NAR: HUD to Allow Dual Agency Agreements in FHA Pre-foreclosure Transactions
On Friday, July 14, 2014, the US Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2014-15 allowing dual agency agreements in FHA pre-foreclosure transactions. Dual agency includes transactions in which two agents are working for the same broker and one agent represents the seller and the other agent represents the buyer. Dual agency also applies to a single agent who represents both the buyer and the seller in a short sale transaction.
Last summer, HUD issued a policy to exclude dual agency agreements in FHA short sale transactions starting October 1, 2013. NAR President Gary Thomas and NAR legal counsel met with HUD staff to express NAR’s concerns about the policy and the disruptive effect its implementation would have on communities across the nation. As a result, HUD agreed to work with NAR to arrive at a policy that better addresses concerns that pre-foreclosure sales are not meeting HUD’s minimum net sales proceeds requirements.
The new guidance will preserve dual agency agreements in FHA short sales, but require the properties to be listed for at least 15 calendar days before any offers are evaluated. After the 15-day period, offers may be evaluated as they are received. If multiple offers are received, the listing agent or broker must forward the offer that provides the highest net return to HUD and meets HUD’s criteria for bid requirements.
The sample pre-foreclosure sale addendum has been revised to: (1) add the name of the listing broker and the buyer’s broker; (2) permit the real estate agent and/or broker to represent both parties; (3) have the listing agent and listing broker certify compliance with the 15-day minimum listing period; and (4) have the listing agent and listing broker certify that in the event of multiple offers, they submitted the one with the highest net return that met HUD’s criteria.
These requirements must be implemented for all “New Approvals to Participate” no later than October 1, 2014.