Made it all the way to investor approval to be denied, My realtor and seller are related
I am a buyer that found a house on realitor.com I did not have a realitor so i contacted the listing agent directly. we put in a offer at fair market value and got all the way to investor approval, yesterday the realitor informed me that the bank has denied the offer due to the seller of the house is her sister. the realitors broker said that he would put another realitor on the case, now the bank doesn't want to deal with the broker or the realitor at all. Does anyone have any suggestions how to fix this.
Appreciate any Help
Paul
Replies to This Discussion
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Permalink Reply by Joan Lorberbaum Moore on
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Illgal or legal - - you can determine that for yourself whether any knowing violation of the arm’s length transaction prohibition may be a violation of federal law. But, here's HAFA guidelines on selecting a short sale agent from the Short Sale Agreement to be signed by the owner and the listing broker:
Short Sale Program—Additional Information
- You can’t list the property with or sell it to anyone that you are related to or have a close personal or business relationship with. In legal language, it must be an “arm’s length transaction.” If you have a real estate license you can’t earn a commission by listing your own property. You may not have any agreements to receive a portion of the commission or the sales price after closing. Any buyer of your property must agree to not sell the home within 90 calendar days of the date it is sold by you. You may not have any expectation that you will be able to buy or rent [servicer may delete “or rent” in accordance with investor guidelines] your house back after the closing. Any knowing violation of the arm’s length transaction prohibition may be a violation of federal law.
Jeff Payne said:I will believe this as soon as I see the law that states it is illegal. I agree that an agent is best advised to not do it but it is not illegal
Joan Lorberbaum Moore said:My understanding of the regs (and my memory seems to recollect) that the short seller and the agent must NOT be related in any way. Further, to disallow any suspicion of collusion, kickbacks, etc. a licensed agent desiring to short sale his/her own property is best advised to give the short sale listing to an agent associated with a different real estate brokerage. I know several agents that are doing just that. They don't want their short sale mucked up by any whiff of collusion or interpretation of arm's length, etc. that would preclude the lender/servicer from approving the short sale.
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Permalink Reply by Scott Korbin on
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There you go! THX for sharing. So at least we know it applies under all HAFA transactions.
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Permalink Reply by Jeff Payne on
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May be a violation of a federal law? What federal law? If there is one, I would really like to see it. I would think it could constitute fraud if the relationship were not disclosed but still do not know of a law prohibiting the sale of a property by a relative. Actually it could be quite the contrary if a lender or investor is knowingly interfering with a contract that I have with a seller, they may be illegally interfering with a contract. Again, disclosure is the key. Fortunately I dont have any relatives who will need my short sale services and my mortgage is almost paid off so I really dont have much of a dog in this fight.
Joan Lorberbaum Moore said:Illgal or legal - - you can determine that for yourself whether any knowing violation of the arm’s length transaction prohibition may be a violation of federal law. But, here's HAFA guidelines on selecting a short sale agent from the Short Sale Agreement to be signed by the owner and the listing broker:
Short Sale Program—Additional Information
- You can’t list the property with or sell it to anyone that you are related to or have a close personal or business relationship with. In legal language, it must be an “arm’s length transaction.” If you have a real estate license you can’t earn a commission by listing your own property. You may not have any agreements to receive a portion of the commission or the sales price after closing. Any buyer of your property must agree to not sell the home within 90 calendar days of the date it is sold by you. You may not have any expectation that you will be able to buy or rent [servicer may delete “or rent” in accordance with investor guidelines] your house back after the closing. Any knowing violation of the arm’s length transaction prohibition may be a violation of federal law.
