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5 Things A Realtor(r) Can Do To Protect Against Short Sale Liability.

By Bryant Tutas

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

July 14, 2011 01:41 AM

Florida Real Estate Broker Hi folks. Have you ever been sued by a Seller or Buyer?? I haven't. But if I were I'd be ready to stand in front of any judge and defend myself.

It's my opinion that over the next few years there is going to be a huge increase in lawsuits against agents and brokers. Mostly related to Short Sales. That Seller you helped is going to be real pissed off, 5 years from now, when he is slapped with a deficiency judgment and his wages and assets are garnished.

Will you be prepared to defend yourself? Do you have a written record of what when down during the Short Sale process? Or did you just wing it?

Here are some things I do now to protect myself in the future. Hopefully there are a few you can implement into your business. Even better, maybe you have some ideas that I can use.

Make sure you are covered with your E &O insurance.

Use email as often as possible for communications so you have a written record of the conversations. If you do have a phone conversation with a customer/client follow up with an email and outline the points that were discussed. This also helps to eliminate confusion. "Your Honor he never told us that" Yes I did. Look here.

Have a disclosure package at time of contract (listing or BBA) that outlines the short sale process in detail and what can be expected. Have this all signed and dated along with the MARs disclosures. "We thought he was giving us legal advice so we didn't hire an Attorney". Sorry, but you signed 3 different times that I was NOT an Attorney and that I was NOT giving legal advice.

Have a log of every action you take related to the short sale. I use Google Calendars for this. My Sellers share in this so that every time I make a notation they receive an email. A recent transaction had over 300 notations. That equates to 300 email updates to my Seller. It would be very difficult for them to tell a Judge I didn't do my job properly. "Your Honor he didn't do anything and we were foreclosed on because of it". I don't think so.

After each closing ask your customer/client to write you a testimonial. Place this in the file. "But your Honor read this. They said I was awesome!!"

I believe if you do these few things you will be good to go if a lawsuit comes your way. Plus the added benefit is that you will be better at what you do if you remember that everything you do needs to be defensible in a Court of Law. What say you?

Are you facing foreclosure in Florida?

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more? www.CentralFloridaShortSales.com

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

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Karen Anne Stone

New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX

Fort Worth Real Estate

Bryant: What an excellent list of things to do to protect yourself. This is just one more piece of evidence why you are so good at what you do. Thanks so much.

Jul 15, 2011 05:59 AM

Richard Zaretsky

THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL

Florida Real Estate Attorney

BB -

Be sure the Google Calendar archives - or be sure your emails are archiving so you can retreive them if necessary.

Be aware that being prepared to defend yourself does not prevent you from being sued. There are some attorneys out there that sue first and ask questions later.

Be sure you continue your E&O until the statute of limitations is over. Most E&O policies only cover a claim while the policy is in force. If you let the policy lapse in 3 years and you get sued, you are not covered!

Be aware, the client can sign 1 million times that you are not giving legal advice, but that won't prevent him or her from saying you did give legal advice and this is what you said.......... Sorry but that release signed while you as the broker are still communicating with the client, is not a defense.

Jul 15, 2011 06:16 AM

Vince McEveety

Gilleran Griffin Realty - Sherman Oaks, CA

that is the righteous of the righteous... take heed real estate agent and listen as the truth be spake unto you... listen not and be smited

thanks BB and TLW

Jul 15, 2011 06:22 AM

John Andrews

Firebird Realty - Peoria, AZ

Bryant

Good advice. You have to keep everything. I use a system which is designed specifically for short sales. It time stamps and dates everything you do, keeping a permanent record of the entire transaction. It’s shortsaletm.com

Jul 15, 2011 06:32 AM

Curt Harrington

Long Beach, CA

To me the essential thing about whether or not you will be blamed for a later deficiency can be done by offering the bank to sign a "WAIVER OF DEFICIENCY" document in consideration of finding a new buyer/ more solvent buyer, etc. When the bank says "No, we will not waive the deficiency" and signs the document under a "NO" checkbox, THIS is an indication to the selle r that the bank will continue to look to the seller. I'd frame the request as a signed letter from the seller and the return as a letter from the lender to the seller. This just makes the bank do what they would do honestly anyway, namely, "tell the seller he will still be liable".

If anyone has problems that involve a short sale, they may also likely have other problems (back taxes) and should have a solvency checkup with a bankruptcy attorney; -- after all, they may be able to get rid of a lot more of their money problems than were present only in the potential for a short sale deficiency suit.

Jul 15, 2011 06:36 AM

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Hi Jim. You just go to settings and "Share" the document or calendar withthem. Then set "whatever" permissions you want to set. If you want you can even embed the calendar on a private web page for your sellers.

Jul 15, 2011 07:14 AM

Ginny Gorman

RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI

Homes for Sale in Southern RI and beyond

Bryant, i was sure i commented when i read this but i knew this was a best practice...i keep an electronic file of everything on a client & so documented...even with the hold harmless agreements, attorney & negotiator i use...we make sure & double sure...great post.

