Short Sale Connection, LLC

Is Your 3rd Party Negotiator Safe?

Posted on 11. Aug, 2013 by ssc in Short Sale Connection Blog

Most of us Realtors try very hard to comply with the myriad of regulations regarding selling houses these days. Short sale listings come with an extra boat load of different regulations. Most agents don't seem to understand that a short sale is a transaction that involves more than just selling a house. It involves other regulatory agencies, and therefore more applicable regulations to be followed. As we all know, every real estate transaction carries risk, but short sales have a much greater potential for liability.

I'm happy to see more of my fellow Realtors starting to accept that it's OK to use someone else that might have a little more experience negotiating mortgage debt, and may possibly be more familiar with the different lenders policies and guidelines effecting short sales. After all, most of what we hire them for is to do all the time consuming short sale tasks we don't get paid extra for... those things that take our time away from listing and selling houses...and making money. I remember many a heated argument over this with other Realtors and Attorneys over the legalities of hiring someone else to help with short sales.

This recent acceptance of 3rd party involvement has spawned scores of new entities to surface over the last 2 or 3 years. Of course not all these companies are doing things the right way, at least from this Realtor’s standpoint. Lately I've seen some pretty serious potential problems with short sales listed with a few agents in my local area of Harrisburg, PA. These properties are listed with agents using a local title company as a short sale negotiator. I feel awful for these sellers when I see their house go to a sheriff sale, knowing they'll have a foreclosure hanging over them for many years. I feel bad for the agents too since they won't get paid and even possibly lose their real estate licenses or face hefty fines.

But they should have known better....

Folks, it's our responsibility as Realtors to protect ourselves and our clients. We all want to keep ourselves in good standing with the RE Commission and other regulatory agencies. We need to understand that when we hire someone to take care of that short sale work, we're not passing off the responsibility of keeping us out of hot water. So please make sure that 3rd party negotiation firm know our regulations, or at least work closely with a very good Real Estate Attorney that does. None of us wants to get that registered letter several months or years after closing (or not closing) a short sale that's guaranteed to make our life miserable. Here are some things we can all do as Realtors to protect ourselves and our clients when working with a short sale negotiation firm.

Know What's Going On! In other words, know all the procedures and methods used by your short sale entity. Ask questions throughout the process. Have them explain what they're doing and why. They should be used to answering these same questions from sellers. The answers also give you an idea of how well they know short sales and how long they've been doing them. Make sure you know of any promises, instructions, and disclosures they use.

Make sure you know that everyone involved in the transaction understands everything throughout the process and get copies of all documents. One seemingly minor item left undisclosed can be the catalyst for charges of bank fraud. Make sure EVERYTHING IS DISCLOSED TO EVERYONE! How is your negotiator disclosing their involvement in the process? Is that disclosure getting to the seller's lender? Remember, if your disclosure is hidden, it's not doing much disclosing, is it? Disclosure by nature should be obvious and hard to miss.

Make sure you are protected. Is your 3rd party company providing you disclosure forms regarding FTC (MARS) regulations? It's your butt on the line - Regardless of who they're representing, when (..it) hits the fan, it's your license. Your 3rd party firm probably isn't a licensed real estate entity, so the Real Estate Commission won't be going after them? They'll go after the licensee...You. Obviously you are the only one that's vulnerable, so it's up to you alone to make sure you're protected. After all it is your transaction and you should be held accountable, so be sure to Ask! Learn! Get Copies! And make sure things are being done correctly or use someone else.

Make sure they're not using forms that will come back to haunt you. I don't have a lot of time to research all the companies offering to help agents with short sales, but when I see agents displaying documents in my local MLS that scream – “Come take my license!... and fine me!” I wonder if those agents checked out that short sale company at all. Seriously, it’s OUR responsibility as Realtors to review any and all documents involved in OUR transactions. I really think it's extra important with all these new companies popping up lately to check their credentials...AND their forms. Case in Point - I just saw one set of documents from a local title company that I'm very familiar with - (They weren't making ends meet doing title work, so short sales sounded like easy money!). Now being a title company you'd expect they'd have some clue as to what's acceptable and not according to those fine badged folks charged with watching over us agents (And Title Companies) to keep us from taking too many liberties with the fees...like those on the HUD1. You know, that little thing called RESPA. You’d think they might know better, but sure enough, here (for all eyes to see) proudly displayed by the listing agent in the MLS docs, their title company/short sale negotiation firm is advertising that if the buyer's lender won't allow their fee on the HUD1, that buyer needs to bring them certified funds at settlement. They may as well say bring the money in unmarked small bills placed in a brown paper bag.I've actually seen these aforementioned documents on several short sale listings. I guess that could mean less competing RE licenses for the rest of us. I may be really pushing the point here, but Agents....look over the forms, all the forms, even those that don't need signed. Read them. Show them to a good real estate attorney if you don't understand them, ask, but don't just blindly have your seller sign them unless you're 100% sure they're not prison bait.

Ross Gahagan, Realtor & Managing Member of Short Sale Connection LLC