it sounds like fraud!
Bryant, I made hints of this on Richard's post also. I agree with you totally. I wonder if it's legal?
BB,
I will not and do not bend over for companies with un-realistic expectations. When agents do what ever they are asked to do then the requests never end.
Once you start down the path of giving in to these type of requests you are on your way out. Solution? Just say no! Every one just say No!
Those who say yes will soon be out of business.
@Herb,
Would you take a short sale listing or sell one with GMAC involved?
No one's debating that GMAC is arrogant and out of line. We maybe of different minds about their legality.
But, where is the greater sin, GMAC's demands or accepting a listing or contracting buyers and sellers when you state you will not do what is necessary to close the deal?
Bill
@Richard,
Your blog about GMAC's claim to forfeited earnest deposits has caused a lot of emotionalism and very little serious consideration. I have a question that requires an attorney.
If a lender in FL takes money on a mortgage loan after starting foreclosure do they then have to restat the process?
I think I the answer is yes in NV, MI, CA, and maybe in TX, but its been along time since I knew for sure.
Assuming the positive, since GMAC's only claim is based on the seller's note and mortgage, won't they have to start the process over with all the built in delays?
Bill
Ok I can't wait to park and hear the remarks on this one?
They should be good, as we all have that protection clause in our contracts.
I'll be back as the comments flow in.
Last two GMAC short sale approvals came back cutting the commission -- Killing me...
JE
Bryant, I'm going to hang out here on this one, too. The language they are using is what I've seen on their REO addendums. I'm working a GMAC short sale right now. It's a Fannie Mae. They better not try to cut our commission. It's supposed to be 6%.
Remember the NAR lawsuit against the banks? the banks lost... Their intent was to take over the real estate industry and we become "employees" of the banks? you have to wonder how much of the backlash and the issues we are facing today are a result of their original loss to the NAR....
I still remember vividly speaking with a banker who was laughing and stated he knew they would be getting loans back ...that is what they wanted....To be able to control the market.....
On the other hand folks we have peers among us that are screwing not only the bank but their clients by bringing in straw buyers and exchanging at the end and having sales concurrently with the short sale at one price say $150000 while closing to another buyer, same house at $300000 , same day no improvements etc......
This whole thing is spiraling out of control.........
In terms of their verbiage since the seller themselves cannot make a profit in a short sale I assume that GMAC attorneys have found a way around the earnest money issue......stinks and sucks and to expect a buyer to remove all contingencies in 14 days is not feasible on a FHA loan by any means thereby reducing qualified buyers to almost nil unless they have all cash or at least 40% down.
Yes there is something very fundamentally wrong here..........
..
I can't stand big banks and their arrogance and heavy handed approach to most things, especially short sales. I think it would be easier sometimes to deal with the mafia.
These banks keep coming up with different angles to benefit themselves!! It all points to GREED on their part!!! If they wouldn't take as long as they do Buyers would NOT walk!!!
This is interesting. I closed a GMAC short sale less than 4 months ago and it wasn't anything like this. They were actually great to work with. It doesn't sound like they're implementing good changes. I hope they go back to some of the things that worked well.
I am not in favor of the short sale lender jumping into our business.
That is just unbelievable. I agree, they are not party to the contract. What is the old saying about the Golden Rule, He who has the gold makes the rules.............waiting on worse to come down the pike !
GMAC - is this the finance side of GM? If so, doesn't that kind of make you go, "HMMMMM"?!
I think 99% of the agents who read this will agree that GMAC is out of line. The question now is what do we collectively do to fight back against this policy?
BB...
Did I miss something here? Are you finally coming around to MY side????
OK I think I may have went overboard on this but GMAC and most of the lenders are really starting to p&^*% me off with the way they keep telling me how to handle my business. Limiting how much I can charge and now saying I can't split a deposit on a default. What's next?
I can't wait to hear what you guys have to say.
Richard, Not yet :) I will work the system and I will continue to list and close short sales. I just have to figure out another way to get paid. And I will.
Bryant- It is disgusting. Big banks own our country, own our government and own our treasury or lack thereof. They own our printing presses for money. They own the toxic derivatives which they continue to play hot potato with.
But worse, is that we kept them out of getting into the real estate business and yet, here we are, they are getting into the real business business any way they can- and yet every single day they prove their incompetency and fail miserably in the customer service department. This is on my list to blog about this week!
Counter it out, and refuse to accept the terms. As a buyer, I would inform the bank that there are other properties to look at, and I'll look elsewhere. It would be the same reaction if a regular seller were to suggest these terms.
A couple of things. In our experience, GMAC is one of the easiest banks to get a short sale through with. GMAC or any bank in a short sale is a legal party to the transaction and when you think about it "owns" the property. This is not an uninterested 3rd party -- what you have is a listing agreement where the sale is contingent upon the approval of a 3rd party. We think of it as having a 2nd seller on board. Not much to do with anti-trust violations actually.
