Replies to This Discussion

Permalink Reply by Terry Price on July 10, 2011 at 5:57am

Bryant,

I suspect that you're going to find a split in opinion on SS involving relatives but there appears to be only ONE correct answer to whether a Buyer can be related IN ANY WAY to a SS Seller: It solely depends on the Lender and their enforcement of the Arm's Length Agreement. According to the 11 real estate attorneys I contacted regarding this, it's illegal to prevent such sales. But, banks deny it via an 'overlay', the Arm's Length Agreement Affidavit (plus, BOA adds yet a second Addendum). When they're signed by Buyer and Seller (which they must be or the lender won't approve the shortsale), nondisclosure and resultatn sale is considered purgery and the bank can come back and unwind the sale, press criminal charges, etc.

 

I'm a distressed owner who was up-front with BOA in attempting such a shortsale to a friend (not a relative). BOA flat denied the shortsale as I had a prior agreement with the Buyer to remain in my home as a Tenant. (My home is over $100,000 upside down, I've suffered over $300,000 in medical bills after a bone marrow transplant and simply can't afford my monthly mortgage any longer. Foreclosure is emminent. I'm not employed so don't qualify for a remodification or refinancing. So, I found a willing friend/Buyer (someone I could depend upon to rent solely back to me) to purchase my home and I would remain in it as their Tenant. My modest monthly disability income cannot service my mortgage but could service my monthly rental amount. I'm not physically prepared for relocation and this arrangement could have avoided all the stress and expenses associated with it while providing me a way to stay in my home (albeit, as a Tenant at a rent I could afford). Plain and simple, there were no scams i.e., to purchase my home back from the Buyer later or sell it for part of the profit, etc. But, BOA said NO WAY!!! BOA's Arm's Length Agreement Affidavit and Supplements both state that the Seller and Buyer MUST NOT be related to one another, have any sort of agreements prior to shortsale that benefits from the bank's loss, and...specifically...the Seller MUST NOT remain in the home as a Tenant under any circumstances. If a SS were to proceed and BOA was to find out about our SS/Tenant agreement after the shortsale, it would sonstitute purgery, BOA could press charges, and the sale would be unwound. Hmm. 

 

Push come to shove, there needs to be a current shortsale court case involving BOA to set precident on this Buyer/Seller/Tenant subject. MEANWHILE, I REQUEST EVIDENCE FROM ANYONE, ANYWHERE, THAT BOA HAS PRESSED CHARGES OR UNWOUND A SHORTSALE AFTER IT WAS SOMPLETED, AS PROOF POSITIVE OF THIS. This isn't NOT something I want to go to jail for but I also don't think it's something that BOA wants to gain a public reputation for, either. My attorney said it was playing with fire, I wouldn't be able to stand the stress of ALWAYS watching over my shoulder for BOA to discover I'm renting from my Buyer after shortsale's complete, so if I want to remain in my home I should let it go into foreclosure and take the chance that my Buyers could successfully purchase my home at auction. Then they could legally rent it back to me. 

Again, it's illegal for anyone, including a bank to determine who a Buyer can or cannot be related or rent to. But BOA  does determine this (in effect, via the Arm's Length Agreement & Supplement) so denies SS's in these cases. My opinion is that banks disallowing shortsales of this sort via overlays such as Arm's Length Agreement Affidavits and Supplements constitutes Strong Arming on the part of banks. It appears in recent literature that BOA is making some sort of effort to follow up after shortsales and unwind such shortsales after the fact. Again, I'd like to see proof of this from anyone who's had experience with this, please.

 

Regards,

Distressed Homeowner

WA State  

 

Bryant Tutas said:

I'm going to blast this out in the newsletter today., Lets' see what our members have to say

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Permalink Reply by Jeff Payne on July 10, 2011 at 5:58am

I guess we can agree to disagree because I have yet to find a law that states that a seller can not hire someone related to them to sell their home.  The key is disclosure.  There are TONS of agents who do their own short sales and disclose the fact and there is absolutley no law that says it is illegal.  Disclose, disclose, disclose.  

Patti Lyles said:

 

Jeff -- Just because you can do something does not mean you can illegally do it. The statutes of limitation are long and in that time period this stuff will catch up with you and others who have done these things. Why sleep with a time bomb?

 

CBS News had an exposé about “Short Sale Transactions Under Investigation” - I will cut to the chase = The State of Nevada Regulatory boards, including DRE are scrutinizing short sales transaction and they have many agents that share your opinion wishing they had known better.  Ignorance is not a defense that stands up well in court.

Jeff Payne said:

No problem Scott.  I have a different opinion and have seen it happen many times, even have seen agents sell their own short sales.

