Question: I'm a mortgage lender and have been for 15 years. Since relocating to a new state several years ago, I've been continuously fighting a problem with builders and new construction loans.

The issue is this: Buyers are offered numerous incentives -- up to $10,000 or $15,000 -- if they obtain a residential loan through the builder's in-house lender, but nothing if they use their own lender. However, after reviewing the loan programs given, I have seen that the payments are so high that builders (through the lender) re-coup all the incentive money. Not only does this practice hurt the mortgage industry, but more the buyer!

There are also a number of builders who literally increase the price of the homes as high as $100k if the buyer does not go through the in-house lender.

What can I do?

Answer: You have to look very carefully at what builders are doing: They are offering a trade. They do not say buyers must use a particular lender or closing company. Instead they offer a bifurcated pricing structure: one price if the buyer uses the builder's lender and closing company and a second price if the buyer goes elsewhere for funding and closing services.

You argue that in-house or captive lenders charge too much. What they charge is as much as the market will bear. You say the builder charges more if buyers do not use in-house and captive services. Yes they do.

Why is it strange that a builder would want to re-coup lost costs? Why would a builder not use financial incentives to achieve a particular business result?

Think about the way cars are sold. Without the profits from auto financing a lot of car manufacturers would be out-of-business. Alternatively, you can get your own financing and still buy the car you want.

The new home buyer in each and every case has a ready solution to the problem you see: Either negotiate better or go elsewhere. Builders react to supply and demand -- in my area builders have been offering discounts of $70,000 to $100,000 for much of the past year regardless of how homes are financed. No doubt a savvy buyer can do better.

Question: We're a family of six and recently bought a larger home to accommodate our family. But, currently, we still own our previous townhouse because it has not sold.

The townhouse has been on the market for five months with the same broker. I was told by our mortgage company that in order to keep the property as an investment and rent it out, it had to be off the market for six months. We currently are paying two mortgages (which is stressful on our budget.)

My question is, during these six months that our home is off the market, can we rent it out to cover the mortgage and HOA dues with a six month's lease agreement and then begin renting at the market value as an investment following the six months?

Answer: Huh? Please speak with a local broker or attorney. Demand to know where, exactly, it is written that the property must be vacant for six months. Unless there's a clause to the contrary there's no reason why your first home must be vacant for six months before being offered for rent.

As to the permissibility a six-month lease, check with your HOA. Many HOAs have rules which prohibit "short-term" rentals, an expression which sometimes means leases of less than a year.

Question: I am not happy with the broker I selected to sell my home for several reasons. For the most part they lost three sales because of lack of time to provide me with the offer. Because I'm unhappy with their service, I started complaining to a friend who had a friend, who looked over my contact and said I may have some room to get out because the agent -- whom is no longer with the company -- did not sign off on a line he crossed off on the contract. Also it says they will list my home on the MLS within 48 hours and that did not happen until over a week later. Can I get out of my agreement with the broker?

Answer: Brokers have an obligation to quickly deliver written offers. That said, it seems remarkable that three offers were "lost" because of delayed delivery. Can you document these delays? Why would a broker have any interest in not closing a sale? Why would ready, willing and able buyers with a sincere interest in the property turn away because of a paperwork delay?

What's your goal? If your goal is to sell the house and you have already gotten three offers -- a very good result in most markets today -- then tell the broker to keep doing what he's doing and finalize the sale.

The office manager or broker will want to hear about any paperwork delivery delays and you should be clear that this is a matter of concern. As to the MLS placement, the MLS may have rules regarding a timeframe within which a listing must be postponed. If the broker violated MLS rules, he may be subject to a complaint by other member brokers as well as the MLS system to which he belongs.

Question: I'm wondering if a mortgage loan officer or a broker can pay a real estate broker or referral source a percentage of the origination for a referred customer? If so, are there particular things that the referring person must do to earn that percentage or can they be paid just for the referral?

I have a couple of people that would like to refer business to me, they really do not want to deal with the hassle (as I am told) of doing the loan application and processing, so they would rather refer the business and just be compensated for it. Can this be done and if so, what are the limitations?

