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Realtor Lawsuits?

I had someone yesterday tell me that supposedly homeowners who have lost their homes to foreclosure are coming after agents and suing because their home didn't sell and ended up being foreclosed on. Supposedly the lawyers are going after the E&O Insurance in these cases. Anyone out there hear about this? Anyone have it happen to them? Give the rest of us some details if its happened to you or you know about this happening to someone else.

Thanks!

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Posted by Walter Hayes, GRI, ABR, e-PRO on 04/10/2010 06:19 AM

Comments (138)

eo insurance, realtor lawsuits, foreclosure

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138 Comments on Realtor Lawsuits?

APR

2010

Deep pockets are an attorney's "--- dream"....homeowner's argument is that their agent was not aggressive enough in marketing OR gave them bad advice on pricing, etc. No personal responsibility on the homeowners' part though!!

This is crazy. The real estate agent does not control every aspect of the transacion. Sounds like someone found a sleazy lawyer which is not a challenge thee days!

I am not surprised as we live in a highly litigious society! Very sad indeed. I will let you know if I hear of this in my area.

If this is true, I hope the REALTOR and Broker has a lot of documentation, including the pre-listing appointment and projections, comps, -including- showings, any advice the homeowner neglected to follow up with. It could have been pre-planned entrapment on the homeowners part. Can you find out where the person with the news, got the news?

Document, document, document.

This was bound to happen. Easier to file a complaint against an agent/broker than a mortgage company.

Not surprising. There have been a couple of lawsuits down this way against the Realtors who helped them buy their houses back when prices were so high and skyrocketing further. The premise being that Realtors colluded in getting people to buy homes that were overpriced and that they couldn't afford. Fortunately, none of the lawsuits have been successful, and that's good!

Oh please tell me you're kidding!

If it's going to be a short sale situation, I always get the seller to sign a "hold harmless" agreement as part of the short sale listing process.

This is rediculous!!! The same thing happends to stock brokers when the market drops. People need to be accountable for their own actions!!

If true I believe many Realtors will opt for a new profession!

Walter I have not heard of this, but I guess it is bound to happen. Richard has the right idea to have a "Hold Harmless" agreement signed by the sellers.

I'm with Lenn ! Based upon this we better have a paper trail !!!!! and WRITTEN proof of a CMA !

Walter, I an not aware of any cases myself but feel there will be a lot of this going on over the next few years. Agents that do not have experience with short sales need to stay away from them. These are not the types of transaction where "fake it to you make it" works, People's futures are in our hands and this is seriio0us business.

And as Lenn pointed out document, document, document. My short sale disclosure is about 5 pages long. My sellers have to sign it. My transactions are handled via email. I don't do phone calls on short sales. I want a paper trail of everything we do.

Walter,

I haven't heard of anything yet, but it certainly wouldn't surprise me if it did.

Rich

Not surprising, lawyers are running commercials here in New York ad nauseum for people to sue their stock brokers if they lost money.

That is sad. I haven't heard about this in my area yet. Anyone can sue anyone for anything these days. Doesn't surprise me.

Several months ago my broker had advised our agetns that he had heard of attorneys starting to look at how they could go after real estate agents doing short sales.

I haven't heard of this in my area yet but nothing surprises me!

The case you brought up is the only one I have heard of. You are hearing it from a third party, so I would take it with a grain of salt unless you have proven facts. As the majority say, document everything, but aren't we doing that anyway?

You will have people out there that are always suit happy and threaten, but mostly don't follow through. As they say, they want to sue all the bastards. They are always trying to intimidate by their threats on getting with an attorney.

I think this may happen in extremely abused cases. Just another reason we all need to walk on glass to protect our assets.

I have a large pool of attorney contacts that I see weekly and I have not heard that (yet) if it gives you all some comfort. Perhaps another regional thing (for now). Rest assured, when you do your job thoroughly and document document document, your odds are far better in the courtroom. I would also ask your e&o rep if they are hearing of this come Monday. I will be calling about it...

I personally believe short sales and REO are going to be extreme areas of litigation in the coming years. IMO, as we all know of many horror stories many can tell because there aren't any set standards and procedures in this segment of the business.

I have not heard of this either. Anyone encountering this needs to contact their association on the local and the State levels. This is something that Our legal hotlines should be aware of. That is part of what our dues pay for. As individual companies and agents, we cant' fight this alone if it comes to being...WE need to band together to help one another.

Walter, the above post #22 is mine. I was not logged in yet.

Thanks for the heads up.

Bill

Walter, though I have not heard of it yet, that doesn't mean it won't happen. How terrible. Especially when agents are trying to HELP those who people who are/were in distress.

How thick is your Short Sale file? Ridiculous!

GOOD! I'm going to go on the other side of the coin of opinions here. Too many agents are practicing outside of their area of expertise! Agents who have never been trained, and have no experience in what it takes to get a short sale to the table are taking these listings (because they need the commission) instead of referring them to agents who know what they are doing. They list the property like any other and hope for the best (instead of contacting the bank on a daily basis working through the issues.)

Short sales are a VERY labor intensive listing that require a VERY experienced agent. While I'm an SFR (BFD, I took a class), I still bring in an agent who has A LOT more experience in short sales (from a different company, no less) because that's what my clients NEED!

The code of ethics is VERY specific here!

Article 11
...
REALTORS^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service...

Walter, interesting although I'm not shocked. I've seen some listing agents of short sales simply do nothing to try to get the home sold. Not answer their phones, not get back to you to schedule a showing, etc. and I feel bad for these sellers that are in the hands of agents who are NOT doing their job. By their job, I don't necessarily mean getting the home sold. We all know that it takes a buyer to get a home sold. I just mean they are doing nothing for the seller. They hang their sign and void the phone calls. Whether it be from lack of experience, too busy or whatever, these sellers are entrusting you to help them avoid foreclosure and sometimes foreclosure is inevitable but I don't think all real estae agents are at fault. Paper trail is the best way to CYA!!!

