Are You Ethical With Your Short Sales?

Real Estate Agent with Keller Williams Realty - DTC

Are you ethical with your short sales?

I recently read a good article in REALTOR magazine regarding short sale ethics and avoiding temptations.

Real estate agents are in one of the few organizations who's members sign-off on a code of ethics and are required to take periodic update courses on ethics. As a refresher, ethics are defined as a system of moral principles, a philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions.

As short sale fraud becomes more prevalent it's good to look at some ethical considerations we should keep in mind when serving clients.

  • Do you consider your clients wishes first? If your client states that they want to keep the house, do you provide them with information of what they may do and who they may contact? Not counseling your client on how they may investigate keeping the house is short sided. Even though the majority of loans are not modified, if you're able to assist someone in keeping there house, don't you think that that act of honesty will be appreciated? You may have lost a short sale today, but you probably made a friend. Priceless.
  • Make sure that the hardship letter is accurate. Not everyone qualifies for a short sale. The hardship letter should explain what hardships occurred that have lead to an inability to pay the mortgage. 
  • There are a lot of investors buying short sales. When an investor is improving a property and adding value, that's a valid transaction. If an investor is buying a property, because they already have their own buyer to quickly flip the property to, without improving the property, without intent to rent it, that's called fraud. The bank was cheated out of the extra money that the second buyer was willing to offer.
  • Some junior lien holders are negotiating deals that are not on the HUD in order to approve the short sale. Advise your client to say no to any transaction that is not on the HUD, which can be constituted as mortgage fraud.
  • Although it's appropriate to provide information for the broker price opinion (BPO), it's wrong make the BPO low, just so you can get the house on the market for less than it's worth. 

Avoid temptation, deliver on your fiduciary responsibilities to your client, and do the right thing (you know what that is) and you'll do fine helping people avoid foreclosure through a legal short sale.

Comments (6)

Larry Story ALC
Total Care Realty - Greensboro, NC
Beneath it all is the Land, Covering all of NC


First and foremost with a short sale listing appointment I try to explore all options.  I see myself not as a listing agent in this situation but as housing counselor.  I recently had such an appointment last week actually.  I spent the first thirty minutes trying to see if there was something they had not tried to stay in the home.  They had been down the modification road twice.  They have tried and tried.  Unfortunately the system and the process simply burns these poor people out.  By the time the existing system is finished with them they have given up.  It is such a shame to. 

Sep 20, 2010 05:52 PM
Joan Valverde
HomeSmart - Colorado Springs, CO
GRI,CDPE,CNE,MRP,SRES Colo Sprgs, Blk Forest, Monu
Mike, no matter the situation for the sale, wes should always be ethical!
Sep 20, 2010 05:52 PM
Lori Mode
The Mode Real Estate Group - Elk Grove, CA
Real Estate Made Simple

Mike - I can't tell you how many times I have been asked to do something on a short sale that was not to go on the HUD; I learned early on with short sales to say NO.  Ethics is very important when it comes to short sales.

Sep 20, 2010 05:57 PM
Scott Hayes
(512) 786-8300 - Austin, TX
Realty Austin, Broker Associate


You said it right in that first paragraph. Sometimes keeping someone in their home is the ultimate service we can do as agents

Sep 20, 2010 06:02 PM
Connie Johns
Transaction Realty - Toledo, OH
Toledo, Ohio Area Real Estate

Mike a very insightful post and worth a "suggest"

Sep 20, 2010 06:11 PM
Mike Miguelez
Keller Williams Realty - DTC - Superior, CO

Thank you all for the input.

@Larry - I believe that the best we can do is be a counselor, presenting what we know and letting the homeowner decide what's best for themselves. It would be great if the system was streamlined and made more effective.

@Joan - Doing the right thing is never wrong.

@Lori - It all has to be up front.

@Scott - That's a true win when that happens.

@Connie - Thank you.

Sep 22, 2010 03:57 PM