Jul 15, 2011 07:20 AM

Jan Green - Scottsdale, AZ

Value Added Service, 602-620-2699 - Scottsdale, AZ

HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Good for you. I'd call that best practices in terms of your actions and accountability. Best of luck!

Jul 15, 2011 07:26 AM

Dawn Barrier Las Vegas Real Estate

HomeSmart Encore - Las Vegas - Las Vegas, NV

Homes in Las Vegas Nevada 702-812-4550

Great post as always. I am also as upfront with the short sellers "before" taking the listing.

Way back a few years ago when a few banks would refuse to remove the deficiency language from the approval letter, (even with contribution or not) (even with an attorney assisting them) some chose not do the short sale due to the 6 years and a few that did, where made fully aware of the 6 year time frame, but they felt it was better than foreclosure.

It is sad to think that the banks will attempt to pursue them years after the fact. Let's hope we have new laws pass to deal with it or some great judges that will throw the cases out.

Jul 15, 2011 08:43 AM

Kent Dills

Broker, Dills Real Estate - Bellingham, WA

Real Estate 817-495-8028, Bellingham, Washington

BB, way to cover all (most?) of the litigation avoidance checkpoints of a short sale.

Even though Richard (#54) is an attorney, I've got to disagree with him saying that you getting a signed release isn't good enough to avoid liability when acting as the broker. I have before (and I will again) stood before judges and gotten favorable adjudications because I had good documentation.

A wise old real estate investor once told me that "he who has the documentation wins" in court every time and that has been my personal experience. Becuase I have the docs, I don't live in fear of being sued.

Jul 15, 2011 09:27 AM

Paddy Deighan MBA JD PhD

http://www.medicalandspaconsulting.com - Vail, CO

Paddy Deighan J.D. Ph.D

The E&O issue is critical...especialy instates that have any legislation on the books regarding who can perfom short sale negotiations and under what circumstances. If you violate any of these rovisions, an astute attorney will have a field day and theeir will be a legal cause of action...not to mention that the E&O carrier will have cause to deny coverage

Jul 15, 2011 09:57 AM

Marte Cliff

Marte Cliff Copywriting - Priest River, ID

Your real estate writer

You will always have liability from some buyer or seller, but did you see how your liability under MARS has just been reduced?

FTC Will Not Enforce Provisions of MARS Rule Against Real Estate Professionals Helping Consumers Obtain Short Sales - http://www.ftc.gov/opa/2011/07/mars.shtm

Also - in California now the banks cannot collect deficiency on 2nds (with exceptions, of course)

It's in the just signed SB 458. I believe that's as of July 15.

Jul 15, 2011 07:48 PM

Irene Kennedy Realtor® in Northwestern NJ

Weichert - Lopatcong, NJ

I agree with your suggestions for documentation - for all deals, BB. Attorneys handle closings in my area, so the seller does always have legal representation. Yippee!

Jul 16, 2011 02:55 AM

Judy Orr

HomeSmart - Scottsdale, AZ

Scottsdale AZ and surrounding towns

There are two excellent short sale attorneys in my area that do all of the negotiating and handle everything once I market my listing and find a buyer for my short sale sellers. If a seller will not use one of those attorneys (or another competent short sale attorney) then I won't take the listing. I have done my own short sales in the past but I do not enjoy them and am glad I know about these attorneys, whose fees come out of proceeds of the short sale at closing.

Jul 16, 2011 04:23 AM

Lyn Sims

Schaumburg, IL

Real Estate Broker Retired

BB, good info as always. I guess I better see is the Illinois Assn has something for us to use.

Jul 16, 2011 04:32 AM

Gerard Gilbers

Higher Authority Markeing - Asheboro, NC

Your Marketing Master

I document all of my transactions just in case. You can never be too careful in this litigious society.

Jul 16, 2011 06:39 AM

Jon Zolsky, Daytona Beach, FL

Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL

Buy Daytona condos for heavenly good prices

Bryant, some very good points, thank you.

We actually for the most part delegate the negotiations to the attorney. We "taught" them how to make money, and no, not a penny is charged to the client

Jul 16, 2011 01:35 PM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

Great Post and one to keep in mind and come back to. I guess I have not used Google Calanders yet and I want to explore that.

Jul 17, 2011 12:57 PM

Catherine Marrone

Integrity Residential Brokerage LLC - West Newbury, MA

West Newbury MA real estate, Essex County

I do quite a few short sales and appreciate your list. I'm going to look into Google calendars - sounds like a time saver as well as an excellent record keeper.

Jul 18, 2011 01:17 AM

Matt Robinson

Professional Investors Guild - Pensacola, FL

www.professionalinvestorsguild.com

Such terrific advise as always Bryant, and I hope the other agents listen. I have about a 10 page document full of disclosures for all of my short sale deals, and I still feel a little nervous about the future. I know I am covered, but anyone can drag you into court and waste a bunch of your money if they want to. I hope we don't see the waive of lawsuits that you predict, but I'm inclined to believe you are right. I think my disclosures, signed AND notarized, along with a letter from my attorney...will probably kill most threats before we ever get to court. Hopefully, that is...

Jan 11, 2012 05:38 AM

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