Brokers Blog

Buyers used to just look for homes that are in the “move-in” state. But home brokers are feeling some changes as home buyers are now also looking at repossessed properties in the market.

Home brokers noted that almost 50 percent of home sales in the Atlanta area involve bank-owned properties or distressed houses that will be facing foreclosure soon. This type of homes seems to gain more popularity in the market nowadays.

Around 6 years ago, foreclosed properties consist only a small segment in the resale market. It was then too small that it does not have a specific subcategory in computer listings. But now, the MLS have a specific category for bank-owned homes and large firms have home brokers and agents that specialize on repossessed properties.

So, why is there a shift in bank-owned home purchases?

• The number of repossessed houses and homes facing foreclosure has multiplied. Foreclosure trackers say that there are about 10,000 homes facing foreclosure in the metro area alone.
• Bank-owned homes are not only found in unattractive neighborhoods anymore. They are now found all over the metro. It seems that bad loans are not among the undesirable neighborhoods anymore.
• The government has attractive offers for home buyers that will purchase foreclosed homes. Like the Federal Housing Tax Credit worth $8,000 for home buyers that will have their purchase within the year, provided that they have not owned a house within the last 3 years.
• Then, there is the Georgia Dream Loan that offers home buyers to avail a $14,000 down payment assistance package. But only 1st time buyers who choose a bank-owned property can avail this zero-interest mortgage that is forgivable for six years.
• But the best reason is the bargain. Bank-owned homes are more affordable, and are even better when it is located in good neighborhoods. Some of these properties may some retouches and repairs that can reach $10,000, but needs nothing really major.

So if you are one of these home buyers considering bank-owned properties, find a home broker that specializes on this type of homes. With the broadening market of repossessed homes, you may need a home broker to help you find the perfect purchase that is in a great location and is still within your budget. So, find a brokerage that has a specific foreclosure department.

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An additional $150 to $500 ABC, processing or admin fee are usually added aside from regular commissions or sometimes during real estate settlements. These charges are exclusively entitled to the brokerage’s owner and not shared with real estate agents.

These mystery fees are said to be added to sustain the business since commission ends up mostly to the real estate agents. Real estate agents can get a commission cut of as much as 90 percent. Laurie Janik of the National Association of Realtors says that these charges are needed for home brokers to profit.

But the current question is: are these fees legal?

Last month, U.S. District Judge Virginia Emerson Hopkins (Birmingham, Alabama) decided that when a real estate firm adds this so-called “admin fee” without specific services performed, it breaks the federal law.

This decision was imposed on RealtySouth, a brokerage unit of HomeServices of America Inc’s brokerage units. RealtySouth was actually sued by a home buyer who paid $149 for an ABC fee. After the court found out that there is no evidence that the realty firm did any services that is separate from the commission fee, a violation of a federal law against unearned or illegal fees was found.

Yet other courts have different interpretation of the statutory language on unearned fees, thus the RealtySouth issue is left unsettled.

If this ABC fee is illegal, around 30,000 RealtySouth consumers who were asked to pay ABC fees in the past years are affected. Home Services of America general counselor and vice president Dana Strandmo says that charging processing or admin fees is quite a popular practice throughout the whole realty industry.

Home broker Frank Borges says that this bogus admin fee problem must be blamed to the increasing commonplace use of home brokers and agents. Because of the bigger commission cuts earned by realty agents, realty brokers earn less and are forced to ask for an “extra” fee to sustain the brokerage.

Janik then suggests to the National Association of Realtors to standardize the system by having flat-fee on top of the commission that are thoroughly explained and disclosed to their clients. There must be a regular or base fee in addition to the standard commission calculated at X percent. Simpler and more legal.

So, as a consumer, what should you do? Ask your home broker for full disclosure regarding all the fees that you will pay. And if you do not agree to this, find what suits you.

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