Scott Korbin said:

Jeff,

I disagree with your assessment. Most regulators, if not all, deny contracts where a relative of the Seller will receive any benefit from the Short Sale. The possibilities of the Seller benefiting from the Short Sale financially are obvious.  I could be wrong. I often am. But I would find a Broker who is not related to EITHER party. Please take no offense, but I have never known an investor to approve a Short Sale transaction knowing that there was a relative involved as the Broker for the Buyer or the Seller.

Jeff Payne said:

Paul, your realtor needs to push back and fast!  The fact that your seller and agent are related is irrelevant,  the current market value and your offer are what is most relevant here.  Arms length transaction definition is getting terribly distorted lately and as long as your transaction with the seller is arms length then this sale should occur.  I would guess that the negotiator on the file does not understand arms length and can only read between the guidelines and can not think outside of the box.  Push this thing and escalate to the investor on this one.

 

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Permalink Reply by Jeff Payne on July 10, 2011 at 6:00am

More misinformation Sarbrina, I respectfully have to say that your information is wrong.  I know plenty of agents that have sold sold their own homes and with proper disclosure the banks will agree to the short sale. 

Sabrina Simpson said:

The bank is not going to approve any sale where there is not arms length transaction.  That includes the seller and agent being related.  Some agents are trying to do short sales on their own homes and those also will not be approved.  It is best that you get your own agent to represent you.  Was it disclosed to you that she was related to the seller?  That should have been disclosed.  These are things your own agent would check out before you waste your time.  Good Luck!

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Permalink Reply by Joan Lorberbaum Moore on July 10, 2011 at 6:02am

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 July 10, 2011 at 6:04am

Did you read my first reply that was uploaded an hour ago that dicussed disclosures?
Jeff Payne said:

I guess we can agree to disagree because I have yet to find a law that states that a seller can not hire someone related to them to sell their home.  The key is disclosure.  There are TONS of agents who do their own short sales and disclose the fact and there is absolutley no law that says it is illegal.  Disclose, disclose, disclose.  

Patti Lyles said:

 

Jeff -- Just because you can do something does not mean you can illegally do it. The statutes of limitation are long and in that time period this stuff will catch up with you and others who have done these things. Why sleep with a time bomb?

 

CBS News had an exposé about “Short Sale Transactions Under Investigation” - I will cut to the chase = The State of Nevada Regulatory boards, including DRE are scrutinizing short sales transaction and they have many agents that share your opinion wishing they had known better.  Ignorance is not a defense that stands up well in court.

Jeff Payne said:

No problem Scott.  I have a different opinion and have seen it happen many times, even have seen agents sell their own short sales.

Scott Korbin said:

Jeff,

I disagree with your assessment. Most regulators, if not all, deny contracts where a relative of the Seller will receive any benefit from the Short Sale. The possibilities of the Seller benefiting from the Short Sale financially are obvious.  I could be wrong. I often am. But I would find a Broker who is not related to EITHER party. Please take no offense, but I have never known an investor to approve a Short Sale transaction knowing that there was a relative involved as the Broker for the Buyer or the Seller.

Jeff Payne said:

Paul, your realtor needs to push back and fast!  The fact that your seller and agent are related is irrelevant,  the current market value and your offer are what is most relevant here.  Arms length transaction definition is getting terribly distorted lately and as long as your transaction with the seller is arms length then this sale should occur.  I would guess that the negotiator on the file does not understand arms length and can only read between the guidelines and can not think outside of the box.  Push this thing and escalate to the investor on this one.

 

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Permalink Reply by Michael Schneider on July 10, 2011 at 6:06am

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 Jeff Payne on July 10, 2011 at 6:12am

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 Jeff Payne on July 10, 2011 at 6:17am

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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Permalink Reply by Scott Korbin on July 10, 2011 at 6:27am

Tx Jeff. Good to know. I'm curious. Has that occurred in the last 12 months, and if so, who was the investor?

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Permalink Reply by Jeff Payne on July 10, 2011 at 6:34am

Scott, are you referring to me closing BofA short sales?  I have done roughly 50 in the last months and they had investors across the board. Never had any issues... I didn't list any relatives properties though :) 

I think that to say NEVER in the case of a short sale is not accurate, to say that all lenders wont or that BofA won't is not accurate because each and every one has a different nuance to it.

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Permalink Reply by Damon Botticelli on July 10, 2011 at 6:35am

The title of the question indicates this decision is coming from the underlying investor.  Going around the issue may be easier than trying to fight it in this case.  The listing agent should refer both listing side and buyer side to 2 different agents in 2 different companies and start over with the short sale.

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Permalink Reply by Scott Korbin on July 10, 2011 at 6:37am

Got it. We're on the same page. I was referring to the Seller not having a relationshio with the LA, BA, nor the Buyer.

Happy SSing!

Scott

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