My recent posting generated the greatest response from real estate agents and brokers we have yet to receive. The article discussed an agent in California that was prosecuted by the State Attorney General for obtaining a short sale fee equal to 3% of the sales price. The problem was that the allowable compensation was limited to 7%. Moreover, the agent did NOT disclose the short sale fee. This article prompted a lot of inquiries regarding whether an agent may charge a separate short sale fee in Nevada.
On October 15, 2009, the Nevada Real Estate Division (“NRED”) issued a Position Statement indicating that “there may be no separate or distinct payment or compensation for performance of activities defined as loan modification, foreclosure consulting or providing of covered services outside of a real estate transaction.” “Covered services” are defined in NRS 645F to include, among other things, contacting a creditor on behalf of a homeowner or arranging or attempting to arrange for an extension of the period within which a homeowner may cure a default and reinstate an obligation pursuant to a note, mortgage or deed of trust. Clearly, “covered services” are performed by the agent relating to obtaining a short sale approval. However, the concern is that the Division did not indicate when it considers these services “outside of a real estate transaction.”
I have recently spoken with the NRED and they have gratefully provided further clarification. The Division considers this fee as well as other fees traditionally charged by a real estate broker, i.e., transaction fee, document storage fee, referral fee, to be compensation and would fall under the requirements of NRS 645.280. In other words, the compensation must be paid through the broker. Moreover, all compensation must be disclosed to all parties involved in the transaction to include the buyer and seller’s lender(s). In addition, a real estate licensee cannot conduct these activities (short sale negotiation) if they are not also representing one or both parties (buyer and/or seller) in the actual sales transaction and cannot be paid for these services outside the real estate transaction. In other words, if the real estate licensee is not representing the buyer and/or seller in the sales transaction, they must be licensed in accordance with NRS 645F to provide short sale negation services independent from the sales transaction.
My thanks to the Nevada Real Estate Division for their quick response in providing this information.
ATTORNEY LEE DRIZIN PRACTICE POINTER: The agent in California concealed the short sale fee. Remember, if in doubt you should always disclose. Moreover, the disclosure should be made in writing in order to properly document your file.