NEWS - ALERT!!
Its a changing market - and coming out are creative ways that scrupulous people will attempt to "profit" from unfortunate homeowners losing their homes.
One current tactic that we have recently seen on the radar is the "Sales Option Contract". This is a "Sales Option Contract" ....meaning the contract may be "optioned" to another buyer, NOT TO BE CONFUSED with a "Lease Option" contract... A lease with the tenant being given the "option" to purchase during the lease period is fine... This is a whole new contract called "Sales Option Contract" or may be identified by the investor as something else. Just remember we use the FAR and/or the FAR/BAR contracts and anything else will require the client/customer to be encouraged to hire legal counsel.
This contract has been circulating in the Tampa Bay area (and now here) and has raised alot of red flags. As a property is nearing foreclosure, a "Sales Option Contract" is offered by an investor. The investor is Buyer # 1. He negotiates a price with the hardship seller using the "Sales Option Contract" which he then turns around and records at the courthouse. After it is recorded, he then begins to negotiate a short sale price with the lender, directly. In the process Buyer # 1 looks for Buyer # 2 to contract and purchase the property, at a higher price. Upon finding a buyer willing to pay a higher price, they then enter into a contract. The investor settles with the lender for the low original short sale price negotiated then turns around and sells it, the same day, to Buyer #2 for the higher price, collecting the difference. One of the sharper criticisms of this is whether the lender knows about the flip. Lenders who agree to allow short sales are trying to get back some of the money owed to them AND its being supported by taxpayer bailout money, therefore this activity is being closely looked at by many...
I read several articles regarding this type of transaction and heard from several agents that are now being presented with "Sales Option Contracts". I took a proactive approach on this and called Carol McKee at the Florida Association of Realtors Legal Hotline to get her opinion on this practice.
She stated that she has never seen "Sales Option Contracts" and can only interpret the FAR or the FAR/BAR contract. Her advice was that she would not recommend any members to get involved with the Sales Option Contracts. She stated that she recommends "any members currently involved with this to withdrawl due to any potential of fraud" AND that there are "a lot of red flags on this type of transaction". To avoid future litigation and fraudulent activity, its best to stay away from them altogether.
If you have a buyer that is presenting you with an Sales Option Contact ( by FREC law you must present all offers) advise the seller to hire legal counsel and/or withdraw from the transaction. The same goes if you are called to "list" a property for sale and the person wanting you to list it is "Buyer #1". They want you to prospect, advertise and market to secure "Buyer #2". Please advise "Buyer #1" that we do not get involved in this type of transaction.
In closing, I would like to disclose that we have not been told that this is "illegal activity"....as of yet. It has alot of red flags and its currently being looked at. Therefore, with the advice of the FAR attorney, its best to stay away from these transactions until there is a clear ruling.
Actually contact from such "investor" and the way they explain it sounds good...But beware!
Here are the reasons why Agents would want to work with us:
A. We will put an immediate Cash Offer in on there deals, getting the package to the Lenders moving!
If there Short Sales have been sitting on the Market with no activity, the package to the Lenders has NOT been sent. The potential Buyers will have to wait months to close, and in today's Market we know that is not likely. If the package is not sent in the Sellers go to the Auction block!!
B. We will handle all the negotiations. This allows the Agent to take on many more listings, and saves them all the Hassles and Time spent on the phone with the Lenders. This time can now be spent doing what they do best, SELLING!
We can handle hundreds of Short Sales.. The average Agent can handle maybe 10 deals max. We free Agents up to handle 20-30 deals at a time, and all they have to do is find buyers, and re-list the property. Imagine how many more people we can help.
C. We have Full Disclosure Docs. The Sellers know what's happening, as do the Agents, and most importantly the Lenders. All docs have been gone over by multiple Lawyers, and most have been written by Lawyers. We are constantly updating paperwork to comply with any State or Federal Laws.
D.. Because we are in the middle of the Short Sale, this will allow Agents to be able to Market the properties much more Aggressively with a Today Selling Price.
E. We will get out of the way, if there is an end buyer with no spread in the middle for us. We will continue the Short Sale using our resources, to complete the deal no matter if we make money or not.
F. We help market the property. Using websites, we will send Agents any leads we get on the properties from our on-line work.
G. Last but not least, Agents are making TWO commissions.
Comments(0)