As a NJ Short Sale Agent, it is important to be aware of the differences between various investors and Short Sale programs. The type of Short Sale - be it HAFA, conventional or otherwise - is what drives the Short Sale Approval process. Staying up to date on changes to these programs is crucial for a NJ Short Sale Agent. Which is why when I heard about HUD's new rule banning dual representation on FHA Short Sales, it grabbed my attention right away.
For those unaware, FHA Short Sales are processed under HUD's Pre-Foreclosure Sale Program. FHA Short Sales are among the more difficult type of Short Sales to process and get approved, because of the slow and deliberate nature of the program. Despite this, we have been able to get many NJ Homeowners with FHA Loans approved for FHA Short Sales.
In so
me cases, we have represented both the Buyer and the Seller in FHA Short Sales, but HUD's new guidelines will prevent this in the future. According to HUD Mortgagee Letter 2013-23, "No party that is a signatory on the sales contract, including addenda, can serve in more than one capacity. To meet the PFS Addendum requirements, brokers and their agents may only represent the buyer or the seller, but not both parties."
That means if you are the Listing Agent of an FHA Short Sale, you cannot represent the Buyer as well. In fact, according to HUD, no one in your office can represent the Buyer either. My office is modestly sized, but imagine brokerages that have hundreds or thousands of agents across multiple offices complying with this rule.
Think about HUD's logic for a moment. HUD claims that this rule is being implemented because HUD’s inspector general “detected fraud and abuse in the pre-foreclosure sales process.” What fraud, you ask? HUD hasn't clarified, but it speaks pretty loudly to me what HUD's opinion of Realtors is. And that's the epitomy of throwing stones in a glass house.
Has HUD considered what the impact to the consumer as a result of this wrong-headed thinking? Assume you are an FHA Short Sale listing agent. A prospective buyer calls you, requesting information on your listing. You gladly provide it. What's the natural progression? "Well that sounds like a nice home," Mr. Buyer Prospect says. "When can I see it?" Your reply would be something like this: "I'm sorry, Mr. Buyer prospect, but I cannot show you the home. HUD says that I cannot represent you on the purchase of this home. Further, no one else in my office can show it to you either. The best I can do is refer you to one of my competitors, who has never seen the home and has no knowlwedge of its features or condition."
Imagine the head-scratching response this would elicity from buyer prospects. But that's not at all. As an FHA Short Sale agent, we have a duty to our sellers as well to do our best to market, show and sell the home. Think about your seller-client's frustration when they call you up, asking why you haven't sold their home. "I'm sorry, Mrs. Short Seller. I have done my best to market your home, but I must rely on other agents to show and sell it. HUD says I cannot handle both sides of the transaction." HUD is essentially telling FHA Short Sale agents not to serve our mutual clients to the best of our ability.
In a letter to HUD, NAR President Gary Thomas outlined how counterproductive this new rule will be to all involved parties when it takes effect on October 1, 2013. I don't know how effective his letter will be in creating change, but if you are of the same opinion as myself and Gary Thomas, then you should contact your legislators to make your voice heard.
If you have an FHA mortgage, and would like to discuss foreclosure alternatives, please contact me at (917) 518-7861 for a confidential consultation at no charge.
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