This is a Realtor's alert as well as an excellent post for the homeowner to read written by Bill Gasset in Massachusetts who handles short sales proficiently and with knowledge of the right process. Many realtors are ill equipped to handle short sales and just want to list a home thinking they will get the lender to agree to 'take an offer' to get the borrowers out of their difficult financial situation...NO, it's a well orchestrated process if it is to be successful...take the time to read and heed...
Avoiding short sale lawsuits
There is no question that in this economic down turn we have experienced over the last five years or so that short sales and foreclosures have become part of out everyday Real Estate landscape.
Every week there are countless new short sale listings that hit the market in Massachusetts. In many of these short sales the seller, not understanding there is a big difference between a traditional Real Estate transaction and a short sale hires any ole Realtor® they happen to come across to represent them.
One the other side of the coin, there are also plenty of Real Estate agents that see the growing number of short sales coming available for sale and realize there is a lot of money to be made.
The problem however, is that many of these agents are flying by the seat of their pants and have done nothing to educate themselves on the ins and outs of closing a short sale.
As a Realtor® who has been successfully closing short sales for almost four years, this is one of my biggest pet peeves! How anyone can look a desperate seller in the face and take on a listing to sell their home with no short sale expertise is just beyond me. It pisses me off when I see a new short sale listing hit the market and know the agent has no track record with this type of transaction.
There are many Realtors® that are putting the noose around their own neck. In desperate times people do desperate things. The end result is that on many occasions consumers get very poor advice that can cost them dearly.
Realtors® that do not have short sale expertise could really do themselves a favor by referring the business out to an agent that is qualified to get the job done.
You may be wondering why this has become such a passion of mine? The answer is simple. Short sales have become stigmatized because there are numerous Real Estate agents and buyers that have been involved in deals where the listing agent did not know what they were doing. The end result for a number of different reasons is a sale that didn’t happen. This leaves a bad taste in everyone’s mouth. Going forward it makes it harder for the agents that do know what they are doing to find buyers for the short sales they are marketing.
Below I am going to touch on all the things you should look out for in trying to successfully complete a short sale whether you are in Massachusetts or another state.
Properly pricing a short sale
When you are short selling your home there is a good chance that you are not able to afford the monthly mortgage payments any longer. You may be just scraping by and know that next month you won’t have enough to pay your lender. When you decide to short sell your home and are no longer paying your mortgage pricing the home properly becomes critical.
The last thing you want to do is either over price or under price the home. For obvious reasons if you over price you will more than likely not be able to procure a buyer in a timely fashion.
If you under price the home and receive a contract from a buyer, the lender is going to reject the short sale after reviewing the appraisal or broker price opinion that they order.
Both of these scenarios can leave you with nothing and that much closer to a foreclosure. A short sale should be aggressively priced such that you will find a buyer in a timely fashion but not so low the lender is going to reject the short sale contract.
The short sale contract
There are numerous Realtors® that are clue less when it comes to giving sellers advice on the short sale Real Estate contract. Lets get one thing straight right off the bat….. When a seller signs a Real Estate contract it is almost always legal and binding as to the terms and conditions in the agreement.
Here are 4 short sale contract issues you need to be aware of:
- Realtors® submitting multiple unsigned offers to your lender
- Realtors® submitting low ball offers to the lender
- Realtors® allowing home inspection contingencies after short sale approval.
- Realtors® allowing an investor to negotiate the short sale
- When a Realtor® submits an unsigned offer to your lender YOU do not have a legal and binding contract. The buyer can walk at any point in time with no consequences to them! Does this benefit a seller in anyway? The answer is NO NO NO! The Realtor® you hire should be looking to lock up the most qualified buyer who stands the greatest chance of getting to the closing table.
- If you sign a low ball offer you stand an equally strong chance that the lender is going to reject your offer and send it back. If you accept an offer that is no where near the market value do you really expect the buyer is going to agree to the price the lender wants? Not likely and again you will be back at square one after being off the market for an extended period of time.
- Allowing home inspections after the short sale approval is another big mistake. Do you really want to have your home off the market for months, get a short sale approval from your lender and then find out the buyer wants to back out due to inspection items? Don’t let the blind lead the blind. There is no reason for letting a buyer have home inspections after short sale approval. I find most buyer’s agents think they are protecting their client by trying to save them from spending a few hundred dollars. WRONG – what the buyer’s agent is preventing is the buyer from negotiating a pricing discount if there were issues discovered. Lenders DO NOT negotiate home inspections issues after short sale approval.
- Letting a buyer negotiate for a seller is clearly foolish. The investor only cares about the seller if they get the terms THEY want. An agent who lets an investor take over a short sale transaction is asking for a lawsuit. Realtors should not let investors negotiate a short sale!
Short sale negotiations
This is clearly an area where you will see most of the lawsuit’s against Realtors®. There are agents who are engaging lenders in the negotiations of short sale approval but don’t have the knowledge and understanding of either short sale debt release and/or short sale tax ramifications.
Who do you think will get sued if a seller receives a 1099-C or 1099-A at the end of the year or gets stuck with a deficiency judgment by their lender(s) at some later date in the future and they were not informed up front about it?
There are many Realtors® who have negotiated short sales that misrepresented to their client that the short sale approval letter removed the short sale deficiency when in fact it did not.
Realtors® are supposed to abide by the Real Estate Code of Ethics but clearly there are many who’s judgment is clouded by the almighty dollar.
The Code of Ethics clearly states:
Article 11 Realtors® are knowledgeable and competent in the fields of practice in which they engage or they get assistance from a knowledgeable professional, or disclose any lack of expertise to their client.
Article 13 Realtors® do not engage in the unauthorized practice of law.
Speaking of giving legal advice, there are Realtors® who are guilty of telling their client to stop paying the mortgage to complete a short sale. While this may be the proper advice in 9o-95% of most circumstances with short sales what if the sale falls into the 5-10% where stopping payment was not necessary?
Most major lenders may require payment stoppage but some of the smaller lenders do not have that guideline. Telling a seller to stop paying the mortgage could have serious consequences on their credit that could have been avoided. Again Realtors® should not be giving this kind of advice. It should come from a lawyer.
The take home message here is to make sure you do your home work when hiring a Realtor to represent you in your short sale!
I am successfully completing short sales through out the Metrowest Massachusetts area. As of this writing for almost four years, knock on wood, I have a 100% success rate for short sale approval! I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales done! I will admit there is some luck involved in my success rate but the team I have put together does a stellar job.
If you are outside of the Metrowest Massachusetts area or even in another state and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and has an understanding of the short sale process! I have referred numerous short sales to other Realtors all around the country.
About the Author: The above Real Estate information on Realtor short sale lawsuits was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-435-5356.
Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise!
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