Jeff Payne said:I will believe this as soon as I see the law that states it is illegal. I agree that an agent is best advised to not do it but it is not illegal
Joan Lorberbaum Moore said:My understanding of the regs (and my memory seems to recollect) that the short seller and the agent must NOT be related in any way. Further, to disallow any suspicion of collusion, kickbacks, etc. a licensed agent desiring to short sale his/her own property is best advised to give the short sale listing to an agent associated with a different real estate brokerage. I know several agents that are doing just that. They don't want their short sale mucked up by any whiff of collusion or interpretation of arm's length, etc. that would preclude the lender/servicer from approving the short sale.
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Permalink Reply by Patti Lyles on
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Are you an Attorney? After 4 years of Real Estate Law I will share an eye-opening revelation. Legal precedent starts with what we call a “Ginny Pig” case. Who wants to be a legal Ginny Pig? Soon this specific Short Sale discussion will be laid to rest. Those Las Vegas real estate agents currently under scrutiny with numerous Nevada Regulatory boards all have smart lawyers arguing their cases. There is also a case in Florida. While all the sides duke it out in court for the next year, professioanlly I will proceed with caution by avoiding any appearance of wrong doing. If it is a HAFA Short Sale read the guidelines carefully.
Personally, I would love to be able to sell my underwater house for a FMV to my sister-in-law and then rent it back, as my loan is about to recast and the payment doubles. So I will be watching what happens in this Wild West World of Short Sales.
Michael Schneider said:
Legal is not the issue here. I can sell my underwater property to my Mother, Brother, Nephew or Aunt (MBNA), if I choose to, and use my Father, Sister, Niece or Uncle as my Broker. But, they may have to buy it, with the lien attached to the property...
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I suppose one could take on the Feds and argue with them in court should they bring charges against you. But, their argument might be that since HAFA (as are other Making Home Affordable programs) is a federally guided program, started and overseen by the Feds that any violation of their guidelines is, indeed, a violation of federal law.
Jeff Payne said:May be a violation of a federal law? What federal law? If there is one, I would really like to see it. I would think it could constitute fraud if the relationship were not disclosed but still do not know of a law prohibiting the sale of a property by a relative. Actually it could be quite the contrary if a lender or investor is knowingly interfering with a contract that I have with a seller, they may be illegally interfering with a contract. Again, disclosure is the key. Fortunately I dont have any relatives who will need my short sale services and my mortgage is almost paid off so I really dont have much of a dog in this fight.
Joan Lorberbaum Moore said:Illgal or legal - - you can determine that for yourself whether any knowing violation of the arm’s length transaction prohibition may be a violation of federal law. But, here's HAFA guidelines on selecting a short sale agent from the Short Sale Agreement to be signed by the owner and the listing broker:
Short Sale Program—Additional Information
- You can’t list the property with or sell it to anyone that you are related to or have a close personal or business relationship with. In legal language, it must be an “arm’s length transaction.” If you have a real estate license you can’t earn a commission by listing your own property. You may not have any agreements to receive a portion of the commission or the sales price after closing. Any buyer of your property must agree to not sell the home within 90 calendar days of the date it is sold by you. You may not have any expectation that you will be able to buy or rent [servicer may delete “or rent” in accordance with investor guidelines] your house back after the closing. Any knowing violation of the arm’s length transaction prohibition may be a violation of federal law.
Jeff Payne said:I will believe this as soon as I see the law that states it is illegal. I agree that an agent is best advised to not do it but it is not illegal
Joan Lorberbaum Moore said:My understanding of the regs (and my memory seems to recollect) that the short seller and the agent must NOT be related in any way. Further, to disallow any suspicion of collusion, kickbacks, etc. a licensed agent desiring to short sale his/her own property is best advised to give the short sale listing to an agent associated with a different real estate brokerage. I know several agents that are doing just that. They don't want their short sale mucked up by any whiff of collusion or interpretation of arm's length, etc. that would preclude the lender/servicer from approving the short sale.
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Permalink Reply by Beverly Cibulsky on -
Great Post Patti!
Article 4 is from the "National Association of REALTORS Code of Ethics, which must be abided by ALL State Association of REALTORS! Dont want to say so, but this Buyer may have a good "Ethics Complaint " against the original agent's REALTOR Association.