Walter,....

I have no personal knowlege of this happening, but I expected it and it is just getting started. Attorneys have been feeding off of insurance companies since Wyatt Earp retired. Good post and subject matter. Thank you

As I understand that you've heard this from someone else, I would have to call it hearsay. I have not heard of anything like this. Anyone can sue anyone. The point would be the merit of the case. Perhaps detailing this case would better serve the AR community.

Hi Walter. I haven't noticed or read about pending lawsuits yet. In Florida we are transaction brokers unless an agreement has been made between agent and customer then the agent would be a fiduciary. That and keeping a paper trail has helped as Tampa Bay has many short sales and foreclosures. All of the paperwork presented to clients explicitly state what our responsibilities are. I am fortunate that I have experience in short sales. Experience helps too. ~ Lana

I agree with all that say don't do it without training! People are already feeling scorned by their mortgage company and situation so I believe each listing is a lawsuit WAITING to happen! I could have a ton of listings but I don't because I am really choosy and use a lawyer for the process so they are aware of the possibilities or consequences that may impact their future.

Walter, I haven't heard of any lawsuits in my area for this situation but nothing surprises me!

Walter,

To suit a REALTOR® for a transaction gone bad is like suiting the minister for a marriage gone wrong: You get the blame just for being there! Seriously, no matter what you do or don't do, when the deal goes bad--your name is bound to come up. Suzi and Lenn came out of the gate early with the only advice to give: DOCUMENT YOUR EVERY ACTION. To that I can only add, Watch what you say, what you do, and what you don't...

Whether a suit has been filed or not is not really the question--it is "When will I be...? In our society, lawsuits are as common as the cold, and you're going to catch one. When you get seud and you've got money, get a lawyer--if not, get a lawyer. As for me, I'm clinging to the scriptures, "All things work together for good for those who love the LORD." and "The effectual, fervent prayer of a righteous man avails much." I'm not being flippant--I believe the Bible has better uses than just a book on which to place the left hand while raising the right hand in a courtroom. I know I can't stand against this onslaught alone; but I love what I'm doing, and trust most people just want a home.

Be sure that I do know some good lawyers [honorable, hardworking and wiley]: I keep their numbers handy, and I keep them in my prayers (even smart lawyers need guidance & wisdom).

Walter, keep us posted...

E&O is not exactly like the new hurt in a car accident money machine. However, I could see where at least there would be ethics complaints against realtors who try to do short sales and have zero experience or expertise. There are certain activities that new or inexperienced agents can do, this is not one of them.

Would not surprise me at all. However, the listing agreement is a marketing agreement, not a guarantee of sale. Also, pretty sure E&O will be off NO HELP here.

We will definitely see more of this to come in the case of short sales. If you are doing short sales, you better get your mortgage loan originators license. Otherwise, you are in violation.

Cover your assets, people. It's going to be a BUMPY RIDE!

I have sellers sign a Hold Harmless Agreement and an Agreement to Seek Legal and Tax Advice on every Short Sale listing. It may not stop the suit, but I suspect it will allow it to be dismissed early on in the process.

Tom

I haven't heard of any specific case like this, but it wouldn't surprise me. The two comments here that stand out to me are Lenn...docment, document, document. Couldn't agree more with Lenn. We should always keep full documentation on our transactions. Short sales even more so. The other is Tori...be careful, she is correct. The Code of Ethics is clear as she quoted. If cases like this happen, this is where the Realtor will be most vunerable. The topic did come up in a recent Ethics CE Class and this is the specific article dicussed. When I do short sales, I hire a professional negotiator. I learn more with every one I do, but at the same time, every bank is different and I don't claim to be an expert with them all.

Maybe I should sue the makers of Crest toothpaste because I still got a cavity

I'm not suprised and, in some cases, the lawsuit is probably deserved. I actually had a short-sale listing agent tell me that he takes the listing and puts his sign in the yard for "free advertising" until the home goes to foreclosure because "We all know that short-sales don't close." I doubt that was part of his listing presentation. As a realtor who works my tail off on short-sales to get them closed, can you imagine how horrified I was?

Walter, I have not heard anything about the lawsuit. This is another stupid lawsuit trying to make someone lawyer rich. How can a realtor/broker, mortgage company, title company or anyone predict a client may lose thier job, health problems occur and they can't work...... Just like Fred said, sue a pastor because he married a couple and now they are not together.... Crazy, Crazy....

Walter: Anyone has the right to sue for anything. On a side note, if we leave all the business to people with exprience in that area, how will new agents ever get started? Before "short sale experts" became so, there was a time they had never done one.

Walter - That's a very interesting topic! I haven't heard about it in my area from any realtor partners; but, I have, of course, heard about all the mortgage company lawsuits with borrower's claiming they didn't know something, even though they signed a paper 3 times that said they did. So, thankfully, competent mortgage people who have done their jobs have been protected, to a degree.

I thought two interesting points were brought up by Lenn (#5) with "Document, Document, Document" and Tori (#27), with the citation from Article 11. Very interesting stuff!

So I guess that means we just need to learn our jobs better and then document we did them.

Walter - I agree 110% with Tori, agents who are taking on Short Sales and have no clue what they are doing should be held accountable. I've always referred my short sale listings to an expert because I don't feel I know ALL the in's and out's. I've witnessed one to many short sales headed for foreclosure because the listing agent is clueless and it could be a different story if the seller hired another agent who knows how to get a short sale closed.

Many of those homes could've been sold with the help of an investor. Before people start throwing stones please realize that I as an investor do understand that there are some shady characters and dealing going on. I would recommend avoiding these folks as well.

