FHA: No Conflict of Interest for Brokers Receiving Commissions on HUD REO Homes

The National Association of REALTORS® says the FHA’s response to its recent advocacy efforts is a big win for members who have an ownership interest in HUD real estate-owned homes. Adopting NAR’s interpretation, the FHA has revisited its policy and will now permit brokers to receive commissions on sales of HUD REO homes in which they have an ownership interest.

The Federal Housing Administration has revisited its position regarding broker commissions involving U.S. Department of Housing and Urban Development real estate–owned homes. The FHA’s original policy prevented brokers with an ownership interest from receiving a commission. The National Association of REALTORS® advocated to the FHA that such a policy was in conflict with its MLS rules in regards to the payment of real estate commissions.

In response to NAR’s concerns, the FHA issued the following response: “HUD has undertaken further research on the impacts of restricting broker commissions. As a result, HUD is currently working to update our system, to allow brokers to be paid commissions on all competitive sales irrespective of the individual/entity purchasing the HUD REO property.”

The FHA says it will continue to keep a question about the selling broker/agent and their ownership interest for gathering and analyzing information only. But it will no longer require that the “Selling Broker Commission” field be filled with zero to proceed with the transaction.

The FHA also said that HUD will remove the following warning notice: “HUD will not pay a sales commission if the selling broker or agent submitting the bid is also a purchaser or has an ownership interest in an entity identified as a purchaser.”

The changes will take effect no later than Dec. 1, the FHA says.

Courtesy: National Association of REALTORS®