Two years ago no one had ever heard of a short sale unless they were a realtor that dealt with them back in the '90's. Now everyone knows what they are. What scares me are these "fly by night" short sale negotiation companies that are popping up left and right. Google "short sale" and you'll find them by the handful. What's scary is that one of my colleagues and myself have taken the time to research some of these so called negotiators only to find that they've been licensed for less than six months or some are not licensed at all.
Yes, I made the mistake of having one of these companies help me with one listing. I interviewed them along with three other companies none of which were licensed in California. This is why they solicit real estate agents. They need your license on all your state contracts and need you to market and procure an offer. Once an offer is submitted they step in and start the negotiation process on your behalf. Yes, they'll do this and you split your commission with them. I chose the one company that I thought was best. Why didn't I handle it myself? Well, my workload was swamped and I was currently handling three other short sales that were driving me crazy so I sought out their help.
Turns out they negotiate terms that work in their best interest and deepen THEIR pockets. And since they don't hold licenses they'll attempt to get you or your escrow company to work in the "grey area". Hey, it's not their license on the line and your name's on all the contracts. Not only did my "rep" attempt this but he also wanted me to cheat my co-op agent out of his commission. The 'rep' is completely unaware that changing the commission promised on a listing is an MLS violation, not to mention pretty slimy. I treat all my co-op agents with respect and fair business practice. I checked my HUD when we attempted to open escrow only to find that the short sale company was making an additional $2000 along with my split that I was going to pay to them. He tried getting my escrow officer to pay commission directly to his company but she todl him she needed his CA broker ID # to do so. Needless to say this sale was dropped like an old hat.
So who do you choose when you need a short sale? A licensed realtor. One that's been in the business for a while and one that has proven negotiation skills. One that knows how to properly excercise due diligence. One that understands the basic fundamentals of contract laws. One that's smart enough to negotiate with the second lienholder prior to negotiating with the first. There's plenty of good short sale listing agents out there. Don't go with those unlicensed companies. They're here today gone tomorrow. Once this wave of foreclosures ends they'll be back flipping burgers or delivering pizza.
Great post! Please PM me (or post) the name of this company. I'm in southern CA and am sure I've probably been contacted by them as I've had 6 short sale listings in recent months.
What about investor/buyers who ask to negotiate a short sale on their own? I got an offer this weekend from an unlicensed buyer/investor who approached my seller directly. The offer was written by her "partner" who has a cancelled license and operates a short sale company. The offer was written by an unknown agent on behalf of the partner's LLC, assigning the property to a trust held by the buyer. They're asking for POA and a warranty deed of trust.
Aside from the obvious red flag warning of the deed assignment, I suspect they'll try to negotiate away my commission. After all, they buyer agent will want to get paid, the "real" investor (not on the contract) seeking to gain instant equity, and the short sale negotiation company that trained her.
Thanks Reggie. Wow, that's another item we have to watch out for when doing short sales. The offer was written by an unknown agent? We're required in California to disclose who we are and who we respresent to all parties involved when entereing a transaction. To withhold that information is a violation of the DRE. The whole thing sounds fishy and I advise your client to walk away from that offer. They want a warranty deed of trust and a POA? Walk away.
Also, if this investor is purchasing the property as an investment, no agent in California can represent him/her unless they have a Non-Agency written agreement and use the C.A.R. form NODPA - Home Equity and Agency Explanation Purchase Agreement. As an investor in this transaction he is an Equity Purchaser in which California Civil code 1695.17 requires the buyers agent to:
Honestly, it sounds as if your client was approached by scam artists anyway. If your client insists on moving forward with them I'd terminate my agency with them. You don't want that kind of liability
Also, find out if the E&O company your broker uses has a HOTLINE for agents. Most do. You can call their risk management attornies and pitch this scenario to them. Good luck on this one my friend.
Why is it that so many self-proclaimed entrepreneurs insist on nudging the law rather than paying the small price to get a legitimate real estate license? Maybe the reason is that they would have a fiduciary responsibility and an obligation to be concerned about the public.
In the past year I talked with dozens and dozens of investors whose short sale value proposition is "we help the owner get out of trouble". But they deliver nothing of the kind. The real goal is to get control, flip the property, and screw the bank. What about he home owner... oh ya, they forget about the home owner.
I hate excessive regulation. But... there aught to be a law.
Jim Broline
Why is it that so many self-proclaimed entrepreneurs insist on nudging the law rather than paying the small price to get a legitimate real estate license? Maybe the reason is that they would have a fiduciary responsibility and an obligation to be concerned about the public.
In the past year I talked with dozens and dozens of investors whose short sale value proposition is "we help the owner get out of trouble". But they deliver nothing of the kind. The real goal is to get control, flip the property, and screw the bank. What about he home owner... oh ya, they forget about the home owner.
I hate excessive regulation. But... there aught to be a law.
Jim Broline