However, there are many legitimate investors out there that provide real solutions for the sellers, lenders, and realtors. Do the investors look to make money by reselling the property? Absolutely! Will most of them forgo a profit if it is the only way to keep the homeowner from going into foreclosure? Yes, most will, atleast any that I'm associated with. Does the realtor collect full comission on both the buying and reselling of the property? You bet! Does the bank recieve more favorable monies than if the property went into foreclosure? Yes.

The negotiating team that I work with has successfully negotiated over 1900 short sales as of the end of February, 2010. The team has a 95% success rate in closing short sales. We push for a waiver on deficiency on 100% of the files, with an 80% success rate. On the other 20%, we are able to negotiate the total way down with very favorable terms for the seller.

The last figure that I heard, the banks on average lose $58,000 by taking a property into foreclosure. So they can and will take big discounts on short sales and will agree to favorable terms to avoid this. One exception might be B of A, they just have a very sloppy process.

So the next time you have a short sale property that you can't move, please consider looking for a good investor. Ask for references and to have a 3 way call with their negotiating team so that you can get answers to any questions that you might have. It is true that most will want to handle the negotiations directly with the bank, but who wouldn't with that kind of money at rish? But remember, you won't have to do the dirty work and you'll still get paid, usually twice.

There really are some good ones out there, myself included, that will do all they can to help the homeowner avoid foreclosure, to make sure you get paid, and yes......hopefully make a decent profit.

I guess the question I have is did the agent receive any offers that the bank refused? If so, how would it be the agent's fault the house didn't sell. No surprise as we are subject to being sued by anyone at anytime. Crazy!!

Walter, I have not heard of any but does not surprise me with people looking for a way out.

I'm not sure what the damage is? The sellers did not lose anything, they were not going to make any money to begin with. Is it just the difference in short sale vs foreclosure on a credit report? How can you determine what that is in terms of cost? I don't see their damages in monetary terms....come and get me. (of course I've only lost one home to foreclosure, a land lease and it was documented and the sellers fault).

I haven't heard of this locally. I think that if the agent has done the job they were hired to do and was not able to sell the home, then they have nothing to worry about.

This comes as no suprise at all and for those Realtors who continue to take short sale listings when they don't have a clue at what they are doing this should be a real shot across the bow!

I agree with Karen that there aren't any damages with the exception that I have heard some agents tell their clients to stop making mortgage payments because they had to be behind in order to qualify for the short sale. I can see in situations like that, lawsuits flying.

With our mls it is easy to defend the price at which they bought the property... We can pull by dates and validate the offer price... that is on the ,buying end...

On my short sale listings, I write in that the home owner allows me to make changes as demmed necessary to sell the house...

We have heard from attorneys in classes and conferences that this is coming down the pike-- not a happy thought for any agents.

I haven't seen a lot of that happening just yet- however, a good friend (real estate attorney) has told me HOA's are going after buyers, and buyer may start going after their Realtor if a thorough search has not been performed on delinquent HOA fees. Even in cases where a lien was not placed onthe house. Be careful out there folks.

Thanks to everyone for all the comments. I wrote this early this morning then got in my first round of golf for the year (don't ask). The way this came about is on a property that I have listed with a 1st and a 2nd. The 2nd is held by a local bank who have refused to do anything with the loan or even talk short sale unless there is a contract in hand. The 1st is held by Wells Fargo, who I've worked with in the past, and they were given everything they wanted to start the short sale process 5 or 6 weeks ago. They haven't responded to us yet but in the mean time they are also pursuing the foreclosure on the property.

Yesterday I got a call from someone I know that does a fair amount of short sale investing. As we were talking about perhaps trying to do something with this house to get the foreclosure stopped he told me that lawyers were supposedly going after agents on properties that end up in foreclosure and in particular he said they were going after the E&O. I'm not at all sure how E&O would even enter the picture but I thought the best way to get the real scoop on anything that might be happening to ask all of you. Thanks again for the feedback. It appears that if there is some of this going on it is on a small scale. However, as has been pointed out by many it's good to make sure we're covering ourselves out there.

Walter I guess they figure what do they have to loose. May as well blame everyone else also.

I have heard several cases where agents have stated that they were "short sale experts" or words similar. When things didn't pan out the way they should have, they were sued, because of the verbage they were sued. I have not heard of any being sued for not selling a home due to it just not selling. I'm not surprised, sadly.

These are the same home owners that let thier home get foreclosed on in most cases. Probably not the ones that honestly have hard ships!

Selling short sales is not for the faint of heart and if a Realtor does successfully complete a transaction it's usually out of sheer determination and hard work. To then turn around and be faced with a possible lawsuit is ridiculous.

This is really bad and you will get sue. .

Don't do short sales . .

REFER THEM TO ME . .for MD, DC and VA

Thanks,

Like Broker Bryant - I try to stay off the phone and use emails back and forth between all parties - paper trail!

Negligence is always a risk, so you had better be preaperd for it. When people lose money they often want to blame somebody else.

this was forecasted a while ago...know what you don't know...and don't do it....lots of realtors should not be doing short sales....and this time, i side with the lawyers....

I have not seen it here yet, but I frequently run into agents who list short sales WITH NO EXPERIENCE. They are shooting in the dark. Same thing with any agent stepping out of their realm of experience. Do not do it, people.

Doesn't surprise me. Lawyers will take these cases on, because they can get paid by their client, whether they win or not. They are always looking for deep pockets and someone else to blame.

Great topic to get our attention but it would seem a tough battle to win on the homeowners part. In order for them to suffer damages at the hands of their agent the agent would have had to have caused accidential or intentional harm and damaged their ability to sell their home.

People find it much easier to blame others than to accept the fact that "life happens".

Hope you have some follow up cases because I would love to read the court rulings on this.

