Broker FranklyRealty.com
Owner FranklyMLS.com

I hate admin fees. Never charged them, never will. (kinda like Sprite)

Just a couple of corrections to my quotes in their post (which they are working on).

1) I initially estimated that admin fees were charged on 40% of deals. I guess I was being conservative. That is actually more like 70% based on 20 recent HUD1s that I pulled (not charged by us, but by the other broker). Also to clarify their post, I don’t know if these fees were agreed to in the initial consultation, or were just sprung up at closing.

(even if they were brought up initially, they are still bogus if the client doesn’t know better, ie they don’t subscribe via email in the upper right corner of my blog. )

2) They quoted me as saying that “many agents” are allowed to keep the admin fees charged by brokers. I actually only know of 1 (maybe 2) agents/brokers that do that. If that was prevailant, it would be EVEN WORSE and I’d go and become a lawyer for the class action on that one! (oh yeah, I got into a law school. I start in the fall.)

But the point wasn’t missed in their post. Agents aren’t completely innocent in their “Sorry that is company policy to charge this.” excuse.

Agents that are with firms that charge bogus admin fees are part of the blame.

Why? Isn’t the broker solely to blame for charging this?

No. They are charging that fee, in part, because they can’t make enough from the agents. Why? Because the agents are demanding better splits. (and they have big offices)

Exaggerated Example/Scenario:

Agent A is with 123 Realty that offers a 60/40% split (firm get 40%). And this 123 Realty charges no admin fees to clients.

Agent A gets courted to move over to 789 Realty. They offer 70/30% split plus a $300 per deal admin fee (that either the agent or the client has to pay).

So when Agent A moves over to 789 Realty and then says to their client, “Opps sorry, this firm charges $300 more per deal, nothing I can do about it. What? You want me to eat it? Heck no, that isn’t ‘fair’.”

Meanwhile on a $10,000 commission, the new company “gives” the agent $1,000 more.While charging $300 to their client.

Another thing that sucks about admin fees is I will see the SAME company charge them one day, and not charge them the next day with a different agent (at least not on the HUD1). So either the agent ate it offline (not HUD1) or they stood up to their broker and said,

“Not only am I not paying this, but I’m not passing it on to my client. Mr(s). Broker, if you don’t do this, I’ll switch over to FranklyRealty.com (if they will take me, no newbies sorry).”

But sometimes brokerages ARE to blame.

Some brokers will start agents off with a 45/55% split (55% for the firm). But of course the $5,500 out of that $10,000 doesn’t cover “admin.” What? Is that $5,500 profit and the $300 is to cover xerox copies (admin)?

Anyhow, thanks MSNBC for blowing the cover off this garbage fee. I hope to help you expose more Realtor tricks.

Tips for Realtors: Tell your broker no. But if you are on a 100% split paying $200 per month, you better believe they are going to charge “admin fees.” Or push you hard toward their Affiliated Business.

Tips for Buyers: Hell no. Buyer Agents advertise their services as “free.” Not “Free*” with a $300 fee.

(I never say I’m “free.” Yes technically the seller pays, but the buyer is the one writing a check at closing, and a part is coming to me. I realize that. Thank you. I hope I helped, and you found it worth it.)

Tips for Sellers: Well this is tougher. At least they aren’t saying their services are “free.” They are saying their fees are XYZ% plus $300. You always have the right to go negotiate the commission split AND/OR the admin fee. But remember, that doesn’t mean the listing agent has to say “yes.” With your right to ask for less, is the agent’s right to say NO. (nothing wrong with discounting or rebating. I write about it here… “I used to do it… but then I got good decent.”)

Tips for Brokers: Just because everyone else is doing it, that doesn’t make it right. Also go cut some overhead. The world is virtual. Get out of the 0.5 real estate world and join the Web 2.0 world.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)

• [Lead up to quote; red emphasis added]… The aggravation has been building for a while and stretches beyond the agreement announced yesterday. For instance, under one congressional proposal, there would also be a break for “short sales“ — that is, when owners sell a home for less than is owed on the mortgage and the lender forgives the difference. Now, the amount that’s forgiven is regarded as income, and the seller owes tax on it. The proposed legislation would forgive that tax.

