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Throw out everything you thought you knew.

By Billie Dalessio

Real Estate Broker/Owner with Home Run Realty, LLC

March 26, 2008 03:04 PM

One of my agents has a listing, the Sellers are getting divorced. They have refinanced every bit of equity out of the home in the past two years so now it's a potential short sale. My agent is making a dilligent effort to sell the property under an "Exclusive Right to Sell" Listing Contract. She gets a call from a Broker that would like to make an offer on the property. He had contacted the Seller directly, viewed the property and wanted to do a short sale on the property BUT he does not want my agent to speak with the bank-He wants to handle the whole thing himself. O.K.- I already have a problem with that. He then calls me to tell me he will be putting up a "For Sale" sign on the property and entering the listing on the MLS while he is attempting to get the short sale accepted because it is his right to do so-WHAT??? I call the Attorney for The Connecticut Association of REALTORS; and he tells me "Yes- If he has a purchase contract, He has the right to do this, as long as he has the Seller's permission"" I am flabbergasted, he then continues "As long as he's wearing his investor hat, not his Broker hat" All new to me, I didn't know, nor would I ever take off my Broker hat to suit my needs above my clients. I ask the Attorney "What about my fiduciary obligation to the Seller? Isn't having two signs on the property confusing to the public? How about when they call him instead of us and want to make an offer on the home (possibly higher than his) What will he tell them, wouldn't he wait until he owned it to flip it to the new buyer, thereby interfering with my Sellers getting the best possible price?" The Attorney says "You need to explain it to the seller, that it may not be in their best interest" The Seller's can't be in the same room at the same time, at this point they will walk away with nothing- already spent their equity- so they don't care.

The way I see it-all the liability is on me. I never knew a Broker could cross over my contract, put a sign up on my listing and put the listing on the MLS while I have an Exclusive Right to Sell Contract. You learn something new everyday.

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Wayne B. Pruner

Oregon First - Tigard, OR

Tigard Oregon Homes for Sale, Realtor, GRI

Wow. That is just too slick for me. Sounds like this is an "and assigns" situation. You have a bag of worms on your hands now. Good luck!

Mar 26, 2008 03:18 PM

Kathryn Tharp

Realtor - Rancho Cucamonga, CA

Rancho Cucamonga, Real Estate Specialist

I think I would check with another Real Estate Corportate Attorney. This sounds really bizzzzare. Plus does your state forgive the tax liability for a short sale. If not, your clients will care if they are going to be taxed on the difference as income.

Mar 26, 2008 03:24 PM

Nadine Blakely

RE/MAX 1st Olympic - Lynchburg, VA

Whew! Now that's a situation! I never knew that either. It sounds like these people (your clients) have enough going on in their lives without the hassle this could bring. I wish them, and you, well! Nadine Blakely, RE/MAX, Lynchburg, VA

Mar 26, 2008 03:24 PM

Billie Dalessio

Home Run Realty, LLC - North Haven, CT

Wayne- Can you believe it, kinda makes you wonder what exclusive means

Kathryn- I know there won't be any federal tax, not sure on CT tax.

Nadine- thanks for your well wishes.

Mar 27, 2008 06:35 AM

Matthew Heavener

ERA Heavener Realty Co. - Jacksonville, FL

Yep, The for sale sign he has is for an intangible asset called a contract. If this is not acceptable the seller should remove "the and assigns" verbiage from the contract before acceptance. Most REOs have addendums making contracts nonassignable. Did your agent price it right? (must be a good amount of equity for these guys to be interested) and did they get a good binder? and was it contingent on assignability? These guys know their contracts, but you better be careful about loan fraud issues. Most conventional lenders don't allow "assignment fees" on the HUD-1. (as always, I am not an attorney, and this information is not meant to be acted on, or relied on as a legal opinion. should you have any questions regarding your rights consult an attorney. Additionally, this advice is not intended to create a agency relationship.)