I also understand the want to compensated and I think it's a personal choice to have earnest money go to the agent -- something we disagree with and choose not to do -- especially when our sellers are typically broke. You can get the home sold even if the buyer falls out. Sometimes it takes 2-3 times.
Also, in most markets in the country (not all), inventory is constrained. Limiting the buyer pool with restrictions ensures a solid buyer that will stick with the transaction and you'll still probably get multiple offers. The bank won't take less than market value anyway, so it doesn't really drive the market down.
Lastly, here's a painful one we ran into a few weeks ago. Chase dictated that we were only allowed to received a 4.25% commission on a 200k property. Yes, regardless of the net to them, they dictated that the total commission for both sides had to be 4.25%. We had already offered a 3% co-broke, which left 1.25% for us AND we owed a referral free.
And all of this too will surely pass.
I'm so glad our federal tax dollars are keeping GMAC afloat, not once, but twice!
Well, I guess they won't be doing very many short sales in my area because 2-3% earnest money won't fly! We have to much inventory and too many options for a buyer to bother.
I'm trying to understand how can they justify taking the earnest money. If it is a short sale, the seller is still in the home and if it's not foreclosed on than it's not in the banks possession. Short sales aren't REO's - The listing agent is working for the seller which is a person and not the bank/lender.
I sure hope NAR, local REALTOR PACS and and consumer groups are aware of this and flooding their representatives to force banks and servicers to be stop these practices.
Good luck with all of that. Every time they make those kinds of changes it blows up in their face. We will see.
Bryan, they are testing the waters to see how far they can push the boundaries... Of course, if you have a great Negotiator, and your buyer's offer is structured well to allow you some "wiggle room", you can always "negotiate" away that phrase.
Regina P. Brown
Unbelievable: What will they (banks) think of next a short sale commission reduction fee? So what do we do as a group? How do we fight it? I like the comment "counter it out". However we all should be on board...
BB - Who do you report this too? I am about to launch a advocacy for area seller's and agents to report to the NY Office of Attorney General a 3rd party settlement company who is taking seller's money and cheating agents out of commissions. I know of one claim files already, but as I understand OAG needs tp establish a pattern - this means getting people to come forward. Perhaps you can put forth the effort to report GMAC. As Realtors we need to draw the line.
Wow, they are WAY out of line! How dare they! I can see if they had a problem with you getting say a 10% commission where the norm is 5-6%.
I just closed one where they cut my commission from 6% to 4%. They said they would pay me 5% if there were two offices involved, but since I sold it myself, they capped it at 4%. It would have been 3% if I did not tell them someone else in my office brought in the buyer. Crazy and unfair!
Remember everyone GMAC is the receiver of over 14 Billion dollars of taxpayer money (this I am almost certain of). Would have been insolvent long ago. In certain cases there is a vested interested since RESCAP may be the holder of the mortgage. Call your congress person to complain. Lots of ties here...GMAC, RESCAP, DITECH, ALLY Bank. ~Doug
Interesting. I have few GMAC deals and this has not been mentioned to us at all. I wonder if they are only enforcing it when they are the actual investor of the note. On the deals I have with them they are only the servicer.
Either way, I'd just say no. The buyer does not agree to such terms. What are they going to do, not approve the short sale that would otherwise be acceptable? Doesn't make sense to me. Not that anything these lenders do does make sense.
On the other hand, I can see where they are coming from. It is not much different from what we expect from a buyer on a regular sale. Although, I agree they do not have a right to change the listing contract. It would be interesting to see how a judge would rule on this.
I can see it now, buyer walks on a GMAC deal. Escrow is held by the selling broker who refuses to give up 100% of said deposit sighting their listing contract which states the broker get 50% and pre dates the GMAC agreement.
At what time do they require the deposit become non-refundable? Sounds like only after they give an approval. What if the buyer never gives the deposit in the first place? Sometimes that does happen, buyer never gives second deposit, sellers only recourse is to cancel the agreement but they do not want to because they want the sale to go through and avoid forecosure. GMAC does not control the deposits nor do they have control over an executed agreement that they are not a party to, so how can they enforce the buyer/seller/broker to pay something they never gave/received? Again, what are they going to do, spend $2,500 on attorneys fees to collect $2500 in deposit money?? Seems like there are way too many variables that have not been considered.
Seems like more brash bravado that can not be backed up by any real substance or law, ala, anti re-sale for 30 days. Sounds tough but would it really hold up in a court of law? Me thinks GMAC has no legal leg to stand on here. I've heard loss mitigators of particular lenders who shall go unnamed even admit the 30 day anti resale verbiage is not enforceable nor legal but they want it signed anyway because it is the only way their investors will allow the sale to go through according to their PSA (Pooling and Servicing Agreement).
