Brokers Blog

Home brokers in California can no longer use the advance fee approval they have previously obtained from the California Department of Real Estate for providing paid loan modification services to customers. More importantly, they can no longer charge fees upfront before starting their loan modification services for clients.

Consequently, the form titled Advance Fee Agreement for Loan Modification Services can no longer be used.
So if you are a homeowner looking for a real estate professional, lawyer or foreclosure prevention firm to help you obtain loan modification from your lender, remember that you can no longer be charged advance fees.

Last October 11, the law prohibiting the collection of advance fees for loan forbearance or modification services covering one- to four-unit residential units was signed by Governor Arnold Schwarzenegger, and the law took effect immediately.

For those who have already signed loan modification contracts with a broker before October 11, the agreements are still valid, but you can no longer be charged for additional fees until the loan modification service is completed.

Just make sure that the broker you have hired is licensed in California and that he holds the No Objection letter issued by the Department of Real Estate before October 11. See to it also that he is providing you the services described in the contract.

You can check if your loan modification specialist has a No Objection document by going to dre.ca.gov/cons_adv_fees_list.asp.

For home brokers who have not yet been updated about the law and unknowingly collected advance fees after October 11, they must return the fees fully and immediately.

For homeowners who want to check foreclosure prevention or loan modification specialists that have pending cases or complaints against them or have been ordered by the DRE to stop providing loan modification services, they can go to dre.ca.gov/cons_drs.asp.

If you are being approached by brokers or lawyers offering or providing loan modification services but are charging you fees in advance because of purportedly special exemptions, report them to the Department of Real Estate, California Attorney General or California State Bar.

Homeowners are often lured into signing deceptive foreclosure prevention agreements because they are swayed by the knowledge of swindlers concerning their mortgages. But swindlers research foreclosure notices and other publicly available records to get information.

All in all, deal only with home brokers or lawyers who are licensed and well-recommended and whose backgrounds you have already checked.

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Discount real estate brokers who offer full service at a lowered commission rate may work better for you than limited-service brokers. But for some customers, flat-fee brokers may be the better option. Both of these types of brokers however enable you to cut your buying or your selling costs.

So you can decide best which type of broker to choose, the differences between these two types of brokers are described here.

A full-service discount real estate broker offers sellers and buyers the full range of realty services at a commission rate lower than the predominating commission rate in the area. In a market where six or seven percent is the predominating commission rate, the full-service discount broker may charge only three or four percent.

Additionally, in states that have no laws on brokerage incentives, the full-service discount broker may provide rebates, gift certificates, vouchers, coupons or discounts to the home seller or buyer. Rebates are often equal to one-percent of the home purchase price. All these incentives are provided to encourage the use of the services of the discount broker.

According to real estate experts, rebates are often used to go around the rules of commission agreements, particularly for the home buyer and the buyer’s broker. Giving rebates to home buyers will enable discount real estate brokers to compete in attracting clients. However, this is only possible in states where there are no laws about real estate incentives.

For clients planning to hire flat-fee brokers, they should know the brokerage services that will not be offered.

A flat-fee broker, or sometimes called fee-for-service or limited-service broker, allows house sellers to choose which among the typical services provided by full-service brokers to pay for. Some flat-fee brokers have arranged different arrays of brokerage services into packages with corresponding rates, ready to be shown to prospective home sellers. Some list basic services into packages and then offer other services as options.

Many flat-fee brokers offer a Multiple Listing Service-only package. This enables home sellers who cannot access MLS to list their houses in these listings.

On the whole, flat-fee brokers fit home sellers who know how to carry out some aspects of the home selling or buying process, but who are not knowledgeable or who need assistance in other aspects while full-service discount real estate brokers fit home sellers or buyers who need all brokerage services but at a discounted cost.

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