With the rise in short sales happening all around the country it is important to know what your responsibilities are as an agent representing a seller in this situation.
A "short sale" is when a mortgage lender agrees to accept less than the total amount remaining on the mortgage, allowing the homeowner to sell the property at a lower price and pay off the balance of the loan.
As foreclosures increase across the United States, lenders are more willing to negotiate short sales to avoid the expense and troubles of taking a delinquent customers home.
Foreclosing on a home and selling it at an auction costs around $50,000 on average. Banks are not in the business to own homes and would just assume to work something out with the homeowner is it makes good fiscal sense.
I can not speak for other parts of the country but as a Realtor selling homes in Massachusetts the law is quite clear. Article two of the Real Estate code of ethics states that "Realtors shall avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction."
This situation certainly can come to pass in a short sale. There will be times as a listing agent that you are representing a seller and find out that your client (the seller) is in financial trouble and their mortgage on the property is higher than what you can sell the home for.
The question that arises is should the seller's agent let the buyer's agent know these facts? The answer is not cut and dry. If the sale is not going to take place because of the "short sale" then it must be disclosed. If homeowner has an agreement with the lender and the deal will close as it was scheduled then the disclosure is not required. As a Realtor you need to make sure you avoid misleading the status of the transaction. If you find out that the sale is not going to occur you need to disclose this information immediatly to the buyer's agent.
As a Realtor when you find yourself in a short sale transaction is makes good sense to get things in writing. As an example, If a seller has told you he has an agreement with his or her bank, make sure you get confirmation of this. The last thing you want is to have a buyer take legal action against you because you trusted the seller was giving you accurate information.
A short sale is a complicated transaction where you will be asked for advice. Above all else do not try to act as an attorney. Make sure you have your seller client speak with appropriate council. These types of transactions can be filled with emotion. After all who wants to lose their home! In a short sale you more often than not will be investing a lot of time and hard work. A short sale has more parties to satisfy including the lender, homeowner, buyer, agent, and investor who has the mortgage.
In Massachusetts like many other parts of the country, the "short sale" will be a common term for a while. Here are a few other Reall Estate articles on short sales worth reading:
About the Author: The above Real Estate information on ethics in a short sale the responsibilities of a Realtor 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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