No, I don’t think Realtors in general fall into this category. Just those Short Sale Agents that suddenly want to take 6 to 12 class room hours and convert them into a legal degree. So, I have another prospective client in our office. Now currently separated due to the stress of financial problems getting the best of them. They started a Short Sale about a year ago after failing to secure a loan modification. A Loan Modification that would have made no sense whatsoever. The Short Sale closes in August. The lender is Chase.
So, what is the problem? The Short Sale closed, Right? Well, the agent tells them, after he has negotiated the short sale, that the Short Sale approval letter from the lender is fine and if they want to seek legal counsel go for it but, if they do, the buyer will walk as the transaction must close that day. What?!? So, the listing agent, a.k.a. Expert, CDPE, Certified Distressed Property Expert, does not share the approval with them till the closing table? Not only that, he does not show up for the closing. They fax the letter to him from escrow and he says that he has seen it and it is fine. The letter is very clear. The Borrower understands that they owe the deficiency and that Chase will pursue collection of that deficiency balance. The Seller did not want to sign but felt pressured by all parties to close.
My problem is that if they had just been directed to legal counsel prior to listing, they would have understood that this First Mortgage with Chase on a Single One to Two Family dwelling of 2.5 acres or less that they had lived in for 5 yrs was non recourse. That is, if they let it go to Trustee Sale, they would owe nothing more. Yes, I hear the argument coming from the Realtor next. “The law says the lender cannot secure a deficiency” Well, we don’t disagree that if the lender sues them, they will probably not win in court…Probably not. Why should we have this discussion now? Because it cost allot of money to go to court and much less than the consultation and legal opinion needed to rely upon when deciding to close or not. When that letter came out, the Seller should have been informed to seek counsel on it and the responded back to the lender with “No, we will not sign till you change the letter”. “If you don’t, we stick the home up your left nostril”.
We really need Short Sale Agents to stop relying upon the understanding in Arizona that there is no deficiency as a way to coax a closing out of a Seller. You see, this is no longer about the deficiency, it is about the turmoil this family is going to now endure. Chase, with the understanding that the Short Sale agreement states that there is a deficiency and the Borrower agreed to it, they have turned it over to collections, they have started making phone calls and written demands. What do the, now damaged, borrowers do? The seek legal counsel now, that will cost more than what they would have spent to prevent it in the future.
Now, we don’t sue Realtors. We don’t advertise to consumers so, the only way a prospective client walks into our doors, is by way of referral from a Realtor, but, I guarantee, this client, is going after this agent. There are a couple prominent Real Estate Law Firms in town that have decided to the Sheriff in town. The agent represented in writing and verbally to the Seller that they had nothing to worry about and that the lender cannot do, what the lender is doing right now. I would bet even money that the E&O policy does not cover the negotiation of a short sale by the Short Sale Agent.
Bottom line, Realtors, don’t just inform your client to seek counsel, Require it. Before you list. Given the layer of MARS, make sure the Attorney puts whatever opinion in writing.
This always blows my mind. I work in Virginia. It is a recourse state, and allows for deficiency judgments. There are so many “short sale” agents in my area that tell sellers that they have nothing to worry about once their short sale is approved. Many of these agents have never taken a short sale course that is designed for Virginia agents. Agents should be held accountable for the information they are giving consumers. I have a feeling that many of these agents were also telling buyers that a sub-prime loan was the bect way to go during the “hay-day” of real estate.