Hello:

If this kind of lawsuit actually ever happens in the real world, I hope those attorneys burn in hell. Slowly.

I haven't heard of it locally but nothing would surprise me. It seems a large part of our society just don't feel they are responsible for anything "bad" that happens -- it's always someone else's fault. If something "good" happens than you hear how smart they are!

I agree if you aren't trained in how to do short sales refer to a sales associate who is and follow along to learn something (if you don't care to take that approach than you need to be prepared for what the end results might be). We can't all know everything and be experts in everything.

Great advise which we should all be practicing is "document, document, document". When I have a phone conversation I will follow up with an email restating what "I understood" I heard and they wanted. Of course for the folks who still don't have email that's a little troublesome but if and when we meet the paper trail starts. The "Hold Harmless" in Contracts does offer some measure of protection and I'm glad it exists in the NC Contracts.

Take care, be safe and have a great weekend.

Sue of Robin and Sue

I can see some getting sued for claiming they are short sale and foreclosure specialists.

I suppose you can sue for anything. But in California, we have a Short Sale Listing Addendume that clarifies that the agent cannot be held responsible.

You can sue for anything. Nothing surprises me anymore.

We are breeding society to think anything bad is someone else's fault. The higher the pain level, the harder they will look for a target.

I wrote about this nearly 2 years ago and have been quoted in USA Today and other publications regarding this issue. I knew it wa scoming and in many instances deservedly so.

We all know that most agents have no reason for even being involved in the liquidation business. I have seen countless so called experts list a house and turn down offer after offer with their shenanigans until the home is lost at auction. I hope this causes the herd to thin further.

Don't think this is a small problem or some sleazy lawyer as some of you have said..it's a HUGE problem and it's going to be a feast out there for lawyers.

I have even read here about people turning down so-called low ball offers...it's simply amazing.

If only 20% or so of short sales closed when listed with agents that means there is a ton of potential lawsuits out there and it's going to be easy to prove. I know I have personally made 50 offers on homes wherein the agent thought the offer was "ridiculous" and many of the homes ended up being lost at auction.

Whose fault is that? I have also had many homeowners fire their agents so that they could deal directly with me and actually get the deal done...it's shameful what's going on out there and I think some of you might want to begin policing from within.

90% of the short sales listed in Broward county are listed by agents who have NEVER completed one. Short sale expert? Hardly..lawsuit fodder..most definitely!

If you are holding yourself out as a short sale expert and you have NEVER closed one you might find yourself on the receiving end of a subpoena or summons real soon and it might not be all that bad that some of you are.

Might be time to face the music for a lot of agents out there.

I have not heard of this happening in our market. And maybe we shouldn't discuss it lest we give some unscrupulous lawyer and idea. :-) Good post and best of luck to you Walter.

This is the first I have heard of this but it doesn't surprise me at all. This should be a heads up to the agents trying to do short sales without training or experience.

This is unbelievable! I would like to know more facts about this possible case. Hopefully, if this is true ... this is just one really bad realtor and is not the beginnning of attorneys making realtors a target to go after. Keep us posted, if you find out additional information.

I agree with Bryant, those who are advertising themselves as "short sale experts" or telling sellers that they are "foreclosure doctors" etc, had better be sure they are not promising more than they can deliver and by putting themselves out there as people with special talents, training or knowledge a court might just find some way to make you liable. Not anywhere I want to go, that is for sure.

Hi, Nothing in my area yet...

Lots of moving parts in a short, keep excellent records. Like Brett said "Document, document, document!"

Dear Real Estate "Investor" who hides without using his real name:

You sound like a bitter investor who is angry because agents will not be complicit in your attempts to low ball sellers and the bank.

People like this waste a lot of time for a lot of people.

This seems like a possibility...fairly remote, but it makes a very strong case for keeping a good paper or electronic trail, sticking to what you know rather than trying to learn on the run, and thinking through your actions. I'm not so sure we couldn't be sued by a successful short sale seller who wakes up next April to find that the IRS is taxing them for the shorted amount as income. That's why I recommend that the seller consult with their accountant or attorney regarding the tax consequences.

I'm with Broker Bryant. I don't do short sales because I am not an expert... and those people NEED an expert. There are too many agents out there that are willing to say they are an expert in anything that might have a paycheck attached to it...

I am sure there are some agents who have screwed up some short sales, but blaming them for a foreclosure is a stretch.

Walter:

Greetings to a fellow KW agent.

I am a Realtor & an Attorney (30 yrs), licensed only in OH.

I understand the concern about lawsuits. However, if a Realtor documents his/her transactions well, there should be no cause for concern. Yes, any client can sue, but an Attorney will not pursue a transaction long if it's an uphill battle.

Walter:

Greetings to a fellow KW agent.

I am a Realtor & an Attorney (30 yrs), licensed only in OH.

We have a society that allows anyone to file a lawsuit as they choose. I have not heard of this, but it is not a surprise.

Hey Aaron..I realize you must be an Internet newbie...because if you had a clue you could easily click the profile link and see that I do not hide...EVER... So speak that of which know..Puhleasee...

FYI, that gibberish about lowball offers underscores your inexperience. You may want to do your homework before casting off a comment that casts you in such an ignorant light. I'm sure if you check around and actually educate yourself before you speak, you will indeed understand that I am not now or have ever hid...many here know that.

You'll also find out that I speak from great experience and success.

Some of the comments here are interesting, in that they present as though lawsuits reflect a moral degredation of our society / economy. Rather, our legal and economic structures are framed in such a manner that a lot of dispute resolution is forced throught the legal / court system. We can thank our legislators, our attorneys, and our insurance underwriters for that. It isn't a conspiracy. It's just a hodge-podge of reactions, not always well considered, and certainly entwined with egos!

