Do a Short Sale in Georgia and risk going directly to jail. OK maybe a little overdramatic but maybe not. Recently Georgia's Department of Banking and Finance modified Georgia's banking law to be consistent with the federal SAFE Act and it has put realtors doing short sales in a very risky position.
The GA DBF recently published FAQ's to better explain to Georgia realtors what they can and can't do and like many other realtors who have read the statement, it seems DBF doesn't truly understand the real world application issues this creates.
Having performed many short sales (but none since the law went into effect...) I think that DBF's position will effectively doom most short sales and send many more homeowners to foreclosure. At least under the current national structure that short sales are commonly being completed with.
Working out a short sale isn't like ordering a pizza. Lenders don't just accept and approve contracts they get...they negotiate. That is why many of them are actually called "negotiators." They will need to negotiate with someone. Who will they do that with?
If I as my seller's real estate agent am contacting them to provide them with details about the sale but can't talk to them about anything else, who will they call or talk to? The homeowner directly? Not likely. Many if not most homeowners I have done successful short sales with would have lost their homes if they had to work on short sale issues by themselves.
So what can we realtors do? Team up with a mortgage originator? Let's see how that works. The homeowner needs to short sell so he calls a realtor experienced in short sales. That realtor can't do anything other than obtain an authorization form (to allow the bank's personnel to talk to them) and then can only advise the lender about pricing and offer details. I suppose we would "comply with the law" by only providing information and facilitating the lender's need for a draft HUD-1 or to compile and send the myriad of documents referred to as "a short sale package."
But how would the following scenario work? The realtor submits a binding contract and all other required documents to the seller's lender for approval. The lender responds by saying they will only approve the short sale if the seller accepts a personal note for $20,000. As the agent who the lender is calling or emailing, can we forward that information to the seller or is that negotiating? What if the seller wants to negotiate that amount down and says they would agree to $10,000 and not $20,000. Can we agents deliver that information to the seller's lender or is that negotiating? We are simply communicating a seller's wishes right?
This is real world. If realtors can't, and the seller aren't equipped to, then who will? A Loan Originator? Now we have yet another spoon in the soup, another mouth to feed and another odd joint venture with potential finger pointing. There isn't any more financial room in a short sale for a Loan Originator to get a fee. In Georgia, Realtors can't pay any type of fee for the service anyway because of BRRETA even if they wanted to.
The loan originators I talked to have no desire to do this sort of work. I don't blame them. It is awful, time consuming, and overwhelmingly not worth the effort when not combined with a commission on sale.
I believe many active short sale agents intend to keep doing short sales telling themselves they aren't negotiating...they are simply facilitating or communicating terms between the lender and the seller.
Eventually someone will get arrested when a deal goes bad and a seller with a bad outcome calls the cops to make a point. Other agents or their brokerages may abandon this already difficult pursuit because of the liability. How would an agent prove he didn't "negotiate?" If you can't effectively manage or at least facilitate negotiations, then the critical piece of the short sale is missing and the outcome will often be bad.
Maybe what DBF wants is for agents to align with a loan originator to handle the negotiating part. I ‘m just trying to figure out how they would get paid.
If you have insight on this law or a different legal interpretion, I welcome your comments.