So I was doing renewal hours so that I can renew my license at the end of the month and I was sitting in a Short Sale class. In the class we discussed the basics around short sales and had an open discussion regarding how the banks operate or don't operate. But I heard something that made my SKIN CRAWL!
First let me make a disclaimer, I can only speak in regards of transactions that occur in Arizona, and you should always have your clients speak with a Real Estate Attorney and/or Tax Attorney to see how a short sale will effect them long term.
As I was sitting in my class, another Realtor spoke up regarding her recommendation to her client during the transaction. She had advised her client to take a $50K promissory note...that's right $50K. The loan was not a Home Equity Line of Credit (which is not covered under the Arizona Anti-Deficiencies Statutes, but can be negotiated and removed during the negotiations with the banks), but rather a second mortgage. So by advising her client to do this, she has allowed him to waive his rights' under the Arizona Anti-Deficiencies Statutes and he has now taken on a $50K credit card bill where he is probably paying around $800-$1000 a month.
So here is the solution, when the agreement letter is sent to the listing agent, there is going to be verbiage in the letter that creates a loop hole for the bank to pursue your client at a later date. This verbiage is almost always in the agreement letter and the agreement letter is usually a form letter. What you need to do as the listing broker, is call your contacts at the respected bank/s and let them know that under AZ Statutes they need to REMOVE THE VERBIAGE. By doing this step, you are protecting the interest of your client. A little negotiation goes along ways. If you are having problems with the bank not wanting to remove the verbiage, move of the chain of command at the bank (this can be fun sometimes, play a game to see how far you can go, I have made it to the Regional President of one bank and I know people who have made it to CEO's of some of the largest banks in America). If you are not making head way at the $10 and hour employee and they won't transfer you, hang up and dial the same number, you will get someone new.
It is scarey to see what some Realtors are advising clients to do. My wife and I only take clients who have talked with a Real Estate Attorney. It usually cost the clients $250-$500 for a consultation, but everyone of our clients come back with a detailed picture of what they getting into. Plus, we now have released a good portion of liability. Lastly, read the bank documents before having clients sign them, and don't let your clients sign a promissory note, but rather work harder and threaten the bank that the deal will fall apart if the verbiage isn't removed from the letter. The bank will remove it, you just need to tell them that this is Arizona and your client is protected under the Arizona Anti-Deficiencies Statutes.
Please protect your clients, if you are not comfortable with short sales, we can help and we do pay referrals on short sales (we have a referral scale that we use do to the extensive work required, please call for details). Our goal is to help over 100 famlies avoid foreclosure this year. Best of luck to you all..
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