Mar 27, 2008 03:51 PM

Guy E. Gimenez

The PowerHouse Group - Austin, TX

ABR, CRS, GRI - Broker & Investor (512-731-5613)

I'm a bit confused. You first say he is making an offer. Then you say he has a contract. She gets a call from a Broker that would like to make an offer on the property

He had contacted the Seller directly, viewed the property and wanted to do a short sale on the property BUT he does not want my agent to speak with the bank-He wants to handle the whole thing himself. I presume this must be a new agent? She should have told him she could care less what he wants and then follow through.

Did the sellers give the other broker written permission to place a sign out....to advertise their house? Who cares what this goober wants! Does he really have a right to take his offer directly to the sellers (not the bank, the sellers)? If this is legal, why would any agent ever talk to the listing agent? Why wouldn't they call up the sellers and start negotiating?

Something seriously ain't right here and I can almost assure you the other broker is scamming someone.

Mar 27, 2008 04:16 PM

Katherine Anderson

Coldwell Banker Hobin Realty, LLC - Hampton & Rye, NH, USA - Exeter, NH

Managing Broker

Wow! That's amazing! Did the attorney offer you any advise on how to protect yourself from this type of practice in the future?

Mar 28, 2008 02:39 AM

Billie Dalessio

Home Run Realty, LLC - North Haven, CT

Matthew- the property is not an REO yet, it is a short sale. The P&S is contingent upon lender approval of the shortage.

Guy- I do believe he is a scammer, just like most of the foreclosure rescuer's that claim they'll buy your home for cash, but really all they'll do is work a short sale and flip the contract or the home. The buyer told the seller the same line of stuff they all say-"I'll take care of everything- you'll get to stay in the home longer-etc." I am more amazed he is a licensed RE Broker and can "take that hat off" at will. My agent has over 20 years experience, has negotiated many short sales and is actually trying to get another P&S approved by the lender.

Katherine- The attorney is general council for CT Assoc. he advised us to make sure the seller's understand it may not be in their best interest. No way to protect ourselves- looks like any unscrupulous broker can make an offer on any ERTS listing and then with the seller's permission place a for sale sign on it.

Mar 28, 2008 02:15 PM

Sherman Smith

Sherman Smith & Associates - Tustin, CA

Billie,

Here is some help on Short Sales.

Short Sale Suicide on Activerain.

Sherman Smith

Sherman Smith & Associates

(714) 544-5445

Sherman@shermansmith.com

Apr 08, 2008 03:46 PM

Billie Dalessio

Home Run Realty, LLC - North Haven, CT

Sherman, I read your blog, I would recommend everyone reading it- all good information. My agent is not inexperienced, she has been licensed 26 years, has been through 2 booms, and the late 80's early 90's downturn. she has done many short sales, REO's, corporate relo's and traditional sales. My post was more about the point of the other Broker's ability to list on the MLS and post a sign on the property for the "intangible asset of a purchase contract". As a side note the lender has decided they only want to speak to my agent as she was the original contact person, and he (the other Broker/Buyer) is filing a complaint with the Real Estate Commission. It gets better everyday.

Apr 09, 2008 01:10 AM

Ted Cowan

Strategic Real Estate Coach - Pacific Palisades, CA

The process you described sound similar to what we teach, but with a few major differences . . .the most important that the listing agent and his/her broker need to be in agreement that this is best for the homeowner . . . clearly not the case here.

We do deals like this with Realtors every day . . . and while a short sale is never easy, it's been good for investors, Realtors and most of all homeowners who are facing foreclosure.

I'll pass your situation onto on of our attorneys and see what he has to say.

Again, we work with Reatlors and investors in 35 states and I haven't heard of anything like this before.

Apr 09, 2008 10:43 AM

Ted Cowan

Strategic Real Estate Coach - Pacific Palisades, CA

We do deals like this with Realtors every day . . . and while a short sale is never easy, it's been good for investors, Realtors and most of all homeowners who are facing foreclosure.

I'll pass your situation onto on of our attorneys and see what he has to say.

Again, we work with Reatlors and investors in 35 states and I haven't heard of anything like this before.

Apr 09, 2008 10:43 AM