Jeff Payne said:I did read this and I agree that you must disclose. Florida requires the same disclosure if you have an interest in or are related to the seller.
I have never had BofA cut commissions or deny a sale just because both agents were in the same office, I have had them cut if I had both sides which rarely happens because I dont work with buyers, just sellers.
are you disclosing that you are getting a referral from the agent that you referred the seller to because you wanted to avoid the family member issue?
Patti Lyles said:They will deny because BofA will not pay commission. BTW: This stuff always gets found out in the eleventh hour when the demands are checked and BofA sees it is the same Brokerage on both sides, their radar goes off. Sometimes you simply open the file again and Seller has to get another agent. 1st try using another agent from the same Brokerage and work out a deal between the two agents to get your agent some compensation for the work. If that doesnot fly it is because the Investor is afraid of the liability, just go get another agent outside of Listing Brokerage and work out a referral deal.
This is an issue on another level. Lack of Disclosure. In the State of CA = When you are the Listing Agent you have to put on the listing in the MLS you have to post “Agent is related to Seller”. On the other hand: If I am representing a Buyer that I am related to, I have to put on the purchase offer that . . . Buyers Sister is a Licensed Real Estate Agent for the State of California… if I buy anything or represent my immediate family. i.e. Buyers wife is a Licensed Agent, Buyers Mother is a Licensed agent. Yahda yahda….
• Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)• Standard of Practice 4-1
For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by REALTORS® prior to the signing of any contract. (Adopted 2/86)
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Joan I am not disagreeing with you, the HAFA program has guidelines and they need to be met, at any rate, short sale or not, I am simply stating that disclosure is the key when dealing with related parties. Everyone is making assumptions and until I see a law that says a seller can not hire their relative to sell their home, I will stand by my non legal opinion.
Joan Lorberbaum Moore said:I suppose one could take on the Feds and argue with them in court should they bring charges against you. But, their argument might be that since HAFA (as are other Making Home Affordable programs) is a federally guided program, started and overseen by the Feds that any violation of their guidelines is, indeed, a violation of federal law.
Jeff Payne said:May be a violation of a federal law? What federal law? If there is one, I would really like to see it. I would think it could constitute fraud if the relationship were not disclosed but still do not know of a law prohibiting the sale of a property by a relative. Actually it could be quite the contrary if a lender or investor is knowingly interfering with a contract that I have with a seller, they may be illegally interfering with a contract. Again, disclosure is the key. Fortunately I dont have any relatives who will need my short sale services and my mortgage is almost paid off so I really dont have much of a dog in this fight.
Joan Lorberbaum Moore said:Illgal or legal - - you can determine that for yourself whether any knowing violation of the arm’s length transaction prohibition may be a violation of federal law. But, here's HAFA guidelines on selecting a short sale agent from the Short Sale Agreement to be signed by the owner and the listing broker:
Short Sale Program—Additional Information
- You can’t list the property with or sell it to anyone that you are related to or have a close personal or business relationship with. In legal language, it must be an “arm’s length transaction.” If you have a real estate license you can’t earn a commission by listing your own property. You may not have any agreements to receive a portion of the commission or the sales price after closing. Any buyer of your property must agree to not sell the home within 90 calendar days of the date it is sold by you. You may not have any expectation that you will be able to buy or rent [servicer may delete “or rent” in accordance with investor guidelines] your house back after the closing. Any knowing violation of the arm’s length transaction prohibition may be a violation of federal law.
Jeff Payne said:I will believe this as soon as I see the law that states it is illegal. I agree that an agent is best advised to not do it but it is not illegal
Joan Lorberbaum Moore said:My understanding of the regs (and my memory seems to recollect) that the short seller and the agent must NOT be related in any way. Further, to disallow any suspicion of collusion, kickbacks, etc. a licensed agent desiring to short sale his/her own property is best advised to give the short sale listing to an agent associated with a different real estate brokerage. I know several agents that are doing just that. They don't want their short sale mucked up by any whiff of collusion or interpretation of arm's length, etc. that would preclude the lender/servicer from approving the short sale.
