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Permalink Reply by Joseph Alfe on August 20, 2012 at 7:02am

Patrick, almost every state has shot down the idea that short sales are the practice of law, HOWEVER (agents take note) that most states also agree that certain parts of the process are indeed the practice of law.  Items such as discussing deficiency, promissory notes, tax liability, etc.  This is why, as a third party negotiator in Illinois (and all states I operate in)  I REQUIRE to seller to have legal representation. Short sale negotiators and attorneys should be leveraging their expertise to get these deals done.

On to the OP, The law firm had the right idea, they just did it wrong. There is nothing that says you can't charge buyers fees, but if you do, it must be disclosed in writing AT TIME OF OFFER, and all disbursements MUST be on the HUD-1 at close. Period. Full stop. End of story.

www.ssprocessors.com 

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Permalink Reply by Diane Wheatley on August 20, 2012 at 12:01pm

I'm concerned for my brokerage in participating in such a transaction when I believe that deceptive business practices are involved.  My buyers were asked to deposit an additional $10,000 into escrow for potential costs incurred that fell outside the scope of the lender's written approval for costs such as liens, taxes, repairs, processing or legal fees.  The day before closing I requested a estimated closing statement and discovered that escrow was instructed to apply the entire $10,000 towards payment for legal fees.  Legal fees for what?  Isn't my buyer entitled to a breakdown of what these legal fees consisted of and for whom they were rendered?  Obviously it turned out to be ruse to collect $10,000 from the buyer for "whatever they wanted" fees. 

And I'm supposed to sit back quietly and allow this type of action to take place?  When the pit of my stomach aches when I think about it, it isn't because I'm hungry.  Should I mention the phrase.......a license to steal?........

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Permalink Reply by Smitty on August 21, 2012 at 1:27am

Taxes and liens do not fall outside the scope of written approval, and even some repairs can get covered.  All of these things can be placed ON THE HUD.

 

Buyers are ABSOLUTELY entitled to an outline of the legal fees.  Like Joseph, we are a 3rd party firm and I too involve lawyers in 99% of the transaction. The lawyers I work with have a fee outline at the ONSET of the transaction so everyone involved, buyers, sellers etc., know what the charges are going to be.

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