November Broker Newsletter

Broker Newsletter
November 30, 2009

In This Issue
· What is a Variable Commission?
· Tax Credit Renewed and Revised
· New Free Fax to Email Tool: MongoFAX
· New HUD1
· Docusign for Electronic Signatures

Revelation Links
Training Calendar
Current RE Issues
IRS Tax Credit Information
Information on the in’s and out’s of the tax credit for first-time homebuyers.
HUD Homes
A list of HUD homes available for purchase by city.
MongoFAX
Free tool to AAR members. Fax to email conversion.
Broker Blog
See Past Broker Newsletters and Discussion of Real Estate Issues
Contact Us
480.722.9800 Office
480.802.1599 Broker Hotline
http://www.mywestusa.com
brokerreview@westusa.com
What is a Variable Commission?
Everyone has heard of a Variable Commission, and most are familiar with the line on the MLS printout, directly after the offered commission amount, “Var: Y/N”. However, I’ve recently noticed that many agents are not familiar with the exact meaning and usage of a Variable Commission. It is important that you understand what a variable commission is, when to use it, and what you need to be disclosing to each party when there is a variable commission in place on a listing.
1. What is a variable rate commission?
The most common variable rate commission is where one amount of commission is payable if the listing broker’s firm or the listing agent specifically is the procuring cause of the sale, and a different amount of commission is payable if the sale is a result of another broker procuring a buyer.
2. What isn’t a variable rate commission?
There is a misconception that any compensation offered through the MLS to cooperating brokers that differs from a fifty-fifty split is a variable rate commission. NOT TRUE. Listing brokers may offer whatever compensation they wish to in the MLS as long as it is stated in either a percentage of sales price or a dollar amount. There is no rule nor can there even be a rule that compensation offered in the MLS is based on any particular split or percentage per Antitrust laws.
Another misconceptions is that a variable commission is when the listing agent wants to “reserve the right” to negotiate the total commission with the seller at the time of presenting an offer.
Acting on Inappropriate Lender Requests for Seller Contributions --Lenders may go after money that sellers have in the bank or retirement accounts as a settlement to approve the short sale. The lender may communicate the demand to the realtor to get the seller to sign a note as a condition of the sale. If the loan qualifies under the state anti-deficiency statutes, the lender has no claim to this money, and agents that suggest otherwise may be at risk for negligence claims. If a lender demands money or a note, allow them to communicate it to the client directly.
3. Why is it necessary to disclose variable rate commissions?
The requirement for listing agents to disclose variable rate commissions is to allow cooperating agents and their buyers to make informed decisions in determining offer amounts for properties. For example, if there was a variable rate commission on Broker A’s listing and Broker B’s buyer is interested in making an offer on said listing, Broker B’s buyer is ethically entitled to know that if Broker A also represents a buyer with an offer on the subject property, two identically written offers will each net the seller different amounts, and therefore, Broker A’s buyer’s offer may actually have an advantage by netting the seller more due to the variable commission.
4. Aren’t listing brokers allowed to charge whatever they want? And isn’t it between the listing broker and the seller?
Absolutely! But when the terms of the commission affect the cooperation by other brokers and a difference in competitive advantage between buyers, it becomes necessary to disclose.
5. Does the listing broker have to disclose the full terms of the commission negotiated with the seller?
No. If there is a variable rate commission disclosed, potential cooperating brokers may call the listing agent to determine what the differential is between the commission paid to a cooperating broker, and the listing agent must disclose the differential as a percent between the two scenarios, but the listing agent does not need to disclose the total commission negotiated.
6. If you’re a buyer’s agent, and you are aware of a variable rate commission agreement on a property your buyers are interested in, should you disclose it to the buyers?
Yes. You MUST disclose it before the buyer makes an offer.
** excerpt from AAR article by Alice Martin
Tax Credit Renewed and Revised
The IRS Homebuyer Tax Credit bill has been extended and expanded.
Please see the attachment which covers a comparison of the former and new features of the bill.
For first-time buyers, the credit is similar… for principal residences, must not have owned a principal residence for 3 years prior.
For current home owners, the credit is $6500, effective from the date of enactment, when the home being sold was the principal residence for 5 consecutive of the last 8 years.
The income limits for both first-time and move-up buyers is $125k for single or $225k for married. The maximum limit of the purchase price for the home is $800,000.
Please note that the extension is good for contracts written through April 30, 2010 and closed no later than July 1st, 2010, which is really not much time. Take advantage of the extension and get your first time and move-up buyers out there! Again, the greatest motivator for all people is... the fear of loss. Make sure that your buyer contacts know that they must act quickly to take advantage of the $8000 or $6500 tax credit.
New Free Fax-to-Email Tool: MongoFAX
If you end up with hardcopy paperwork that you need to email to someone, you can always come into the office, scan your paperwork, and email it from the computer across from it, but if you are away from the office and in need of a way to email a document that you only have in hardcopy, there is a new free service available to you for just the occasion! MongoFAX allows agents to fax paper-based documents directly to any email address. You don’t need to register, and you don’t need a login or password. All you need is a fax machine, paper documents, and the MongoFAX cover sheet. You just fax your hardcopy paperwork with the completed MongoFAX coversheet on top to the toll-free number on the MongoFAX coversheet, and your paperwork will be emailed to the designated email addresses.
New GFE/HUD1 Effective January 1, 2010
As a result of ongoing RESPA reform, HUD has revised the Good Faith Estimate and HUD1. The object of the revision is to simplify and clarify the documents for buyers and sellers. Of course, in simplifying each document, the GFE has increased from one to three pages, and the HUD1 has increased from two to three pages. It is important that you take some time to learn about the changes so that you will be able to explain the forms to your clients.
When you receive notice that your buyer’s appraisal is less than the agreed upon purchase price, have the discussion with your buyer about their options:
Good Faith Estimate:
1. The lender must provide a GFE to the borrower within 3 business days of the loan application.
2. The lender cannot verify the borrower information prior to issuing the GFE.
3. The quote must be good for 10 days unless circumstances change.
4. The lender cannot charge for the GFE preparation.
5. Mortgage must disclose Yield Spread Premiums which represent fees paid to the broker on the loan.
6. Lender is bound to the GFE.


