Are Attorneys Ruining Homeowners???
I might get burned on this one as well but hey, this is what's needed and I'm dedicated.
I understand we may get some biased answers/opinions because this is heavily frequented by Realtors but let's see what spark we can create.
I had an appointment today for 10am for a seller who is delinquent, motivated and wanted to do a short sale. I have spooken to him now for two weeks. He has an FHA loan with BOA and has tried numerous times to get a modification (Unsuccessfully). This was actually given to me through my loss mit work directly from BOA and was told he has two options....1. PFS program (Short Sale) with relo money. 2. DIL
He understood and was ready. 9.30 on my way and a call comes in saying "I spoke with my ATTORNEY and he advises that he has a special program that will allow me to do a modification and I have to do what's best for my family."
Now, I'm going to stop here and see what responses come in but I want to add, I am all for OPTIONS, Foreclosure relief and my community. I am dedicated to spreading TRUTH and I want the best for PEOPLE.
This in NOW WAY is a bash against GREAT ATTORNEYS who are dedicated as well and who really want the BEST for clients however there seems to be a conflict and it's RUINING people.
Please share!!
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Janice, what about the question that I asked? How often do the attorneys if ever, touch these files compared to the number of times that you "touch" the file. More curious than anything!
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Permalink Reply by Douglas Lineberry on
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The answer is that it doesn't matter. Attorneys are responsible (under the rules of professional conduct) for supervising their staff members. An attorney might not touch something as much as a staff member does, but only the attorney is legally and professionally responsible. Paralegals don't get sued for malpractice, attorneys do.
Your question is much like asking how many teeth a dentist touches compared to how many a dental hygienist working for a dentist might touch. The answer is that the hygienist touches a lot more, but that doesn't make the dentist less responsible to the client/patient or make the dentist somehow lesser of a dentist.
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Wow that sure was an answer from an attorney! Why do you avoid the question? To me, if an attorney tells me that they can put a "Spin" on the short sale then I would want to know if that attorney would actually touch the file or would the paralegal do it all? I think you answered my question, most likely the paralegal is the only one that will touch it.
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I did not avoid your question. I directly answered it. You may have missed it, so I'll say it again: "It doesn't matter." You may have also missed the point of my example about the dentist, so I'll use another example. The Boeing factory employs thousands of machinists, many of them of a very high and supervisory level, and many of them are very new to what they are doing. They work as a team. The supervisory machinists are responsible for ensuring that the new guys are doing their job, but that doesn't mean that they do the job for them or that they double-check every single action that the new guys undertake. Guess what? Boeing's planes are not falling from the sky.
As it turns out I know a number of real estate agents that employ staff members as well, many of them with very little formal training or experience in real estate. I know from my own experience that those same agents use those staff members to assist them with short sales. Since your question is so relevant to you, I will ask: how many times do the supervising agents actually touch those files?
The answer is the same: it doesn't matter. The agent is the person responsible for the transaction and supervising the work of the person they hire. No one here is questioning that those agents are somehow less professional for using staff members. The fact that you question the professionalism of attorneys for using staff members simply demonstrates your bias toward attorneys.
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I can not answer for all agents here but suffice it to say that the top agents that I know all have a direct hand in each and every file that they have. I guess I will have to ask you a direct question to get a direct answer. When you take on a short sale (you) as an attorney, how many times do you actually even look at the file?
Not to bash you but in my experience, most attorneys hand these things off to an ex real estate agent turned processor and never look at them again. Keep in mind that is in my experience.
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Jeff that's exactly the point I was trying to make when I waded into this conversation. There are "top agents" that do a fantastic job, but there are also some really bad agents that do a really bad job. It isn't sufficient to simply say that they don't get paid because they are often making the situation irretrievably worse. Similarly, there are some great attorneys out there that genuinely care about their clients and the problems they have. There are also, unfortunately, some real losers that don't care and are also making the situation worse. Bad apples in every barrel, we're just talking about different barrels.
