Hello fabulous short sale superstars!

I don't know if I had seen this question here before, but should you try and list a family member's home with you as the listing agent, of course with full disclosure,  or just refer it out, so you don't break the Arm's Length Affidavit? This is a Wells Fargo loan.

If you have to refer it out, can your name be added in to the authorization form to negotiate on behalf of your seller (the family member?)

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Laura, I would list a relatives home.  I do not believe that it violates a true arms length transaction, the banks are or should be more worried about the buyer and seller being related.  Having a family member list a home would not be any conflict of interest as the family member would be doing the exact same job as a non family member.

I would NOT let a bank dictate that I could not sell my family members home and would fight them with everything I have if they tried to restrain my trade like that.

Maybe the person who said I couldn't (at the bank) does not really understand the true meaning of Arm's Length and therefore recommend to refer it out.

Thanks for your help Jeff. Happy Holidays to you!

That is probably the case.  That person needs to look up the definition.  What bank are you dealing with?

Definition of 'Arm's Length Transaction'

A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.

Read more: http://www.investopedia.com/terms/a/armslength.asp#ixzz1goBNma1y

Investopedia explains 'Arm's Length Transaction'

The concept of an arm's length transaction commonly comes into play in the real estate market. When determining the fair market value of a piece of property, the price for the property must be obtained through a potential buyer and seller operating through an arm's length transaction, otherwise, the agreed-upon price will likely differ from the actual fair market value of the property.

For example, if two strangers are involved in the sale and purchase of a house, it is likely that the final agreed-upon price will be close to market value (assuming that both parties have equal bargaining power and equal information about the situation). This is because the seller would want a price that is as high as possible and the buyer would want a price that is as low as possible.

This contrasts with a situation in which the two parties are not strangers. For example, it is unlikely that the same transaction involving a father and his son would yield the same result, because the father may choose to give his son a discount.

Read more: http://www.investopedia.com/terms/a/armslength.asp#ixzz1goCWAgvK

I am currently involved in a Short Sale with Chase whereby the seller and agent and the buyer and agent all had to have notarized documentation for Arms Length Agreement and in the agreement it CLEARLY stated that there could be NO connection between any of the four parties EXCEPT for this specific transaction.  I am sure if this were me listing a relative's property that Chase would have had a problem with the transaction.

I have had others with Arms Length Agreement that were not as strict and specific and did not need to be notarized.

I've encountered this before and the first lien holder took 5 months to process it and then declined the short sale file without issuing a reason code. The first buyer ended up walking I advised the seller to find a new agent and we closed a few months later at virtually the same terms as the first buyers contract.

In a separate transaction I've had first lien holders issue an exemption for a family member as the listing agent.

In another separate transaction that listing agents family member (married female sister) last name was different than the seller and nobody asked questions it was approved and closed. I was not aware they were related until closing.

So this appears to be lender dependant.

In the spirit of not wasting dozens of hours of aggravation and time if I am aware of this prior to listing I strongly discourage my seller clients from doing it.  I cite PURE Arms Length and the elimination of post closing litigation issues that could be brought up by the buyer or their title insurance company.




I've successfully completed this with BofA.  It was fully disclosed on the contract and had to be escalated so it wasn't auto-declined.  I was not paid a commission.  However, when I researched it, I was told that if it had been a Fannie Mae loan I could've collected commission as well.

From my experience, B of A would have declined the Short Sale if you were receiving a commission as they would assume that to be a tangible benefit to the Seller who is otherwise required to net $0 at closing.

BOA did not allow me to list my Uncle's home in a short sale.   I referred it out to another agency and received a referral fee.  (25%)

I did not add my name to negotiations as the agent and allowed the agent to do his job.  He successfully closed on the home. 

Thank you all for your responses. This is a Wells Fargo cooperative short sale. I am leaning towards referring it out


P.S. Thanks to All you Short Sale Superstars who are regulars here, I became a better and more educated short sale agent because of you guys. Here is hoping we successfully close more short sales in 2012.  Thanks Wendy and Bryant for creating this group.

Jeff you have made very reasonable rebuttal arguments to this question.

YES BUT, one lender framed it to me in the form of a short sale fraud scenario.

The listing agent family member has the control and power to extend their family members time in the home for up to one year rent free via stifling negotiations with both the buyer and with "document omissions" in the short sale package submission to the sellers lender.

If and when it comes down to contribution participation demands of the seller, the buyer and/or both agents of any short sale approval "funds-short-fall" this issue really comes into play.


I have been told by Citbank that they would not  pay a commission if either agent was related to the buyer or seller. I had an agent submit an offer for her son and the bank refused to pay commission to her.

Bank of America declined my daughter's short sale until I had another agent in my office do the transaction for her. I do not believe it is a conflict of interest, but Bank of America said they had no way to be sure my daughter would not profit from the sale. I dont know about anyone else, but I am not in the habit of giving away my paycheck, not even to family members.

I had good luck with Wachovia and Franklin.

Let us know how it comes out..




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