HUD-1 Settlement Statement:
1. HUD-1 some fees that are currently shown broken out will become bundled such as title insurance, settlement costs, title exam fees, commitment fees, etc.
2. Escrow officers will not be able to complete the third page of the HUD-1 without the lenders settlement statement. Page 3 will disclose whether the lender has exceeded the allowable tolerances between the GFE and actual costs.
3. Specifics with regards to the buyer’s loan will be disclosed clearly on page 3 such as whether or not there is a prepayment penalty and what it is, the initial monthly payment, whether or not the interest rate might adjust, and whether or not there will be a balloon payment due.
Juliet Lewis from First American Title will be in the office on Monday, December 21st at 1pm to present the changes to the HUD-1 and what you need to know about the changes to represent your clients.
Docusign for Electronic Signatures:
One of the most convenient tools available to realtors in today’s market is Docusign, the electronic signature software, which allows you to move forward with paperless documentation and provide cutting edge service. If you are looking to increase your dollar per hour wage earned, consider adding Docusign to your tool belt.
Contact Nicole to sign up. The cost is $15 per month added to your office bill. There is no contract to sign. The service is the advanced version with unlimited envelopes and the ability to add text boxes. Additionally, Angela has created templates for most of the common AAR and office forms so that when you upload a contract into Docusign for your clients’ signatures, the template automatically applies the signature and initial flags to the appropriate lines.
Angela will be conducting an information session and training class on Docusign on Friday, December 4th at 12:30pm following our office meeting.