I am the operations manager for Friedman Law Associates, P.C. Our law firm is a national law firm which specializes in short sale, loss mitigation negotiation, and foreclosure defense.. As you all may know, many states are passing legislation which is advising that you must be a lawyer to negotiation short sales. All other individuals are categorized as an agent that is unauthorized to practice law. Home owners can go after the negotiating agent and sue them for negligence. We are looking to launch a new program which would educate the real estate community on how to make a short sale transaction, a traditional sales transaction. We would like to offer short sale and loss mitigation services to the real estate community. Once again, we are a national law firm with attorney's in 46 states. Our fee for short sale negotiation is contigent upon the deal closing.
I know that Bank of America will not pay a law firm, or third party agent, from the lenders proceeds at closing. Does anyone know any other lenders that have this policy and is there a way around Bank of America's policy ?
Please let me know your thoughts about our program and if any other lenders will not compensate a law firm from the proceeds at closing.
Thank you
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Elliot, as far as I know, there are NO states that require a law firm to do short sales. None. I have also read AG White papers from many states, including FL, IL, and NJ, and every single one advised that negotiating short sales was NOT the practice of law. They did, however, unanimously, advise that certain parts of a short sale, namely any discussion of deficiency, review of approval, and handling of promissory notes were in fact the practice of law, as they should be. This is why, as a third party negotiator, we require that the seller have an attorney represent them and handle these aspects of the transaction. As negotiators, we have strong relationships with short sale trained attorneys and agents, and my business model is that we all leverage each others expertise: I am an expert and getting short sales approved. The agent is the marketing expert, and the attorney is the legal expert, and we all owe duty to the seller to close the deal and put the seller in a better financial position. Perhaps this is why we are so successful on a national scale. One thing Elliot is correct about though is E&O. Go ahead, call your provider, and ask if they cover short sales and negligence. The answer is no because it is out of scope with a real estate agents customary actions. This does not mean, however, they they are strictly in the legal realm either.
www.josephalfe.com
www.ssprocessors.com
Since I started doing short sales about 6 years ago, the system has improved tremendously and I beleive that is in part to people like you and I showing the lenders that we are their solution and not the problem. Our masterminds we have with the lenders have helped the process tremendously because the lenders now see us a people with passion who are here to solve the problem
Jeff,
Believe it or not, most of the negotiators do not have a degree or any education. They get paid on volume, declined or approved. Most are lazy and if the file requires any extra work, they will automatically decline it so they can receive their volume bonus. In most cases, they have the authority to make the decision on the short sale. The system is ridiculous and needs to be changed or this issue will drag on for many, many more years.
Kudos to you for your passion foryour client and your passion for this business. People like you are few and far between.
Lets find a way to work together !
Technically, short sales are simply debt mediation. Agents do not write the legal listing, nor the contracts, therefore they are not engaging in the unauthorized practice of law.
Then following the bank's narrative on what documents need to be submitted, the docs are submitted. With time the banks have basically set up systems and told us how and what to submit. In fact, lately they send Approval Letters without any 'negotiation'.
Agents are basically doing the bank's work of gathering docs and submitting without being compensated as an employee of the bank. But it is what we do to help distressed homeowners and to save homes from foreclosure and falling into the hands of the government to rent out.
Interesting reading.
Let's be clear here. Licensed real estate agents have a fidiciary relationship to their clients. I absolutely believe it is in my client's best interest for me, the person who has been in their home and has the best market knowledge to represent them in this transaction. Short sales are almost never disallowed by a lender based on hardship etc. On the contrary the battle is almost always over the value of the property. The person in the best position to discuss value is a licensed real estate agent practicing in that area. I outsourced my short sale negotiations to a law firm in Florida for 6 months with terrible success. Why? Because it always came down to value and defending the offer that was submitted as the best possible price the lender will receive. In the end, I spent more time sending the comps to the attorney than if I had just submitted them myself.
Further, in the restatement/repeal of MARS, the government already clearly stated that negotiating the short pay off of a mortgage is NOT practicing law. On the contrary it may be illegal for 3rd parties to step into the transaction, charge a fee and profit for negotiating the short payoff. Read: http://ftc.gov/opa/2011/07/mars.shtm
I have no interest in making the short sale process more "expensive" by adding a 3rd party to the equation. Ever since taking back and owning the responsibility of negotiating the short sales myself I've gotten 100% of my short sales approved and only 1 did not waive the deficient balance.
I advise my sellers to have the attorney of their choice review the approval letter for which I am willing to pay up to $250. It certainly won't take more than 15 minutes for an attorney to review 2 paragraphs and issue an opinion.Only 1 has taken me up on that offer.
However, the attorneys that want to negotiate the short sales are attempting to charge ridiculous fees to do what the agent should be doing.
Let's keep short sales efficient, and contain costs so that all parties are well served.
An attorney can be sued just as easily as an agent which is why we both maintain E and O and General Liability policies. I'm no more exposed for a law suit than an attorney. And further, I think that if I need to defend myself any jury would look at the substantial volume of short sales I've negotiated and families that I have helped and look well on that, rather than some attorney sitting in an office, outside of the area trying to cash in on the process.
PS: Jeff CONGRATS on your high ranking. Those of us that sell at a high volume embraced the short sale business so that we could most effectively help our clients through these tough times.
The legislation was passed in NJ and does not specifically state that non attorneys cannot negotiate short sales and it does not prohibit realtors from doing so. The legislation does state that a consumer can file a civil suit against a third party negotiator for the "unauthorized practice of law". We have seen many law suits filed against realtors for negligence and not protecting the seller's best interest in a short sale transaction. The realtors are technically practicing law when they negotiate a short sale transaction. These law suits are increasing every single month and more states are pushing against the "unauthorized practice of law". A licensed law firm, with a local attorney in the state, are the only ones that can practice law.
Nice try Elliot, this topic has been beaten to death here on this site. Sure a seller can sue for anything, what protects you from a lawsuit more than a realtor?
There have been plenty of lawsuits by sellers on non short sale properties too, does that mean you think we should not be working equity sales too?
No law firm is going to work short sales that I am involved in because there is no need for a law firm to work the short sale, it is a simple process that any agent can do in my opinion. Why would a lawfirm do any better of a job?
As far as getting paid by the lenders, the lenders know that there is no need to pay an attorney to negotiate a short sale.
Jeff,
Please read the NJ assembly bill No 1050. Many other states will soon follow. You must not be a good realtor, beacuse you are obviously spending more time negotiating short sales than obtaining new listings and selling homes. You are naive to think you are not vulnerable to these law suits.
Why wouldn't you pass on the negtoation and practice of law on to a licensed law firm that is authorized to practice law and allow yourself the time to get more listings and sell homes ? I thought that top producing agents spend their time obtaining listings and selling homes?
Just out of curiosity, how much time does it take your law firm on average to get a short sale approved. In terms of time, how many hours are spent on each file once an offer is accepted and sent to you until the time it is approved.
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