New twists in negotiating short sales are occurring almost daily. Frustrated by long delays and lack of success in utilizing others, some investors have entered the negotiation arena. The concept is fair and simple: investors want some control over the process and many have taken to negotiating the short sale.
Everyone in the industry has an opinion on who should negotiate a short sale. I can say that major lenders (I work as a consulting attorney for two of the largest) do not favor short sales that are negotiated by someone with an interest in the property, or an interest in whether a property closes escrow. This would include listing and selling agents as well as the home owner. I suppose that this must now also include the investor as well. It would also include third party negotiators that are paid only if the property closes escrow. However, it is unlikely that a lender would ever discover the financial arrangements of a third party negotiator and client.
You can understand why – temptation and greed are powerful motivators for someone to fudge a short sale a little bit – state something to the lender that may not be accurate or fail to provide information that may lead to a denial or less favorable terms.
Today, I was contacted by a gentleman who was advised IN WRITING that the second and third liens were released and that a waiver of deficiency had been obtained. The short sale was negotiated by the investor buyer personally. You can imagine what happens next: there was not a full satisfaction of the second and third liens and one of the lenders filed suit in pursuit of a deficiency judgment. Perhaps the investor buyer honestly believed that he had obtained a waiver. It does not matter because the fact is that there was no waiver and now the home owner is in litigation.
There is a dramatic increase in litigation such as this. There is likely to be a lot more ahead as more restrictions are belong placed upon a short sale home.
Paddy Deighan
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