Answer: A real estate broker or other party cannot simply refer business to a lender in exchange for money or other consideration. This would be a "naked referral" under RESPA and thus a huge no no.

Once upon a time HUD outlined a series of standards which would allow a real estate broker to collect a referral for mortgage origination work. Those standards were previously published on the HUD site and said as follows:

In the determination of whether payments from lenders to mortgage brokers are permissible under Section 8 of RESPA, the threshold question is whether there were goods or facilities actually furnished or services actually performed for the total compensation paid to the mortgage broker. In making the determination of whether compensable services are performed, HUD's letter to the Independent Bankers Association of America, dated February 14, 1995 (IBAA letter) may be useful. In that letter, HUD identified the following services normally performed in the origination of a loan:

• Taking information from the borrower and filling out the application;

• Analyzing the prospective borrower's income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford;

• Educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product;

• Collecting financial information (tax returns, bank statements) and other related documents that are part of the application process;

• Initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit);

• Initiating/ordering requests for mortgage and other loan verifications;

• Initiating/ordering appraisals;

• Initiating/ordering inspections or engineering reports;

• Providing disclosures (truth in lending, good faith estimate, others) to the borrower;

• Assisting the borrower in understanding and clearing credit problems;

• Maintaining regular contact with the borrower, Realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed;

• Ordering legal documents;

• Determining whether the property was located in a flood zone or ordering such service; and

• Participating in the loan closing.

Given the penalties involved for violating RESPA, and given the potential for conflict with clients, a real estate broker should never seek a fee for mortgage work without first speaking with a knowledgeable attorney.

Even if okay from a RESPA standpoint, for what it's worth I'd tell you to stay away. Why?

If you represent the seller you will be in the position of getting a fee from the placement of the buyer's loan. If something goes wrong with the financing and the sale does not go to closing, guess who'll be blamed by both buyer and seller?

If you represent the buyer and seek a fee for a mortgage placement, the purchaser may feel there's been a conflict-of-interest if you do not get the best possible loan for your real estate client. It will inevitably happen that someone else will offer a loan at a rate that's .25 percent lower. The purchaser -- filled with buyer's remorse -- may wonder why he was unable to get that great rate which was available from other lenders.

In either case a real estate broker has problems no one needs. Brokers should stick to brokerage -- and lenders should stick to lending.

Question: Are there real estate brokers who currently use an the hourly fee instead of percentage-based commissions?

Answer: I have no doubt the general answer is yes, however contact the real estate regulators in your jurisdiction for specifics. It seems to me that hourly fees were not permitted in all jurisdictions at one time, but I do not know if that's currently the situation. A list of regulators can be found at ARELLO.com.

Question: My father has been a contractor for more than over 35 years. He has a lot of contacts and when my older sister lived here she used to broker real estate transactions.

I've been considering getting my license and working in the real estate market as a way to supplement (not replace) my income from working as an assistant to my dad. I have experience in radio and television marketing as well as public relations. Have you ever heard of someone working as an agent part-time?

Answer: Yes, absolutely.

Everyone has to start someplace and it follows that many people now in real estate began on a part-time basis for precisely the reason you cite: They had income from another field and did not want to instantly lop it off.

However, I think you will be best served by taking a somewhat different route: Starting part-time is fine, but get work as an assistant to a successful professional. You'll get a practical education, earn some money and have real-world experience to offer clients when you're ready to go it alone.

Have a real estate question? Send your inquiry to Ask Realty Times. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here. For past columns, please press Ask Realty Times. This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: November 10, 2006

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Have a real estate question for Realty Times? Wondering about buying, selling, financing, refinancing or renting? Here's where you can send your question to Peter G. Miller, OurBroker®, a nationally-known columnist, author and reporter. Peter G. Miller has written six books -- including The Common-Sense Mortgage -- a guide with hundreds of thousands of copies in print. Miller was the original creator and host of America Online's Real Estate Center and joined Realty Times in 1998. Send your questions to . Because of the volume of mail received, individual questions cannot be answered privately and not all questions can be used. Published letters may be edited for space and style and all letters become the property of Realty Times upon receipt.