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We represent many buyers who look to buy a foreclosure home or condominium in Las Vegas, North Las Vegas and Henderson, Nevada. As such we have been significantly impacted by the policies that these REO agents and their brokers as well as Nevada Real Estate Division and Las Vegas Realtor Association have imposed on such transactions.  

I have previously wrote that banks, who are the sellers of these foreclosed properties, see no need to follow any law as they don’t suffer any consequence for doing so, and this has expanded to the REO agents who represent the banks in Las Vegas because they don’t want to go against a deep pocketed customer.

One of Las Vegas’ biggest real estate brokerages advertised an event so other Las Vegas Realtors could meet their REO agents and become familiar with their REO Realtors procedures. After their number one REO agent explained her procedures and policies, which included oral counter offers, it was time to ask questions from their broker. I got up and said that their procedure is in violation of all that I have been taught about real estate transactions and encouraged all of the other agents that had attended the meeting to stand up to them, which they didn’t like a bit. Their broker’s response was that they have vastly improved their procedures and that the Las Vegas Real Estate Division is forgiving when it comes to foreclosures.

I try to avoid confronting others because I believe that anyone who enters a conflict loses by default. One has to spend time and energy to win a conflict when the same time and energy could be spent toward a worthwhile goal.

Anyway, on an offer that I made on behalf of one of my clients to one of the REO agents from the same brokerage, which I will not hesitate to name next time, two glaring issues came up that I want to discuss.

One is the following paragraph from the bank’s counter offer:

     35. Seller shall not be liable or bound by any verbal or written statements, representations, real estate broker “set-ups” or information pertaining to the Premises furnished by any real estate broker, agent, employee, officer, servant or any other person, including but not limited to any representation in any Multiple Listing or Internet Service, unless the same are specifically set forth herein. All oral or written prior statements, representations, or promises, if any, and all prior negotiations and agreements are superseded by this agreement and merged herein. The Seller reserves the right to immediately place the property on the market for sale to a third party without the consent or release from the Buyer herein.

36. Real Estate commission to Buyer’s agent will be paid per the listing agreement between Seller and Listing Agent.

I am not an attorney and can’t discuss law, so I will not analyze these paragraphs, however the following questions have to be asked, and I hope an attorney can answer them.

1: If “Seller shall not be liable or bound by any verbal or written statements, representations, real estate broker “set-ups” or information pertaining to the Premises furnished by any real estate broker, agent, employee, officer, servant or any other person, including but not limited to any representation in any Multiple Listing or Internet Service, unless the same are specifically set forth herein“. Then why is this listing permitted to be published in the Greater Las Vegas MLS?

2: Why would a buyer choose to open escrow, pay the inspection fees, and forgo all other opportunities if he/she will not know until the close of escrow whether the home or condo is going to be theirs?

Showing properties based on the commission is a red line that neither me nor anyone connected to my team will cross, because we follow a customer centric business model and not an agent centric business model. Besides, we think that even at lower commissions we are being paid well. I hate greed. Nevertheless, the law is the law, so the following paragraph raises serious questions that the listing REO agent and their broker should be familiar with.

 3: Seller agrees to pay or credit buyer up to $4,000 in closing costs and commissions will be based off the purchase price of $ 125450. The Buyer shall be responsible for the payment of any and all transfer taxes due at the time of closing. Agents commission based off of the net sales price.

Again I am not an attorney, but below is an article written by Sue Saunders, General Counsel at the NVAR, which I am reproducing here because it was not copyrighted:

“Commission Cutting…A Slippery Slope for Many Listing Brokers

Sue Saunders, General Counsel, NVAR

It is happening a lot more now, especially with all the short sales and REO properties on the market. The scenario is the seller or the seller’s agent tries to cut the commission to which the buyer’s agent is entitled. When a seller and/or his listing agent attempt to cut the buyer’s agent’s commission after the buyer has made an offer, that listing agent is violating both a contract and the REALTORS® Code of Ethics (Hereinafter “the Code).

“What contract?” you say. The contract brokers and agents agree to when they join the MLS. That contract says that you must abide by the MLS rules. The MLS rules are based on the Code and frequently parrot the same language. MLS Rules (Section 5 in Las Vegas and Section 6 in Northern Nevada) specifically say that the compensation being offered in the MLS must clearly inform the Participants of the compensation they will receive in a cooperative transaction. MLS rules further say that the compensation offered in the MLS may only be changed by notice in writing in advance of the cooperating agent’s making an offer. The commission offered to a buyer’s agent in the MLS cannot be changed once the offer has been presented, unless the listing broker and the buyer’s broker agree otherwise (see comments later). The fines are $250 or higher depending on the severity and frequency of the agent’s violations.

