Question: Can an agent accept an advance fee for negotiating a short sale?
Answer: As mentioned in first tuesday’s tip-of-the-week in our March 28, 2011 Weekly News Alert, a broker or agent can accept an advance fee for negotiating a short sale. To do so, the broker or agent must first submit an advance fee contract to the Department of Real Estate (DRE), and then receive a no-objection letter relative to that contract from the DRE.
For more information regarding the DRE’s short-sale policies, see the DRE publication, Short Sales – An Overview and Warning to Real Estate Licensees Re: Fraud, and Legal and Ethical Minefields and The Essential Elements of an Advanced Fee Agreement.
Brokers or agents who accept an advance fee for negotiating a short sale are not required to register with the Nationwide Mortgage Licensing System & Registry (NMLS) or receive DRE Mortgage Loan Originator (MLO) endorsement. For more information regarding these policies, see the September 2010 first tuesday article, Licensing for listing negative equity properties for short sale and the September 2010 first tuesday Legislative Watch, Advance fee for broker services clarified.
first tuesday’s book, Agency, Fair Housing, Trust Funds, Ethics and Risk Management also contains a chapter titled, Advance fees as trust funds if you would like more information about advance fees.