BEWARE of the "Arms-Length Transaction" rule.

By
Real Estate Agent with Indiana Realty Grp IN #RB14028721
https://activerain.com/droplet/mS2

ATTENTION AGENTS:  What is an "Arms-Length Transaction"?

Short Sale TIP image

Well, when you are talking about a Short Sale transaction, this means that the Buyer cannot be related to the Seller and neither can be related to the Real Estate Agents.  So what does this mean for you?  Let's say that your aunt is one of the best Agents in town.  Of course you'd want her to sell your home, (or be your Buyer Representative), right?

Too bad.

More & more I am seeing the banks kill deals because it's not an arms-length transaction.  It might have just happened to me today!  (Of course, I'm not sure yet because bank reps seem to have a once-per-day limit of answering their phones) ...

Then I got the fax.You see, we've been working on the sale of my neice's home since August  ... We clearly disclosed in the purchase agreement that "the Seller is related to the Listing Agent" and "the Buyer is related to the Selling Agent".  We were told a month ago that our submitted offer was accepted, but had to go through additional approval via RHS (Rural Housing).  Okay, we can be patient.  And, luckily, the Buyer decided to hang in there too and get this deal closed, regardless of the delay.  T
I was SO excited when the Short Sale bank called me this morning and said, "I have an Approval!" ... She proceeded to give me a list of a few minor things she would need.  Things like an updated HUD-1 statement, updated paystubs, etc. ... pretty typical items, really. She said she would fax me with the detailed instructions to share with the title company & that as soon as she received those things, we could schedule closing.  "Yay!", I thought to myself.   I called the buyer's agent & my sellers to spread the good news.hings seemed to be progressing as usual for a short sale.

The first few pages looked like typical requirements, basically just like the bank rep had mentioned on the phone ... But the last pages had stamped on them:  AFFIDAVIT OF ARMS LENGTH TRANSACTION MUST BE RECEIVED BACK BEFORE FINAL HUD WILL BE APPROVED. "NO EXCEPTIONS".

Uhm, excuse me?!

Had they not reviewed the purchase agreement that we had sent to them THREE months ago?  Of course they had.  They just didn't care.  They don't care that an agent, (two in this case), spent months working their tails off for their clients.  They don't care that if they can't make this offer work, there probably won't be another offer.  They don't care that the home will end up in foreclosure and ultimately cost the BANK more money in lawyer fees & court costs.  Not to mention loss of value when the home sits empty for several more months unnecessarily.

But is it really the BANK that doesn't care?  No.  It's the bank's short sale negotiator assigned to the file.  Why would she/he care?   It's the bank that is losing money, not the negotiator's own personal bank accounts dwindling.

I am sure we will find some type of resolution.  That's what I do best.  But I felt the need to share.

Hopefully you will not make the same mistake of thinking that just because you've disclosed a relationship upfront, the bank will pay you ...

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Home Selling
Location:
Indiana Tippecanoe County Lafayette
Tags:
homes for sale
indiana
short sales
agent advice
real estate training
metlife

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
134,231
Marcia Kramarz
Re/Max Executive Realty - Medway, MA
CDPE,LMC,CBR

I hope you're going to give us the FINAL CHAPTER - I'm sitting on the edge of my seat!  Seriously - Keep us posted!

Nov 10, 2011 10:35 AM #1
Rainer
311,757
Debora Nichols
Residential Sales, Purchases, Investors, Vacation Homes - Phoenix, AZ
Realtor Anthem,Phoenix,Scottsdale,Glendale,Peoria

Kimi, Thank you for sharing.  I have had this happen to me once before.  I was representing the buyer.  The listing agent was related to the seller.  She had to remove herself from the listing and put into someone elses name.  She still did all the work on it.  It just wasn't in her name.  Hope that helps.  Good luck.  I would love to know how this works out.

Nov 10, 2011 10:35 AM #2
Rainer
117,647
Nicole Needham
Needham Realty - Winters, CA
SFR (530) 302-5478

Kimi, Near the end of your rant you hit the nail on the head. " they don't care" how much of your time and energy they waste. This market will pass and the Realtor community needs to remember the way the big banks have treated us when there loan officers come calling for business.

Nov 10, 2011 11:09 AM #3
Rainer
9,637
Kimi Sharp
Indiana Realty Grp - Lafayette, IN

@Marcia ,I will - I am as anxious as you to see how this turns out! ... @Debora ,I see what you're saying.  I think I might not be as worried if it was just one of the agents.  But with it being both sides I just don't know how it's going to turn out ... @Nicole , I did sound like I was "ranting" didn't, I?  Sorry for that.  I guess this business can be pretty emotional sometimes if we let it get to us.  Thank you for the reminder that I shouldn't let it ... And I don't think any of us Realtors will forget the way we've been treated - this has been a continuous thing for quite awhile now.

Nov 10, 2011 11:11 PM #4
Rainmaker
90,505
Goran Utvic
606 Homes LLC | Chicagoland Brokers Inc, Chicago IL 60656 - Chicago, IL
We Buy & Sell Chicago Houses Fast

The bank really shouldn't care! I could see if it were a relationship like the listing agent being related to the buyer or the seller related to the buyer of course but I really don't see why it would matter in your case.

Nov 14, 2011 08:57 AM #5
Rainer
9,637
Kimi Sharp
Indiana Realty Grp - Lafayette, IN

I guess I see why they might care in certain situations, and like you said - if it was reversed on who was representing who ... But what I am finding out is that a LOT of banks either already have this policy or are migrating towards it.  It's really something that Agents need to be aware of!  Our deal almost completely fell apart ... The only way to resolve it was for both the buyer and seller to get new representation, and for my seller's new agent to agree to give me a higher referral rate on future referrals :(

Nov 17, 2011 09:00 AM #6
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainer
9,637

Kimi Sharp

Ask me a question
*
*
*
*
Spam prevention