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Well said Beverly, disclosure is the key
Beverly Cibulsky said:Great Post Patti!
Article 4 is from the "National Association of REALTORS Code of Ethics, which must be abided by ALL State Association of REALTORS! Dont want to say so, but this Buyer may have a good "Ethics Complaint " against the original agent's REALTOR Association.
Jeff Payne said:I did read this and I agree that you must disclose. Florida requires the same disclosure if you have an interest in or are related to the seller.
I have never had BofA cut commissions or deny a sale just because both agents were in the same office, I have had them cut if I had both sides which rarely happens because I dont work with buyers, just sellers.
are you disclosing that you are getting a referral from the agent that you referred the seller to because you wanted to avoid the family member issue?
Patti Lyles said:They will deny because BofA will not pay commission. BTW: This stuff always gets found out in the eleventh hour when the demands are checked and BofA sees it is the same Brokerage on both sides, their radar goes off. Sometimes you simply open the file again and Seller has to get another agent. 1st try using another agent from the same Brokerage and work out a deal between the two agents to get your agent some compensation for the work. If that doesnot fly it is because the Investor is afraid of the liability, just go get another agent outside of Listing Brokerage and work out a referral deal.
This is an issue on another level. Lack of Disclosure. In the State of CA = When you are the Listing Agent you have to put on the listing in the MLS you have to post “Agent is related to Seller”. On the other hand: If I am representing a Buyer that I am related to, I have to put on the purchase offer that . . . Buyers Sister is a Licensed Real Estate Agent for the State of California… if I buy anything or represent my immediate family. i.e. Buyers wife is a Licensed Agent, Buyers Mother is a Licensed agent. Yahda yahda….
• Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)• Standard of Practice 4-1
For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by REALTORS® prior to the signing of any contract. (Adopted 2/86)We
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No Patti, I am a real estate agent. I have no issue at all, tell the Feds to come see me, I am an open book. what exactly are the real estate agents in LV being investigated for, disclosing that they are related to the seller? Is it illegal for the seller to be related to their agent in a non short sale? I know HAFA has guidelines but read all of these posts and tell me that EVERY lender has a rule that there can be no relationship between any party to the listing or purchase agreement.
Just because there may be investigations does not mean the parties are guilty, so we should not make assumptions.
My point in all of this is that there is not grand rule, law or guideline that says on every short sale there must be no relationship between seller and their agent or even any rule that says the seller can not sell to their tenant (arms length transaction). Each lender, servicer, program, investor is different and one rule does not apply to all
Patti Lyles said:Are you an Attorney? After 4 years of Real Estate Law I will share an eye-opening revelation. Legal precedent starts with what we call a “Ginny Pig” case. Who wants to be a legal Ginny Pig? Soon this specific Short Sale discussion will be laid to rest. Those Las Vegas real estate agents currently under scrutiny with numerous Nevada Regulatory boards all have smart lawyers arguing their cases. There is also a case in Florida. While all the sides duke it out in court for the next year, professioanlly I will proceed with caution by avoiding any appearance of wrong doing. If it is a HAFA Short Sale read the guidelines carefully.
Personally, I would love to be able to sell my underwater house for a FMV to my sister-in-law and then rent it back, as my loan is about to recast and the payment doubles. So I will be watching what happens in this Wild West World of Short Sales.
Michael Schneider said:
Legal is not the issue here. I can sell my underwater property to my Mother, Brother, Nephew or Aunt (MBNA), if I choose to, and use my Father, Sister, Niece or Uncle as my Broker. But, they may have to buy it, with the lien attached to the property...