As to my personal practice, we didn't take a short sale unless the client first met with me or one of my associate attorneys (one attorney in particular - the two of us were pretty much the short sale show here). Once we had the assessment consultation with the client we would have a staff member work with the client to compile information to submit to the lender. I might mention that the staff member we used worked in banking for years, so I was pretty comfortable with her knowledge of real estate financing. Once the information was together we would review it together and then the staff member would submit it. I would monitor the transactions regularly through a database that we maintained. That is, my staff member would regularly contact each lender for every file (at least once a week just to harass them, more often as the transaction was finally getting attention from the bank). She would maintain notes of each conversation in a database and then I would regularly review the file notes. If she had problems with the lender, agents, homeowner or buyer anywhere in the process she would bring it to me for guidance and often I would do what had to be done to resolve the problem. Once we got an acceptance letter on a transaction I would personally review it and contact the homeowner to explain to them what it meant to them. If the bank was proposing a deficiency I'd often get more involved in the direction negotiation with the bank and try to resolve the deficiency issue. After that my staff member would monitor the transaction to closing, bringing problems to my attention for resolution as required.
If there was more I could have been doing I don't know what it is.
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Permalink Reply by Kevin Hardin on
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Great Answer Doug, Around here we use the analogy of the Football Coach. The coach does not run the ball or pass the ball, but when the team loses it is the Coach they look at. It is amazing to me that people believe that an Attorney must be the admin too. When the deal gets sideways, a good Attorney calls a time out and gets involved.
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Permalink Reply by Ray Snook on
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Re check what? Please re read my post... I was referring to "Attorneys who charge an upfront fee"....your firm - you have just now revealed - is in the other camp which is awesome.
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How is working with distressed homeowners "our territory"?
Understand that the distressed home is often a symptom, not the illness. The illness often relates to issues broader than the home, such as divorce, job loss, lawsuits, family business problems, other secured and unsecured debt, taxes, etc. No one other than an attorney is professional equipped to analyze all of those issues and help the homeowner make a strategic decision as to what course of action will treat the underlying illness (or at least resolve as many of the symptoms as possible).
Speaking specifically about taxes, I might also point out that I've saved a number of people from short sales that would have been disastrous from a tax perspective. Real estate agents are not professionally equipped to properly counsel people on cancellation of indebtedness income tax matters (remember that if you engage in the practice of law without a license you'll still be held to the same standard of professional knowledge and conduct as an attorney). I've had a number of people ready to launch on a short sale, with their agent cheering in the wings, who when told of the tax issue that they could not escape decided to instead undertake a bankruptcy where there are no cancellation of indebtedness income tax issues.
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Now this is something that I can get on board with! ALWAYS, ALWAYS have the client consult with the proper professional.
This topic is something that we all could benefit from Douglas, would you mind enlightening us more on cancellation of debt and income tax issues? This is where this post needed to go in my opinion.
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Sure. Look at it like this. If I owe you $5,000 and you call me up one day and tell me to forget about the debt no money changes hands. I just don't have to pay you $5K. Unfortunately, however, the government doesn't just tax you on money changing hands. From Uncle Sam's perspective I just got $5K wealthier, and the Internal Revenue Code hits you for any accession to wealth. So I'm going to get taxed on $5K as if YOU had paid ME because I'm now $5K better off by you cancelling the debt.
In the distressed property transaction the problem is with getting full satisfaction on a short sale out of the first and/or second. If they give you full satisfaction they are cancelling the deficiency and will issue a 1099 to you and send a copy to the IRS. You must report that cancelled debt on your tax return.
The only question is whether or not you can somehow then avoid paying tax on it. The most likely avenue for homeowners is the qualified principal residence indebtedness exception (what a mouthful - it's worse to type than say). Unfortunately that exception is currently scheduled to expire at the end of 2012. Congress may extend that, but who knows. If not there's still the insolvency exception but it's not nearly as broad or useful.
That said, it bears worth mentioning that no debt discharged in bankruptcy will be subject to cancellation of indebtedness income taxes. Debt gone ... no taxes ... no worry about fitting into an exception. That works pretty good in a lot of situations.
If there's interest in this topic I'd be happy to schedule a web seminar.
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We may put out a poll here to see if there is interest, It has been a highly debated topic here.
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