Hadn't ever heard of this...pretty scary.

Mellisa (#71) your signed disclaimer may mean nothing to a jury if your advertising, signature line and bio claim something else. Not that I'm a lawyer - but I stay in a Holiday Inn once.

This is the first I've heard of it but I am not surprised.

Insurance companies never go to court, they settle out of court because they don't want to set a legal president. Makes us great targets becaue we have insurance. They file, they get something.

Walter, this was bound to happen. I haven't heard of any in our area and I am sure our company would be on top of it and make us aware.

APR

2010

Walter:

Congratulations on the feature. You certainly stirred up a lot of interest. Be sure to keep us posted if you hear more. I know people will sue for anything and some lawyers will do anything for a buck. Really scary!!

This can happen when agents practise out of their area of competence. Especially in short sales.

Agents need to refer out if they are not competent in an area. I always refer my commercial inquiries out. I am not competent in that area.

Stay off the phone and use e-mail, especially with a co-broke transaction and you will most likely avoid lawsuits. This advice was given to me 20 years ago from a very successful litigator; I do not know why it is not taught in Real Estate school or continuing education. The advice was given to me before we used e-mail, I insisted that all detailed correspondence be faxed to me, it was not a popular request, but it was effective. I have seen many realtors ruined financially and emotionally being hauled into court over and over again. In 22 years I have never been sued. We Realtors are easy prey for litigators, just ask one.

What a crazy world we live in ...

Colorado has an excellent short sale addendum with many,many warnings about what may happen to a short sale including foreclosure. I disclose short sale status any time I'm doing one. Still, MOST of the time, agents submit offers without the short sale addendum. Kinda dumb - it's really a good form that covers the bases for everyone.

This sin't the first time I've heard this. Now that we have health care changes in the works, I guess the legal profession is looking for a new industry to take advantage of.

Harvey Collier - First Trust Mortgage - Fort Lauderdale, FL.

That is pretty interesting - and I suspect that if a lawyer can show the Realtor did nothing to get a buyer, there could be a case. Indeed, if you get hired to do something and you don't fulful your contract obligations, aren't you liable for the damage you cause to the other contracting party relying upon your performance?

Thus - I am going to say it is not the lawyers' fault that Realtors are getting sued and it is not because they lawyer is money hungry. Here's why:

A listing agreement is not a promise to sell, but it is a promise to use best efforts. What is best efforts is always a question - but we all see Realtors that take a listing and for all intents and purposes, do nothing. In the past it such conduct resulted in "no harm - no foul" mentality since the seller would just get another Realtor. Not in THIS market! Do nothing Realtors are the parties that need to be aware that conduct like that is always actionable for breach of contract - this market has just made it more acute.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

Great post Walter. Haven't heard of this in my area yet, not to say it isn't coming. Very interesting theory/premise. Hope you're doing well. Call me next week. Gotta a new service to tell you that I found. Pretty amazing results on Google.

I am not surprised. Document everything and let them know up front that there are no promises.

Wow! Deep pockets??? REALLY?? LOL

Most of this thread seems to be based on heresay. Unfortunately there are a LOT of realtors who hear things like this and swear off short sales, working with investors, and a number of other types of transactions. Or they'll take them on not really knowing how to get them done, because they need a pay check.

These sellers deserve to have someone look out for thier best intrest, NOT the banks. The banks wouldn't agree to a short sale if it didn't make financial sense to them, period. Our job is to help them liquidate houses and mitigate damages and liability to sellers (#1).

I applaude those that bring in specialists weather it be an investor or agent. Tori, great comment and reference to the realtors code of ethics. More should take that to heart and go actually READ HUD/FHA guidelines on flipping for example. FLIP may be a 4 letter word, but the action is totally legal and if you read beyond the first paragraph that most realtors hear about and assume any transaction with that word is illegal. You'll see that they explain HOW to flip properties.....ethically and legally.

Barry (RE RADIO), keep up the good work. I can't stand the smug attitude "branding" investors as scammers, etc. "you're one of those investors". There are bad ones, that doesn't mean there aren't those that do it legally and ethically based on REAL guidelines. You and I both know how many really really BAD agents there are out there. I'm sure you realtors have seen them too, how about we brand you ALL as bad or unethical? Not cool? I didn't think so, so be fair back.

Lane #82, Yes, they need specialists involved. Seek a local one, if you can't find one...there are those of us that can do it in any state. Your sellers DESERVE to be represented by a knowledgable specialist. You could probably at least get a referral fee or more if you allow them to teach you the process. And you'll be able to seek more that need help or buyers for those homes. After all, that's what realtors are supposed to be trained for. Working with buyers and sellers, NOT negotiating with mortgage companies who play with you like puppets only to REDUCE your commissions and not repay for expenses you've paid out of pocket.

Brett #44, spot on. Document, disclosures, and ethics (Tori). As a mortgage guy, I'm sure you know that they're coming around with financing on these properties for end buyers too. Wells recently put out guidelines for this....and they'll get a lot more business because of it.

We've been working with realtors in PA for years, handling short sales negotiations for them. They love that they don't have to do the tedious process of learning what each company wants and what they will allow. We step in as a buyer and start the long process immediately, thus helping YOUR client as quickly as possible. We fight for full releases and are usually successful.

Look us up if you would like to discuss how we can help you help your clients in these situations. They deserve it. Besides you signed a contract to look out for them, don't they deserve specialists in these situations? And NO, a 12 hr course does NOT qualify any agent as a specialist in this industry.

