Short Sales & Dangerous Strategies

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Dangerous Listing Strategies in a Short Sale The growth of short sales (i.e. circumstance where mortgage debt exceeds the fair market value of the house and necessitates the lender discounting the mortgage to effectuate a sale) has reached epidemic portions in Minnesota and throughout the country. As a result, real estate agents are dealing on a regular basis with the myriad of problems associated with short sales. One of the more frustrating aspects of implementing a short sale involves identifying and opening a dialogue with the appropriate representative of the lender in an effort to discuss, negotiate and ultimately secure a discount on the mortgage balance sufficient to effectuate a sale. Between the frustration of talking to voicemail, other than a live body, and the complex bureaucracy of most lenders, connecting with the “right person” within the lender bureaucracy is challenging and frustrating. A variety of imaginative techniques have been developed in trying to implement a short sale and overcome the challenges of connecting with the right person in the lender bureaucracy. One technique that is becoming more common is the listing agent for the short sale seller prepares a bogus purchase agreement on behalf of a bogus buyer or a buyer who has no intention of going forward with the transaction. The seller signs the purchase agreement and the agent then submits it to the lender. The purchase agreement is then assigned to a lender’s negotiator, at which time the agent withdraws the offer so it is never approved or considered by the lender. The strategy behind this technique is that the purchase agreement gets the attention of the “right person” in the proper department within the lender bureaucracy and is the catalyst for opening a dialogue on short sale terms. The problem with this technique/strategy is that it is fraudulent, that is, the submission of such a purchase agreement constitutes a misrepresentation to the lender that this is a valid purchase agreement submitted by an interested buyer when in fact it is not. In pursuing this strategy, there are potential adverse consequences to the listing agent on the following three fronts: 1. Department of Commerce: To the extent a competitor, the lender, the seller or any other interested party files a complaint with the Department of Commerce against the listing agent, that agent runs the risk of Department of Commerce sanctions for fraudulent, deceptive and dishonest practices. Sanctions can include fines up to $10,000 per violation, suspension of license, or revocation of license. 2. National Association of REALTORS® Code of Ethics: Article 1 of the National Association of REALTORS® (NAR) Code f Ethics requires a REALTOR® to “protect and promote the interests of their client” and “to treat all parties honestly.” Article 2 states that a “REALTOR® shall avoid exaggeration, misrepresentation or concealment of pertinent facts relation to the property or transaction.” The technique/strategy described in this article may well be deemed by a professional standards hearing panel in violation of one or both of these code sections. Sanctions could include fines up to $5,000 per violation, suspension or revocation of membership in the association and therefore lack of access to MLS. 3. Lawsuits: Someone adversely affected by the technique/strategy described in this article, such as the seller or the lender, could commence a lawsuit against the listing agent and his company for fraud/misrepresentation seeking recovery of damages arising our the fraudulent activity of the agent. While the frustrations of implementing a short sale are real, real estate agents are cautioned against the use of the technique/strategy described in this article. Source: Minnesota Association of Realtors

Have you received a Notice of Default on your property?  What are your plans?  Do you plan to walk away or do you want to try a Short Sale which has much less damage to your credit and helps you save face? You need a plan of action and if you want to buy some time, stay in the home until it sells and save up some money - then contact:
 Kathleen Lordbock REALTOR/Staging & Short Sale Specialist 
Keller Williams Realty Brainerd Lakes
Don't just walk away - there is hope, there is help!