A typical scenario may go like this: The buyer makes a low offer for a property. The seller says to his agent, “This could work if you make a counteroffer saying we’ll accept if you and the buyer’s agent each take $5000 less in commission.” The seller’s agent objects, but the seller insists. So the listing agent, in a counteroffer, states that the price is accepted and the buyer’s agent commission will be reduced by $5000. This is a violation of the above stated MLS rules and the Code. The Buyer’s agent could make an ethics complaint and seek arbitration from her local REALTORS® association.

Another scenario may be like this: The listing agent has a listing agreement for 20% and offers a 10% commission to the cooperating agent in the MLS. In the entry the listing agent indicates this is a short sale but nothing more. The buyer makes an offer. The seller accepts the offer. The contract is sent to the seller’s lender for approval. The lender approves, but cuts the total commission from 20% to 10%. The listing agent tells the buyer’s agent that her commission will be reduced to 5%. This is a violation of the Code and MLS rules. (I used unusual percentages to get your attention).

In short sales, MLS rules and the Code provide that the listing agent must clearly communicate in advance if the commission might be reduced by the lender. This is done by stating in the Agent-to-Agent Remarks that the commission may be reduced by the short sale lender and stating the method by which the potential reduction in compensation will be calculated. In the above scenario, the listing agent did not state in the Agent-to-Agent remarks that there may be a reduction and how the reduction would be calculated. Because the listing agent did not give advanced notice of the potential reduction, his trying to require the buyer’s agent to take a reduction would be a violation of the Code and MLS rules and expose him to disciplinary action. Also if the buyer’s agent asked for arbitration, the arbitration committee would likely award the 10% to the buyer’s agent because that is what was clearly communicated in the MLS compensation offer. If arbitration makes that award, the listing agent or his broker would have to pay the complete 10% commission to the buyer’s agent.

A third scenario involves an REO property where a Realtor may have to deal with (as his bank “client”) a relatively uninformed asset manager. A Broker accepts a listing of a bank owned property from an asset manager. The asset manager uses her own listing agreement form. The form has a fill-in blank in which she entered 9% commission. The listing broker signs the listing agreement and offers 4.5% cooperating commission in the MLS. At closing, the asset manager tries to change the commission to 7% stating that she used an out-dated form and the bank was only offering 7% at the time the listing agreement was entered into and will only pay 7%. The asset manager refuses to pay the agreed 9%.The listing agent changes the escrow instructions to state the buyer’s agent will only be paid 3.5%. The listing agent has violated the Code and the MLS rules by trying to change compensation after the buyer’s agent has made the offer.

The buyer’s agent would probably succeed in arbitration unless the listing agent could prove, “…it was impossible or financially unfeasible for the listing broker to collect a commission pursuant to the listing agreement.” [MLS Section 5 or 6]. This is the only exception to the listing broker’s obligation to compensate the cooperating broker as stated in the MLS. Historically, it is rare that the listing broker would meet the “impossible or financially unfeasible” test. (Then again, in today’s financial arena, maybe it isn’t so rare).

These scenarios have been presented to me in the last few months. Listing agents need to take heed, because what is offered in the MLS is what a cooperating participant is entitled to be paid. If the listing agent tries to change the compensation after a cooperating agent has presented an offer, he is violating the MLS rules. He could end up not only paying the cooperating agent what was offered, but also paying a heavy fine to the MLS.

Of course, in all of these scenarios, the Code and MLS rules do not preclude the listing and cooperating brokers from entering into an agreement to change the cooperative compensation. This would be done by a broker-to-broker agreement separate from the purchase agreement between the buyer and the seller. [Code of Ethics, Article 3, Standard of Practice 3-3].

Statements made by the NVAR Information Line attorneys on the telephone, in e-mails, or in legal e-news articles are for informational purposes only. NVAR’s staff attorneys provide general legal information, not legal representation or advice regarding your real estate related questions. No attorney-client relationship is created by your use of the Legal Information Line and any information you receive. You should not act upon this information without seeking independent legal counsel. Information given over the Legal Information Line or in these articles is for your benefit only. Do not practice law! Inform your clients they must seek their own legal advice. “source: www.NVAR.org

Again you can judge for yourself.

I am sick of this and am losing patience. So Las Vegas REO agents this the last fair warning as I will start taking these issues as high as I need to take them to resolve them. As I said, I am not looking for confrontations, but I have never backed off one when I thought all other avenues were dead end.

Given that I have one of the top ranking real estate web-sites in Las Vegas and one of the most popular real estate blogs in the United States, what I write is being read by about 12,000 unique visitors per month, including Fannie May, many banks, and governmental entities. Additionally what I write about tends to find its way to the top of search engine result pages, so if I want to popularize an issue I can.

Related web-site links: getting the best deal for a Las Vegas home or condo, Buying Las Vegas homes for sale, Buying Las Vegas condominiums for sale, , Buying Las Vegas new homes for sale