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Permalink Reply by Kathy Dyer Realtor Rosevillle Ca on
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If the short sale is Hafa and the investor is Freddie Mac- my understadning is that the Listing agent and seller can not be related plus the Listing agent cannot be with the same brokerage.
See what kind of short sale it is?
Hafa, Co-operative Short Sale or Traditional Short Sale. Is the Investor a GSE- Fanney or Freddie FHA short sale?
If this is an FHA Short Sale, it states in the guidelines : "The Mortgagor must list the property with a licensed real estate broker, unrelated to the Mortgagor. "
Kathy Dyer
CDPE Certified Distressed Property Expert
Keller Williams Realty Roseville
916-759-2147
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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Patti -
I'd like to know where in the MLS Rules it includes any of the following:
In the State of CA = When you are the Listing Agent you have to put on the listing in the MLS you have to post "Agent is related to Seller".
I re-read our 43 page MLS Rules (CA) and cannot find it, maybe I'm blind, maybe during my 4 years on the MLS Committee I missed it, maybe the year as Chair of the MLS Committee I missed it, or maybe 3 years on the Board of Directors of the largest Association in CA I missed it..... what page and paragraph?
As a matter of Practice, as Realtors we disclose any relation to a party in the transaction within the MLS - but it is not required. It is required per the Code of Ethics that we disclose any relation in writing PRIOR TO a Purchase Agreement being signed.
Sometimes, we are all working so hard to do the right thing, we believe things are written into the Rules, but they may not actually be written.
At our Brokerage, we don't have this issue to deal with;
1) We never double-end in our brokerage,
2) We do not list or sell properties owned by relatives.
It makes it very easy !
Thom Colby
Broker
Newport Beach CA
Jeff Payne said:
Well said Beverly, disclosure is the key
Beverly Cibulsky said:Great Post Patti!
Article 4 is from the "National Association of REALTORS Code of Ethics, which must be abided by ALL State Association of REALTORS! Dont want to say so, but this Buyer may have a good "Ethics Complaint " against the original agent's REALTOR Association.
Jeff Payne said:I did read this and I agree that you must disclose. Florida requires the same disclosure if you have an interest in or are related to the seller.
I have never had BofA cut commissions or deny a sale just because both agents were in the same office, I have had them cut if I had both sides which rarely happens because I dont work with buyers, just sellers.
are you disclosing that you are getting a referral from the agent that you referred the seller to because you wanted to avoid the family member issue?
Patti Lyles said:They will deny because BofA will not pay commission. BTW: This stuff always gets found out in the eleventh hour when the demands are checked and BofA sees it is the same Brokerage on both sides, their radar goes off. Sometimes you simply open the file again and Seller has to get another agent. 1st try using another agent from the same Brokerage and work out a deal between the two agents to get your agent some compensation for the work. If that doesnot fly it is because the Investor is afraid of the liability, just go get another agent outside of Listing Brokerage and work out a referral deal.
This is an issue on another level. Lack of Disclosure. In the State of CA = When you are the Listing Agent you have to put on the listing in the MLS you have to post “Agent is related to Seller”. On the other hand: If I am representing a Buyer that I am related to, I have to put on the purchase offer that . . . Buyers Sister is a Licensed Real Estate Agent for the State of California… if I buy anything or represent my immediate family. i.e. Buyers wife is a Licensed Agent, Buyers Mother is a Licensed agent. Yahda yahda….
• Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)• Standard of Practice 4-1
For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by REALTORS® prior to the signing of any contract. (Adopted 2/86)We
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You absolutely can save this deal. The seller needs to get a new agent and reinitiate this file with Bank of America. Bank of America has recently in the past couple of months have created their version of an arms lenght agreement. In this agreement they specify that there can't be any relations between sellers and buyers and their agents. This is very big not only with Bank of America but with 98% of most short sale lenders as of late.
So, get rid of the related party to the seller and get this going again.
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