We have a strong network nationally, if we can't help...we know who can. shortsalespa.com

Listing agents who negotiate short sales for their seller could be sued for damages to the seller if the entire SS process isn't properly disclosed. Reference, Realtor magazine, March 2010 issue, page 39

Additionally, until a purchase agreement is under contract, the listing agent could be sued for damages to the seller if all offers aren't presented to the seller. I've had listing agents tell me not to send my SS offer to them unless it was for Xprice because the lender wouldn't accept any offer for less. The seller has to accept the offer first before it's submitted to the lender, so who is the agent representing, the seller or the lender?

State laws differ from state to state, so if you know your business, simply follow your state real estate laws to be fearless.

I will stay alert for the "Prius" effect. Too many people want easy money. Thanks for the heads up.

Yes Walter!! I have heard of this years ago and now!!! And good for that home owner!! Yes I am going to Play Devils Advocate now!! Or should I say former home owner? I am an investor that does Short sales and Have a Team that can handle all 50 states. This economy has exploded in Short sales for us. When my assitant saw this titile she could not wait to tell me about it. We are now Launching another website to come out this week called www.stallionincshortsales.com . Just to keep up!! Walter back to your answer!! All over this nation we are hearing about Realtors whom are negotiating short sales with no experience and outside of the normal practice. These stories are not new, to seasoned Investors. Case and Point!! This week I am in GA I am looking at a Luxury home case just this past week!! On the MLS it says Short Sale Pending Lender approval, Short Sale approved Price!! or simply Short Sale. When my team made contact with the Realtors whom had the listings for the The Luxury homes they came back and told me that it had been a netotiated price on the home and or homes already done by the Realtor. I went Huhhh? Not again!!! If you did not understand what I just said and how it has an impact on a Cash Buyer Investor or a home owner experiecing hardship and the local area contact me Now!!! Or go to www.stallionincshortsales.com Later this week it will be up. It will have all the information that is needed for Realtors, Buyers, sellers experiencing Hardship!! And it is Free!! When you sign up!! Ok your final answer!! Realtors are negotiating short sales without the proper knowledge and experience. We have seen this to many times. They make an agreement with the Lender at an over inflated price to cover there commsission closing cost etc. Giving the Homeowner a false sense of securtiy that their worries are over. When in fact they have just begun. A seasoned investor or negotiater will attempt in an agressive manner to get that property below fair retail by 50 or even 60 percent sometime even more!! This way the property can be put back on the market for a quick sale at whole sale price to a cash buyer or retail buyer. We work with our realtors all the time. In our group our realtors only re-list our properties unless the want to go through a negotiating course. We do alot of the work to free up our realtors time, so they can find us more shortsale deals. We all benefit this way!! I have read some of your responses.

Let me leave this with you!!

You can be held liable even with a (hold Harmless clause) in your paperwork for a short sale it does not matter how many pages it may be. If a lawyer representing a Pissed off former Home owner finds or can prove to a Judge or Jury that your were negligent in your negotiation process of a short sale and it did not have the proper ingredients due to lack of experiece even though you were acting in good faith. You can be held Liable!! I will tell you to be thorough be honest disclose everthing!!! Your way out!!! Contact me or my team I am always willing to educate. Remember if a short sale has be negotiated a lender is relcutant to come down off that price they have intialy agreed too!! At that point your in over your head!!

Feel free to contact I do not bite I am only an Investor!!

George

Stallioninc1@gmail.com

I feel it is the responsibilty of the Realtor to also inform the Homeowner of option while Foreclosure get closer, there is a Group of short Sale investors that pay cash for property in that exact situation. The Realtor should be resaponsible to know that 60% of the market is Short Sales and it is where all homes are headed if you can't sell your listing. The homeower is exspecting you to help them save their Credit, when you List their property you are playing with their future credit. The Lsiting is just a Paycheck to you, their future is on the line.

I am a short sale Investor with Cash to close each and every deal, a Short Sale is not a regular sale and needs to be handled as a Short Sale. I can buy and save every single property you have, but you as Realtors are not looking at the Market, which is "What can you sell the house in 15 days" This is the Real Value, by you holding out for top dollar people are having the Bank take the home, the owners credit is damaged and the Banks are Failing from the burden of your actions.

I think each Realtor should have at least one or two Short Sale Investors to help as a last minute Plan, when a homeowner lists their propety they exspect you to know everything and you should be responsible. So if you don't Short Sale Investor even after all this Media on the housing problem from the President snd all the Bills he is putting in place, I would find a Short Sale Invesot to work with.....www.we-pay.cash.net

Yikes,

No wonder we refer our short sale listings to someone else!

Lisa

Walter,

Surprise that it hasn't happened sooner. These types of real estate meltdowns spawn strange legal challenges, most of which don't usually go to far. If homeowners have money to throw away, why not try at least.

Since I am one of those much maligned attorneys, as well as a broker who knows short sales, I can tell you that far too many people in both professions are trying to do more than what they are qualified to do. It may or may not be the Realtor's fault if a short sale doesn't work and the home is foreclosed on. Most attorneys will not take a case unless there is a likelihood of prevailing.

Frivolous lawsuits are nearly always tossed out at the very beginning if the person being sued has a litigation attorney. This gives the attorney who filed it a bad reputation with the judge. And in many states, the person who sued and had the case tossed would have to pay the attorney fees of the agent.

When you hear about those attorneys getting huge judgments against people it's because those people were at least negligent, and probably did something bad enough to be charged with punitive damages, and the attorney fought to get their clients justice for what was done to them.

Remember, attorneys don't decide cases, judges and juries do after they have heard the evidence. Evidence laws require that the attorneys present provable facts - not conjecture or pleas for sympathy. The news doesn't always give the public the evidence - just the verdict and maybe some whining from the person who has to pay a judgment.

I haven't heard that yet but it wouldn't surprise me as so many people are looking for an easy dollar....it cost practically nothing to sue unless you win and then they take their many percent from your winnings/settlement.

