Flipping, flopping and the potential future lawsuits with short sales
If you are a Realtor and work with short sales you may want to check out the article I wrote about one type of short sale fraud. The blog article is a very transparent battle between my view points, views of a few other Realtors and those of short sale investors.
If you are into controversy go visit the article because you are in for a real treat! In fact the article was plagiarized on Active Rain and I had to ask the powers that be take it down!
Many of the short sale investors who made comments have a problem with the title of the article as they believe that I am casting a negative light on all short sale investors. Actually this was not my intention in writing the article at all.
I truly want to make all consumers aware of what is going on in the world of short sales. There is short sale fraud taking place on a monthly basis throughout the country.
Don't tell an investor that though....they won't believe you. In fact they believe the national media has it all wrong.
Short sale fraud comes in many forms but the example I discussed was when a short sale that is listed for $175,000 receives an offer from a couple that wants to buy the home for $160,000.
Instead of submitting the offer to the lender, the agent calls up an investor friend and has them submit an offer for $140,000. The agent does not let the lender or seller know about the $160,000 offer but instead submits the investors offer of $140,000.
The investors offer of $140,000 gets accepted and the investor turns around and sells the property to the couple who was willing to pay $160,000. Folks this is what is known as MORTGAGE FRAUD! The other term for this practice is known as “flopping”. Someone caught doing this will more than likely find themselves in Federal Court. Both the Realtor and investor in this example are obviously criminals.
The article goes on to talk about why a consumer should do their home work when deciding to work with an investor or not.
There were some very good points made from some of the investors along with some ridiculous statements from others that don't have a clue about Real Estate laws and what the term fiduciary responsibility means. The ones that really get me are the investors who are also Realtors. Frankly they should know better.
They were all trying to poke holes in everything I wrote and were even bashing me in their investor forums (Bigger Pockets) all the while thinking I would not see it. Most of them obviously don't know how the internet and search engines operate. It was very comical to watch it all unfold behind the scenes.
All these investors were writing things like "I am the dumbest Realtor in the Northeast", "I can't believe this guy can even get business he's so stupid and that's putting it nicely", "I can't even believe he got a license". While I certainly have strong opinions, I did not post any disparaging remarks. I truly was LMAO looking at some of the comments being written.
I have been fortunate that I have closed every short sale I have listed. I will admit there is some luck involved with that and my streak will come to an end at some point. A couple of investors did not believe me and went so far as to call me a liar. Real Classy. And investors wonder why they get a bad rap with Realtors!
What you can take away from this article and the comments from investor land is that they absolutely hate it when Realtors mention anything negative about them. We all know there are good and bad eggs in every business. There is no exception for those in the investment world. Don't tell them that though. Every one of them is walking on water in their eyes. The media is just providing sensational journalism folks!
They will tell you that they are providing a service and helping home owners escape foreclosure. Fine..I have no problem with that. In fact I believe that all of the investors that visited my blog and made comments are probably honorable, trustworthy and good at what they do.
I repeatedly stated over and over that I don't have a problem with their business. If they can free a short seller from their debt and make a profit all the power to them.
There is a very big difference however, when a property is listed with a REALTOR and here is why!
Realtors should not let short sale investors take over negotiations with a lender!
The reason why short sale Realtors should not let a short sale investor take over negotions with a lender is fairly obvious.
If you are a Realtor who does short sales or is thinking about doing them here is where you really need to pay attention. Without a doubt we live in a very litigious society today. There is going to be lawsuits that come out of many of the short sale transactions that are taking place or should I say don't take place.
When you sign a listing contract to represent a seller they are YOUR client. YOU are THEIR trusted adviser and advocate. You need to be thinking about doing everything possible that benefits THEM.
The same holds true when it is a short sale transaction. The rules of the game don't change! This is where investors don't understand that we are held to different legal standards than they are.
What do you mean by that Bill? Simple...when a person needs to short sell their home and they hire me they can expect that I am going to do everything that I normally do for every other seller. My goal is to get my client the best terms and conditions.
Once I get a good offer from a buyer that has a strong probability of closing, an attorney, who is part of my team, takes over the negotiations with the lender. The attorney I use is very good at what he does. This is part of the reason why the seller hired me. Most of the sellers have done their research and selected me because of my track record with closing short sales.
When an investor approaches you about making an offer they will undoubtedly want to negotiate the deal for the seller. Well guess what the seller didn't hire an investor to get them out of the financial mess they are in... they hired YOU!
If you go along with this arrangement and the transaction goes sour for any reason causing the seller to be foreclosed on guess where the fingers are going to be pointed. Do you have a mirror handy? This is akin to letting a buyer's agent negotiate for the seller!
I can already hear the seller's attorney in court:
"The Realtor said this was a good idea and told you should let the investor take over the short sale negotiations Mrs. Jones. Is this correct? Yes sir it is.
"Didn't you hire this Realtor and his team to help you with your short sale mam"? Yes I did sir.
"Did the Realtor advise you to work with this investor mam"? Yes sir they did.
"Do you know this short sale investor MR. Gassett?" No sir I do not.
"Mr. Gassett do you think the investor was working on behalf of the interests of your client"
Well Um Err they told me they were going to do everything in the best interests of Mrs. Jones.
Your honor.... no further questions.
NO THANKS! I certainly don't want to find myself in court and neither should you. Do yourself a favor and don't end up looking like the dude above.
Other short sale reading:
About the Author: The above Real Estate information on Short sale Realtors and short sale investors do lawsuits wait in the wings was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356.
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Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys providing helpful information to buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and others.