In Nevada, real estate agents are reporting that they are streamlining the short sale process by listing properties on MLS far below market price to elicit multiple offers. They believe that this streamlines the negotiation process with the bank or other lending entity because it gives them many different offers to work with and heightens the homeowner’s odds of getting out of their pre-foreclosure status and into a short sale before time runs out and the foreclosure is enacted.
This sounds like a pretty good idea to me, and it appears, so far, to be making at least the sellers, buyers and agents happy. However, they could be setting themselves up for a fall. After all, at least some of those buyers are likely investors who would like to pay as little for that property as possible – and we all know how Freddie Mac and other lenders feel about that. With the new scrutiny on short sale negotiations and short sale investors not endorsed by the federal government – and by that, I mean everyone in short sales who is making a dime – these agents who are artificially deflating the values of their homes by listing them low could be next on the list of targets.
As always, just make sure that whatever tricks and techniques you use in short sales are approved by your short-sale-specialist lawyer. As a real estate investor, you cannot afford right now to have your methods questioned in the short sale arena.
Great post, it seems that the short sale process is ugly enough and anyway to streamline it is good. It’s a shame that the people that caused all this trouble is making it harder and harder to solve the problem they caused.
A VERY IMPORTANT CONSIDERATION ABOUT REALTORS:
Listing Agents HAVE a “Fiduciary” Responsibility to the Home Owner/Seller the moment that they sign a Listing Agreement. Black’s Law Dictionary Defines Fiduciary as One who: 1. Owes to another the duties of good faith, trust, confidence, and candor. 2. Must exercise a high standard of care in managing another’s money or property.(Page 640 – Seventh Edition)
IT ONLY FOLLOWS THAT ONE MUST ASK THIS QUESTION:
Who Does the Listing Agent Really Work for when Negotiating a Short Sale? The Homeowner or the Bank?
The Listing Agreement states that the Listing Agent Represents the Homeowner…yet, it is the Bank who Dictates whether or not that Realtor ultimately brings home a commission check.
This Opens the Door for the Listing Agent to be in the awkward position of Violating their Fiduciary Responsibility by Having a “Conflict of Interest”.
It is this writer’s opinion that many Short Sale Listing Agents are Setting themselves up for Great Liabilities by putting themselves into this position of having a “Conflict of Interest”.
There ARE Other Alternatives that Work much better that based upon U.C.C. (Contract Law) where the Responsibility for Compliance is placed upon the shoulders where it rightfully belongs. REMEMBER: “Compliance is Not Retroactive”..
Pro Short Sale Wiz…….. interesting comment. would you mind expounding upon the alternatives and placing responsibility?
If a real estate agent is listing a home at the market value and making all appropriate disclosures that the transaction is subject to third party approval, there is no violation of fiduciary responsibility to the home owner. The duty is to SELL the property. It used to be to get the maximum price for the home owner, but now the homeowner is not getting any of the money in a short sale. So the agent wants to sell the property. That means not only listing for a price that will attract buyers, but being able to submit a market analysis to the bank which justifies that pricing, and being involved enough to dispute the BPO if it comes back way off the mark.
That said, the banks are going to take the property if they want to. I’ve seen it happen with BPOS in beachfront properties, where age of building, condition after hurricane, and view matter greatly for pricing – but the BPO prices a 40 year old townhouse with no ocean view and hurricane damage the same as a 2 year old high rise on the ocean that has never seen a storm. These are allegedly done by local realtors, who do them in bulk and job them out to India. Since there is such low pay for BPOS and they are often done in bulk, a realtor should be questioning them when they are that far off. The question is, will the bank spend another whole $30 for a second BPO.
