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Who Negotiates with the Lender on a Short Sale in Your State?

Services for Real Estate Pros with Law Office of James Miner LLC

In NJ, there is a "Debt Adjusters Act" that states that only persons licensed under the Act can legally negotiate mortgage modifications or short sales.  Attorneys are exempt from the act and there are a few other narrowly tailored exemptions.  To get a license there are background checks and the licensee must purchase a Bond for the client's protection.

Anyone who peforms these activities without a license risks criminal sanctions and Consumer Fraud Act actions.

I'd like to hear how it is done elsewhere.  Anyone care to comment on their State?

Thanks, Jim


Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Hi Jim - Thanks for bringing this to our attention. It was a wake up call as I do short sale negotiations for my clients who have out of state properties. In CA, to the best of my knowledge, anyone can negotiate a short sale.

Let me ask you this. In your state, can a homeowner negotiate their own short sale? How about a licensed real estate agent and/or broker?

Sep 20, 2009 09:05 AM
James Miner, Esq.
Law Office of James Miner LLC - Westfield, NJ

Yes, the homeowner can negotiate for their own short sale. 

The licensing requirement kicks in when someone else negotiates on behalf of the homeowner.  The reasoning behind this is that such negotiations (negotiating someone's legal rights & obligations) is considered to be the practice of law.  The licensing rule allows non-lawyers to perform this as long as they are licensed ie: properly vetted and bonded. 

Agents and Brokers are not able to do this (unless licensed under the Debt Adjuster's Act).  Many of them are not aware of this, however, and are doing the negotiating at great risk to themselves.

Sep 21, 2009 01:16 AM
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Thanks for the information and your contribution to Activerain.

Sep 24, 2009 06:02 PM
Sean Carroll
The Get Off Your A$$ Academy - Manhattan, NY
Real Estate Speaker and "Expert" Coach


what denotes "negotiating"? Does this then mean I cannot cmmunicate with the client's lender at all?

Oct 08, 2009 12:17 PM
James Miner, Esq.
Law Office of James Miner LLC - Westfield, NJ

Great question, Sean.  According to the Dept of Banking and Insurance:

A debt adjuster license is required to engage in the business of either: (a) acting or offering to act for consideration as an intermediary between a debtor and his creditors for the purposes of settling, compounding, or otherwise altering the terms of payment of debts of the debtor, or (b) to that end, receiving money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

I haven't researched whether or not this has been more clearly defined in case law, so can't give a definitive legal opinion yet.  It could be interpreted to mean that it would be OK to assist the homeowner to gather documents and put together the package, but the submission (and subsequent negotiations) must be by the homeowner, or her attorney or a licensed debt adjuster.  You wouldn't want to be in a position of being considered an "intermediary" without the license.

Oct 09, 2009 11:30 AM
Sonya Koster

Good Morning,
I'm an independent short sale specialist who negotiates such transaction for clients who have properties located in the states of Florida and New Jersey. Do I require to obtain the necessary licenses for both states?

Jun 29, 2016 01:18 AM