How about trying this....cross out 100% and put in 50% and send it back along with a copy of your listing agreement with that particular paragraph highlighted or circled. I'd have to think they will not let a deal die over this issue. It seems to me to be more about making sure it is not so easy for the buyer to walk than it is about trying to take money out of the listing agents pocket.
If that doesn't work then I would take the prior approach and make them take me to court after the fact and see what the judge says. What's that saying, possession is 90% of the law? If you are the listing broker and you have possession of the deposit money seems to me like you would control who gets what and when.
Personally, I find these banks to be laughable, it really is quite amusing to see what they are going to come up with next. It's like a giant chess match.
That's unfair that big companies are able to do this. Awareness is improtant and I will be mindful of this information when working with this company.
Bryant - Do you have a feel for if it is the specific investor that owns the loan that is requesting this? I have a feeling you'll get some creative ways to handle this. Of course, I would be negotiating like crazy those terms they are asking.
I am an REO attorney in NC/SC.... Did you all realize its usually cheaper to buy out of Foreclosure??? and it takes less time... and title is typically in better shape. I have been doing short sales since 2003, and I made a decision to quit messing with them. My malpractice carrier doesn't want me to mess with them...
Has anyone talked to their E&O company?? I bet they will not cover you in the negotiation of a legal action...
GO REO... safer, cheaper, and takes less time...
I am working on a piece on the attorneys view of the Short Sale world...
I'm curious about the tortious interference idea. It makes sense as the agreement is between buyer and seller. However, the bank doesn't have to agree to less than it is owed. This is not a requirement of the loan. It's fascinating to me, perhaps as a train wreck might be to some.
I would have to believe that the big banks attorneys have been asked about this, but I've worked with big companies before and have been surprised at the decisions that are made without legal reprsentation, so maybe not.
Alot of feathers being ruffled here. I figure you go into a short sale knowing anything can happen and if you don't do your homework ahead of time then shame on you. If your commission might be at jeopardy, put it in the contract and stand firm. As far as the buyer walking---for what reason? Just because? Short sales in our area are turning into foreclosures cause buyers don't want to wait. Did alot of short sales years ago and they were a cinch, today I walk lightly. I'd rather run but it's the market.
Tortitous Interference of Contract is where a third party takes an action to interfere with your contract..I understand that you have a listing agent, the party who is agreeing to change the terms of the listing agreement is the Seller... not the Bank. If the Seller wants to save his skin, he has to agree to the terms. Be upset with the Seller... not the Bank. They will sell you out in a heartbeat.
The bank is simply giving the Seller an opportunity to work out, they are changing the terms... you need to to take that into consideration when listing a property which may end up being short. Its up to you and your client to take a stand against the bank...
Do not get me wrong the short sale process is a disgrace, and the banks are horrible to deal with, and I have lost upwards of $25,000 in trying to negotiating this things... At least they will pay you in a short sale.. If I negotiate on behalf of a seller the Seller has to pay me...
It's a shame that GMAC and others are doing this.. Bottom line should be.. Does it meet their minimum net.. not how muchwe make.
Ahhh Short sales. When will we be done with these? The banks make them a lot harder than they have to be!!
In my area this practice will bring a near stand still to short sales for GMAC. Since most of the buyers here are purchasing using FHA or VA mortgages this "condition" would clearly not be acceptable. (I also wonder how they could possibly think to negate the FHA/VA certificiation clause???)
Enough with banks and others dictating OUR business to us.
Very interesting information. I am glad I read almost all the comments. I am still not working short sales, and I am not looking forward to them.
At the end of the day House Rules. Whoever has the house makes the rules. If you work with it use it, if not, walk away
I'm surprised that the government won't step in and do something. I'm also wondering if they are aware of how they are going about it. It goes against all the new ways to stop the insane way lenders are approaching a way to help instead of just burying a bigger hole...it's all publicity. The banks want us to do all the work yet they want to dictate how we do business too.
GMAC can say whatever it wants to say but at the end of the day, they probably can't enforce it. We recently had a court case in California that says earnest money deposits cannot be non-refundable. On top of that, our purchase contracts call for the deposit to be returned to the buyer within the contingency period.
I always thought that even by lenders dictating a reduced commission amount was tortious interference. I wonder what would happen if NAR filed a class action lawsuit against a few of these big lenders.
so go after them in court... why speculate... that serves nothing cause they will just keep doing it... or perhaps it is nto important enough...
BB -
This is head-exploding news. Thanks so much for sharing. I was hoping to have one day free of turds floating in my punchbowl; but alas, it looks like today will not be that day.
Lenders suck.
Well maybe not ALLL lenders, but most of them these days seem to, and GMAC certainly does.
How about this? They want to play by those rules they can keep their frickin inventory. Surely there are other homes to show with different loan cos. holding the note.....right?
