Yesterday I had the opportunity to attend a short sale class for san diego realtors give by an attorney and realtor. She sits on boards for Realtor associations, does some short sales and defends Realtors when they get sued.
She had a great deal of credibility with the audience of close to 200 as many had seen here lectures previously.
The take away from the class for me and I am sure for almost every Realtor there, is that a Realtor should not take a short sale listing until the client sees an attorney and tax advisor.
Here is just a beginning list of considerations why a Realtor should not list a short sale until the seller has spoken with an attorney and perhaps a tax advisor:|
1. No amount of disclaimers can make up for the fact that a short sale may harm many sellers and no amount of signed disclaimers will allow a Realtor to practice law, analyze the situation and declare a short sale is the right choice for the seller. A seller must consider and weigh the consequences of a deed in lieu of foreclosure and foreclosure.
2. No amount of disclaimers will avoid the fact that a lawyer needs to go over the paperwork to ensure the seller is well advised and protected. A short sale without agreements will probably get the Realtor sued.
3. A Realtor may not advise the client on deficiency. To do so could get the Realtor sued.
Just think about the fun plaintiff's attoneys will have. Did you get paid for the short sale? Were you an agent? For whom, the lender? Did you have any duties? What were they? Was your client at risk for a deficiency? (you lose when you answer this one) How did you know? Do you ever mention anything about deficiency to the seller? Why not? So you made a legal choice for the seller? Are you licensed to make legal choice? Give counsel on California law? Why don't you explain 580b to me. So prior to the property going back to the bank does the owner have personal liability on the loan? So why do the short sale? Did you negotiate with the bank. As a representative, isn't that what attorneys do? Do you draft the release? Do you understand the legal consequences, did the seller etc, etc.
4. A Realtor may not advise the client on taxation for loan forgiveness. Even if they could they are not license to suggest that a short sale may be a better solution than a foreclosure. So again how can a short sale happen without legal advice?
5. A Realtor may not advise the client on taxation for capital gains. To do so or not do so could get the Realtor sued for the reasons seen above.
1. I think it is safe to say no Realtor should take a short sale until the client has been advised by a lawyer and perhaps a tax advisor. No amount of disclaimers will get around the fact that without proper legal advice a Realtor is taking on way too much liability.
Why? because a short sale is just one of the pre-foreclosure remedies a homeowner can consider. And for many it is not the best option. A short sale may introduce liability for deficiency and taxes to many homeowners who would not be exposed to such liability if a foreclosure or deed in lieu of foreclosure is selected.
In our next blog we will talk about the liability associated with the short sale package.
In future sales we will speak about negotiations and releases.