I don't think it is the answer in every case but I am dealing with two now that the REALTOR, the Appraiser and the Loan Officer should be sued. The houses were NEVER worth what they sold for...not even close.

Howdy and evenen there Walter

I have heard of some of those kind of cases going on. Not sure as to what is going to end up happing.

Since when is their a guarentee a home will sell and most of the ones that went into foreclousure would of sold at a reasonable market value price..problem is they owe to much....The homeowner sets the price or the bank not the sales agent. Now if you promised them something you couldn't supple then shame on you. Now this happens. I have lost several listing to other agents at appointments because the sellers have told me that an agent told them if they priced it here they promised it wouldnt take long to move the home. Have to watch how you get the listings !!!!!

APR

2010

Another symptom of a society filled with people in search of someone to blame.

Just sounds like BS to me....I would bet the judge tosses the case unless the agent was truly useless. We have helped more than 400 homeowners across the country with short sales and I know the NAR teaches tons of stuff to help you avoid lawsuits.

My best 2 cents on short sales, hire a third party "professional" or "expert" to handle the non-sense with the lenders (and it is a HUGE deal of non-sense), and, make certain your short sale case is well documented to cover your backside (we of course do this with 24/7 web based tracking and update the Seller and listing agent anytime an action is taken on their behalf). I would not even suggest taking a short sale listing without someway to track your short sale.

Investors -- I would also STRONGLY suggest taking any short sale offer in order to get things moving at the bank. Most of the short sales that are lost are b/c the lender did not get what was needed to cancel or delay the auction (including of course an offer). This is also why agents typically only close 20% of their short sales and our cloisng ratio for 2009 was close to 80%.

I would go on for pages, but, end of the day, be smart and cover your butt. I have a short sale course coming out on negotiting with the lenders in the next 4 weeks that also goes over PRE-SCREENING YOUR CLIENT PRIOR TO EVEN TAKING A SHORT SALE!!!

Number one reason short sales take so long -- The Servicer, who the Seller writes his/her check to, gets paid more cashola by dragging out the process!!!!

Quick free negotiating tip you can use TODAY -- after you leave a voice mail for your negotiator, hit the "#" sign to send with urgency (for some Servicers it sends an e-mail and/or instant message)

Unfortunately, your statement is true. Many lawsuits were filed in orange County and L.A. County California when short sales, DILs etc were not consummated and the home went into foreclosure. It got so bad that there is pending federal legislation that would prohibit anyone with a financial interest in a home to negotiate the short sale. this includes the real estate agents and HOMEOWNER! I believe that there will soon be infomercials and late night ads on TV by spokespersons for attorneys advertising for owners who lost their homes. I am an attorney and a real estate investor....my advice is to leave short sale negotiations to third parties- for a number of valid reasons.

Susan in #112 above commented:

"Remember, attorneys don't decide cases, judges and juries do after they have heard the evidence. Evidence laws require that the attorneys present provable facts - not conjecture or pleas for sympathy. The news doesn't always give the public the evidence - just the verdict and maybe some whining from the person who has to pay a judgment."

As I see it, the danger isn't that the Realtor will lose the case if it goes to court. The problem is that the cost to defend in many states can be prohibitive, and the E&O insurance carrier will usually want to settle before it actually goes to court because of the expense of winning.

In Ohio it is very hard to get attorney fees awarded to a successful defendant.

As long as there is a possibility of extracting a settlement without much danger of having to prove a case in court, there are some hungry lawyers who will be eager to take such cases.

Did someone say "document, document ... " somewhere here?

In my blog Aren't Realtors Also to Blame for the Housing Crisis? I point out that many Realtors, knowingly or unknowingly helped put their clients into the situation of buying more home than they could afford. Whether that was advise that was relied upon is a matter for the courts to decide, but in today's litigious society, everything you say can and will be held against you. We should all look at our E&O policies and think about isolating our business assets from our personal assets, should this continue.

Wow. This business just keeps getting scarier. I hadn't heard of this yet in our area and hope I never do. Unbelievable!

Walter, good post. Lots of great comments. Point is that anyone can be sued for just about anything. It's too bad that we live in this kind of society. But do document and document even more, get everything in writing.

Kenneth

I could see this coming for ages! I'm not surprised at all. That's why I decided over a year ago, to take all of my short sales to a real estate attorney that specializes in short sales. I have a great working relationship with them and they assume the liability that I don't want! I document EVERYTHING and keep a good, thorough paper trail going at all times. I keep in close contact with the attorney's staff so that we're always on the same page.

I knew that it was just a matter of time...

I make sure that I've done my job above and beyond the call of duty so that I don't worry about being one of the unfortunate REALTOR's that have a target on their back. Should anything come up that's a legal matter--my attorney would take it from there.

I love dealing with REALTORS that know what they're doing in a short sale situation. It makes the process go so much smoother. When they don't have a clue it makes for a VERY stressful situation!

Great post Walter! Thanks for all of the great comments. I learned a lot from this post.

Ronda Densford signature

Some agents deserve it unfortunately. I've seen some horrible marketing and representation.

For most agents, though, this is upsetting but do what we're always told...document, document, work your butt off, follow code, document, market well, price right, research, document, oh, did I say, document.

APR

2010

I've heard of some suits against Realtors who sold folks homes back in 2006/2007 when the market was booming and homes priced high, but these are frivolous lawsuits in my opinin. The homebuyer makes the final decision as to home purchase. If an economic expert cannot predict the future as to future economic conditions, how can a Realtor be expected to do so.

APR

2010

Shouldn't we be handling short sales the same as we do every other listing? Yes there is additional information needed, make sure we CYA..have the sellers sign an addendum explaining the process and procedures, You can get and addendum from a lawyer or NAR. Make sure the sellers try to work with their lender or lenders first and see if they can keep the house. From that point on, each bank requires their own docs... All banks require a CMA, letter of hardship, finanical info etc....