 

• [My quote] Without the threat of the tax, sellers might not be as reluctant to consider a short sale, said Northern Virginia real estate broker Frank Borges LLosa. He predicted the number of such [short] sales could double. 

  Maybe Congress should allow a 50 to 75 percent break instead, he said. “I am not saying not to help out these people,” LLosa said. “It’s very sad. I have spoken to people who have lost their homes. I just don’t know if a bailout is the right thing for the marketplace as a whole.”

I’ve discussed Short Sales previously in “SOL” Homes: Virginia MLS Foreclosures, REO, Short Sales Defined, but here is a quick recap:

Short Sale: Usually a Realtor MLS listed house that is heading toward foreclosure. The deal requires 3rd Party Approval (the bank) because the seller is trying to sell for BELOW the loan amount and is hoping that the bank will approve the deal, and eat the loss. Only about 5-15% actually get to closing since banks oftentimes say, “no” (blog post coming soon on this, so make sure you subscribe Update: Here it is).

Example of a regular Upside Down Sale: (loan amount is over the sales price)

1. 2005, $500k home was bought with a $475,000 loan and $25,000 cash (5% down).
2. 2007, home price drops to $450k.
3. To sell at $450k, seller must bring a $25k check to closing.

Example of a Short Sale:

1. 2005, $500k home was bought with a $475,000 loan and $25,000 cash (5% down).
2. 2007, home price drops to $450k.
3. To sell at $450k, they show the contract to the bank and ask for a short sale approval.
4. Upon rare approval, the bank eats the $25k.
5. Seller still gets a taxable 1099 for bank’s loss, also called Phantom Income (at least for now).

• The benefit for the seller is not having a bankruptcy and or foreclosure, which is worse for their credit.

 

• The benefit to the bank can be lower foreclosure, legal and remarketing costs.

For those that they can’t afford an Adjustable Rate Mortgage that is resetting much higher, this can be the savior, with the exception of having to deal with the Phantom Tax. But now the “Mortgage Cancellation Tax Relief Act, H.R.3648″ wants to remove the 1099 tax bill.

This sounds great and dandy for a polititian to “keep from kicking people that are already down,” but if you remove the penalty for doing a short sale, this will lead to… MANY MORE short sales.

More Virginia short sales will drive down prices, thus hurting others in financial trouble, and their neighbors that didn’t buy risky loans.

And regarding any legislation to FREEZE rates for distressed homeowners, Freeze Interest Rates? From Bankruptcy to Profit?

-Written by Frank Borges LL0SA- Broker FranklyRealty.com (please report typos)

Sneak Preview: My next blog post will talk about FAKE Short Sale prices, and how you can lose $10,000 as a seller competing against these oftentimes fake listings, and how only 5-15% ever get to closing.

CNBC STREET SIGNS: Homebuyer Beware

Do you know what your Realtor is making? You should.

Now that the market is slowing down, the incentives offered Buyer agents has
increased. Not across the board, but occasionally. I have recently seen incentives as high as 10% in Miami! And I saw one ad where they are offering a vacation to the Realtor. But the WORST I have seen is “$5,000 bonus for a full price offer.” This should be banned (it might be). The Buyer agent (even though paid by the seller) is supposed to be working for the buyer, not the seller. An agent that takes a $5,000 bribe instead of working to get their client, $5k or $10k is an embarrassment.

Buyers should know exactly what their Realtor is making?

How do you do this? You can start with an “Exclusive Buyer Agency Agreement.” I know what some of you are thinking “Oh, I don’t sign those, I would rather work 4 agents to help me find a home.” Ok, I can see how that initially would sound reasonable. But put yourself in the shoes of the agents. How likely is that agent going to be to help you try and fight for an extra $5,000 or $10,000 off? Human nature would kick in and say “why should I be aggressive on this offer if they might just go elsewhere if this deal doesn’t happen.”

Watch CNBC interview Frank Borges LLosa from FranklyRealty.com on the issue of extra bonuses. This interview pulled from the article “Do Real-Estate Agents Have a Secret Agenda?” in the And in BusinessWeek’s article: “Home Buyer, Beware”.

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
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