Denied to to "Non-Arms Length" - Suggestions

Got notice from Aurora today that our short sale was denied because it's not an "Arms-length" transaction.

The fact is that our realtor is a family member and he was representing both us and the buyer...but we thought the buyer just couldn't be related/friend...not that the realtor couldn't be family...he offered to help, why would we say no?

Anyway, does anyone know if we can resubmit with a new realtor representing us and a new realtor representing the buyer? Or will Aurora look at the history and be suspicious?

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Replies to This Discussion

Permalink Reply by Kynse L. Agles CDPE on November 17, 2010 at 1:10pm

I got denied last week also for the same reason, only no one is related??? Crazy, we re-submitted with a new buyer (original buyer was an LLC) and it has not been kicked back yet. I will keep you posted!

Permalink Reply by Alan Remigio on November 17, 2010 at 3:49pm

Have broker resubmit

Permalink Reply by Brigitte Mueller on November 19, 2010 at 8:38am

I would resubmit with new realtor. Sorry.
I watch closely for the Arms Length. It says that even a business partner, co-worker cannot be involved. When those arise, I refer to someone else to ensure there is no reason to deny due to arms length rules.

Permalink Reply by Brigitte Mueller on November 19, 2010 at 8:40am

Kynse - I have had LLC buyers, and always made sure I have the articles of corporation, etc. Mine have gone thru with LLC's in the past. Hope that continues....but thanks for the heads up.

Permalink Reply by Val B on November 19, 2010 at 2:00pm

Yea, we are resubmitting with a new realtor. It's so frustrating because I spoke with Aurora and they said it basically starts all over...they need the Borrower's Financial Statement, bank statements, etc all over again and it gets placed back in the queue which means another 60+ days until they review it. I was hoping they would just take the new Sales Contract and continue the old file. Hopefully the buyer doesn't get tired of waiting and walk.

Permalink Reply by Steve Early on December 6, 2010 at 4:37pm

We had a short sale rejected for the same reason last week with Wells Fargo, and they would NOT accept a new Realtor. They made it clear that the BUYER had to be replaced. The buyer and his agent were husband and wife.

In my view, it is not a good idea to represent relatives in a short sale. Not only can you run afoul of the Arms Length requirement, but it is not uncommon for servicers to refuse payment of commissions to Realtors who are directly related to the seller or buyer.

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