If an agent is not working a short sale correctly, then they probably are not working any other listing as they should be.

I can not see how anyone can blame an agent for a short sale going to sherrif sale if we handle the property the same as we would any other listing. Market them as we would any other listing...

In response to lawsuits against a realtor for selling them a house priced high? Wouldn't the lenders appraisers be responsible? The market shifts all the time, we pull comps for solds in the past 6 months. Would they come after us if we sold the homes to low? Yes..these are people that feel everyone owes them something, and would Sue thier mothers if they had a chance..welcome to America people.. remember.. document, document document... Verbals are nice but e-mails and paper trails are the best. Peace and good luck..

Everyone's favorite target. When do we get a voice and some protection from these types of actions against us. Does a car dealer get held responsible for someone crashing their car?

It seems that the law society protects the lawyers, the Doctor's associations stand up for their members. Accountants have an out by stating they are only working with the information they had been provided.

Now I'm not trying to run away from what we are responsible for but it would seem there now needs to be a clear line of what and what we cannot be help responsible for. Our organizations need to rachet up their and, our defense somewhat.

APR

2010

It sounds as if many of the realtors out there aren't even touching the short sale market because of this. If you are one of those who are avoiding short sales like the plague you are losing out on 38% of the market and that is expected to jump to 45% when the 5 year ARMs reset. Our company takes the liability from you the real estate agent when we negotiate the short sale. We have a retainer agreement that states that exactly when you and your seller sign with us. The best news is that our services are free to you the real estate agent and seller. If you have any questions about our program please email us at jnocera@theshortsaledivisionusa.com or go to our website www.theshortsaledivisionusa.com to find out more.

What is a short sale? A short sale is a sale of real estate in which
A short sale is a sale of real estate in which the proceeds from the sale fall short
of the balance owed on a loan secured by the property sold.

Why should I outsource my short sale business and partner with The Short
Sale Division USA?
It's Simple. Let an experienced law firm execute the process from start to finish.
The average short sale process takes 33 hours of phone time and 30-90 days to
complete. Let our negotiators call the lender; submit a complete attorney
package, including the appropriate financial information, hardship letter, and a
market analysis while you spend your time listing/selling homes.

Does it cost me to outsource my short sale business?
No. We get paid just like you do; at closing, a fee included on the HUD-1
settlement statement. Our attorney fee is included in the final sales price that's
been negotiated by our firm. Your real estate commission is included as well and
paid from the gross proceeds of the sale. The lender pays your real estate
commission, as well as our attorney fee, and doesn't cost the buyer or seller.

How does a short sale benefit the seller?
In most cases, when a distressed home owner is in foreclosure and loses the
property to the bank, the lender can sue the home owner for a deficiency
judgment (judgment lien against a borrower whose foreclosure sale did not
produce sufficient funds to pay the mortgage in full) We negotiate with the lender
so that the short payoff is paid in full and the obligation is therefore satisfied upon
sale of the home.

It's not to surprising to here this. With the glut of lawyer and the reduction in their work load due to the economic downturn I am sure that it is inevitable that they try this to. However, I am not overly concerned. I believe if you treat your customers honestly, do your job diligently and document everything along the way you will be fine.

APR

2010

I have been waiting to hear about the law suits for doing or not doing something in as a result of the current Real Estate market. I think the worst is yet to come.

As for the seller being unhappy that their home doesn't sell, they expect miracles in a down market and then they don't reveal that they are behind on their payments when the list. I've found out two weeks before the home goes to auction by reading the Trustee's Sale listings in the paper. Then had the seller want to try and Short Sale it. Sorry, too late!

I side with Bryant. I heard that people sued agents, after a year later they received a letter from IRS. For some it was a surprise.

APR

2010

It's a harsh reality when your 18 or over. You sign on the dotted line, your liable. You gamble your money in Las Vegas, your liable. You decide to buy a house after it tripled in price and you listen to whoever and you sign on the dotted line, your liable. But if you were smart enough to remember the old saying, "What comes up, must come down!" and stop buying when a realtor says, "Don't buy that house it used to be $200,000 and it's $600,000" and you listen and don't buy it, your liable. Stop being a cry baby America and face the facts. It's a harsh world, you should be harsh on yourself on any given dotted line signing...and be liable!!!

APR

2010

Great post and great comments. It gives me a lot to think about. I have heard since getting back into real estate that agents putting people into homes they couldn't afford where now helping them do short sales on those properties (actually directly marketing to them as now being short sale specialists) and wondered how they could sleep at night. But then I have to think did they do anything wrong if the intent was to help those people achieve their dream and now are attempting do get them out of a nightmare. It's the buyer (now seller) that is responsible for their predicament.

APR

2010

Walter, I am very curious about this, not to mentioned disturbed by it. Is it possible to get more information on this?

I was told about this by an investor locally that works a lot of short sales. In my case he was able to get Wells Fargo to stop a foreclosure sale in 2 days where I hadn't been able to get them to even respond to me in 3 MONTHS! And I've previously had good luck working with Wells Fargo.

It sounds like a good source of information may well be George who was one of the kind folks that have commented here. He can be contacted at Stallioninc1@gmail.com.

APR

2010

Luckily I have a best friend who is an attorney. The sad part is people will look to blame anyone but themselves for going into foreclosure. I know of someone recently who is using an atoorney to stay in the house - knowing they haven't made a payment in almost a year.

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Walter Hayes, GRI, ABR, e-PRO

Joplin, MO

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Keller Williams of Southwest Missouri

Address: 619 S Florida, Joplin, MO, 64801

Office Phone: (417) 623-9900

Cell Phone: (417) 649-6776

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The thoughts and ramblings of Walter Hayes on real estate as well as local state and federal issues and politics.

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