It is a short sale bec the seller or the “borrower” as the lender calls them, pretty much left the negotiating table the moment they defaulted on their mtg. The lender agrees to short or discount what they owe by cooperating with the process, in return they are not foreclosed on (they can buy another home w/ FHA financing) in less than a year. According to the new HAFA program the seller gets $3,000 relocation benefit to help them, there is no tax ramification, second mortgages disappear and no deficiency punishment. It is a more gentle way of pushing them out of their home! When the lender/servicer signs up to particiapate in the HAFA program, they are also expected to abide by the “rules”. They dictate the listing price based on the appraisal reports they acquired, they have only 14 days to answer an offer and the negotiator assigned is responsible for quick response. The realtor is given a shorter term to list and market the property, or the listing is taken out from them if they are lazy
The realtor discloses to the seller of their right to get advice from their Attorney or accountant before the process begins. The lender/servicer must first qualify the seller through the HAMP program to assess their situation before they agree to the short sale or deed-in-lieu.
TO: cmsvmom’s Comment on 27/04/2010 in 07:54
What you Say is ALL Well and Good with One Major Exception:
What HAPPENS to an INVESTOR with Multiple Properties WHEN that REALTOR Does what this Main Article Discusses and That Real Estate Investor GETS A 1099 (An Income Statement Sent to the IRS) in the Amount of the “SHORTED” Amount AS “Income” They Never Received ? ! ?
OUCH !
There IS a Better Way to Handle this than by Doing a Traditional “Short Sale”. An Ounce of Prevention is Not Worth a “Pound of Cure” in this Case … but Rather a “METRIC TON” of Cure ! ! !
The Realtors of this country have never done anything beneficial for the buyer, seller, or anyone else except themselves.
They are just one of the cogs in the whole housing mess that works behind the scenes to prolong the misery and corruption of what has been happening since Carter’s administration decided Red Lining was going to be thrown out the window and everyone should own a house.
What I mostly see written about our current national dilemma is mostly short term, short sighted, under informed talk about what is happening!
What this article talks about in Nevada is a form of fraud and collusion it does not take a lawyer to figure that out but many realtors have used all kinds of fraud for decades to sell real estate all across the country. Realtors have worked very hard and are still working hard to fuel the housing market at everyone’s expense going up and going down.
The housing mess is so overrun with corruption and dishonesty at this time I am beginning to wonder why anyone would think there is any way of making a moral deal with anyone.
I can understand the people in Nevada wanting multiple offers, people are desperate there. I can understand realtors wanting to make a living, they need to eat also. I can understand where a lot of the mentality comes from; I think I am just sick of all the crap that has been spawned by all of the special interests of each group looking to have some advantage over the other group. It is like honesty has been lost and no longer has a chance to survive any deal. Goodwill has been thrown out the window and concern for our fellow man is the least important aspect of what drives too many people today.
I read in this article one more example of continuation of the same quasi-legal dealings that dragged us all down in the mess of economic collapse and all too much of what I have been reading recently is about “BETTER GET YOUR NOW WHILE YOU CAN!”
That seems to me to be a familiar saw, one that it would appear many have learned nothing from.
Short sales …are not faster sales…they are dragging out the sales, Banks are not responding to the Realtors…I know of many many short sales that offers have been made and cash buyers have been waiting a long time to get banks to release them. A year or more is a typical wait time. Many buyers simply walk because of the banks dragging their feet and not getting the job done.Ultimately, when it finally does come time to close on the property, the buyer walked because of the long wait and the property goes into foreclosure anyway. Short Sales mostly are a Big waste of time for the seller and the buyer.
I have said this before, and I will say it again: I don’t give a DAMN about banks. I hope they all FAIL. I, as an investor have learned that there are many properties that exist in every neighborhood that are owned free and clear and have been neglected by the owners. These are known as “Ugly Duckling” properties. I am getting tired of all these “Guru’s” teaching REO and Short sale deals, when they could simply work on locating, contacting owners, negotiating a fair purchase price and rehabbing these properties without ever having to deal with the corrupt banks or Real Estate brokerages. Both of these industries are corrupt as of now, and are likely to remain that way for some time into the future as long as they maintain their “Get out of Jail Free” card, known to the rest of us as Congress. Get back to the basics people. Find the Diamond in the rough and do things the right way.