Just say NO. That's how you fight back against this ridiculous money grab by a bank. You are guaranteed that if this little scam is even remotely successful by GMAC, the other vultures will descend posthaste.
If you think about all the changes taking place in the mortgage industry and the banks' continuously assertiing control over the real estate market, you have to know that their motivation is to make LEMONADE out of the lemons they sold us 2-3 years ago.
Hard to know if it's a MONEY GRAB or a LAND GRAB.
I've not yet run into this issue in my area but I imagine that the day is coming...blah!
I know the banks seem to be getting tougher and tougher to deal with. We have been able to make agents productivity go up with our negotiation services. We take your short sales start to finish. If you have any questions how we can help your business boom in 2010 please call me.
Elizabeth's statement on #49 above seems this could be taken out in due course. But if they do this for a while to flesh "fake buyers" with lowball offers who are plugging up the line, is it really a bad thing? As far as dictating the business at some point we all will just have to say no. It will take a while to diminish the influence of banks but this is not irreversable. I used to wonder why my great grandparents kept money in the mattress. Now I know why. In some countries in South America distrust of banks has reached epidemic proportions. We might be on our way to that here.
I love the vulture picture! I think a picture speaks a thousand words.
Even the smaller local banks are getting in the act. I had one recently who strong armed me AFTER A CLOSING about my fee. Unbelieveable.
Wow Bryant, I've represented clients on a few GMAC short sales and never saw that. I will definitely be on the watch for it. Thanks for sharing!
I cannot imagine they are firm on their stance, for just the reasons you stated. 101% VA buyer for example. Also, they can ask for x-amount, but what would prevent the seller from asking for a default amount, too?
From the desk of David Dee,
BB, 2-3% earnest deposit AND non-refundable. Don't like the sound of that approval letter at all.
Bryant, I brought up the same point. What right does GMAC have to unilaterally (and they are not even a party to it) my listing agreement with my seller? We bail out the big guys and we are just trying to hang in there while they get bonuses. Most are adding fees and raising interest rates on credit cards and other loans. Now they want to dip back into the honey pot again. I have never seen such greed in this country. Reminds me of what my grandfather used to say about the Robber Barons of the early 20th century.
Next time they come to Washinton with their tin cups, maybe we should lobby to let them go broke. I for one have lost patience with their greedy attitudes and lack of cooperation. Are foreclosures or short sales any easier where you are? They sure are not here. If anything, from GMAC's example, things are getting even worse. I am at the point of saying "let them go belly-up"
PS GMAC now owns the second on my little 600 sq ft home. Wouldn't it be ironic if their greed caused me to lose it and since they are second in line after Bank of America, they ended up holding an empty bag. Haha. Would certainly soften the pain for me. Remember what the old joke was "What do you call a hundred lawyers at the bottom of the ocean"? Perhaps we need to change out lawyers and put in something else. No offense to lawyers, I have many friends in the legal professsion. In banking, not so many any more.
There are some great comments here....I was surprised to read Jamie's, stating that our E&O may not cover short sales. That's worth checking in to. I count my lucky stars that short sales are few in my area and pray that it remains that way.
Neai- Comment #48 Please! You have got to be kidding! You ask why is the government not doing something about this? Do you think they really care about realtors? Or homeowners? No, sorry to break this news but the government and the banks are in bed together. They get together and the White houses say to the banks- oh, we have to make you look bad so in public we are going to slap some extra fees on you- but don't worry- you can pass those fees right along to your customers. The banks run the Federal Reserve. The government turned over their money printing presses to the Federal Reserve. The Fed Reserve is a private banking cartel that dictates to the government what they can and can not do. The banks control the world. It is a very scary thing of which Thomas Jefferson warned us about over 200 years ago. I guess some did not listen too well. Katerina
This GMAC deal is a joke, and I think I will avoid these deals if at all possible.
Interesting stuff I wonder where this is heading with the banks!! I have little experience of short sales but seem to be hearing more and more about them here in NC
Thanks for the post Bryant. It does not surprise me what GMAC is doing. They have been bailed out with our taxpayer dollars and they just do not care. I have been working on a short sale for over a year now and have lost 9 buyers because the bank will not make a decision. There have been two BPO's both of which came in at the current list price yet they are unable to make a decision. I have sent them a new offer and have two more in back up currently and I'm still waiting.
I haven't seen a home that is that great of a deal for all of this drama! We'll just see how this goes however. I see a revision in their future.
Parked...
Obviously you forgot to park me.
TLW...ROAR!
They are further reducing their buyer pool but I can understand why they want this. They are trying to keep buyers engaged in short sales. The spirit is right, but the execution is questionable...We have many VA and USDA buyers that would never have 2-3% to put down. I hope GMAC doesn't have many deals out west in Nevada (HA! We know the answer to that one don't we? I wonder if this will become regional.)