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Bad Advise From Your Realtor? From Your “Short Sale Specialist”? What Are Our Responsibilities? Where Does The Buck Stop?

ignorant agents or deceiptful agents?I’m going to start this post with a true story. A week or so ago I received a phone call from an out of state Realtor asking if I would list his sister’s house- a short sale listing. I don’t list many short sales; mostly for past clients or friends. They’re too time consuming, I can’t increase my commission to compensate for the time or skill- and I basically flat out hate dealing with them. I’m good at it; I understand the process and have great follow up skills; I’m a good negotiator. I’m detailed oriented and I do educate myself about short sales. I just choose not to make listing them a large part of my business.

The out of state agent tells me he has the process started, and an actual human being has been assigned the file. He goes on to tell me that he has already referred the listing to another agent who sent the file to a “short sale team” – a team of agents at the same office who negotiates short sales for a fee. This particular group markets themselves to both the consumer and to agents. They free up your time to do what you do best- list and sell real estate. Leave the headaches of dealing with the short sales up to them and their great expertise; after all, they all have short sale designations and because of their great experience they have contacts at the various lending institutions. Blah blah blah.

This out of state Realtor was NOT impressed with this group of so called experts and jerked the file. I felt bad for what this agent, and his sister, have gone through, and he did have a lot of the leg work taken care of. His sister has a very salable property in my market area and it could be a good listing, so I agreed to take on his sister as a client.

Last week I picked up the file from her now ex agent, and spoke to the seller yesterday morning. Between my conversation with the seller, information from the file and my own homework, I found out that the house had gone up for sheriff’s sale Dec. 2010. That she owes less than $160,000 and that the house sold at sheriff’s sale for over $160,000. That there is only one mortgage. And that she is on 10 acres so her redemption period ends Dec. 22, 2011.

A few facts needed to understand the moral of this story:

  • In Michigan if a house sells on short sale or goes back to the bank via foreclosure, the bank(s) can seek a deficiency judgment for their losses. They have 10 years to do so and can renew the deficiency judgment every 10 years until satisfied.
  • If there is 1 mortgage on the house and it sells at sheriff’s sale for more than is owed on that loan then there IS NO DEFICIENCY for the bank to come after. If it sells for less than what is owed, the owner/borrower is responsible for the short fall if the lender chooses to come after it.
  • If there are 2 loans on the property the owner/borrower will be responsible for the amount owed on the second if the lender chooses to come after it no matter what the house sells for at the sheriff’s sale.
  • In Michigan there is a 6 month redemption period after the sheriff’s sale if the house is on less than 3 acres. If the house is on 3+ acres there is a 12 month redemption period.
  • The redemption period is the time after the sheriff’s sale where you have an opportunity to “redeem” the property (sell and pay off the debts). OR live rent free. Either way as long as you don’t abandon the property you retain the rights you had before the foreclosure process started.

So- on this particular house there is NO deficiency for the bank to come after. The current owner can live there rent free through the end of the year and may even be able to get some cash from the lender if she doesn’t make them evict her at the end of the redemption period. SO WHY THE HELL WOULD SHE WANT TO GO THROUGH WITH A SHORT SALE AND ALL THE HEADACHES THAT COME WITH SELLING???!!!

I gave her the facts and advised she speak to an attorney and accountant. She is choosing to live it out and save her money.

Why didn’t the original Realtor give her the facts and go over her options? Why didn’t the so called shortevil agent sale experts? Is there cause for a law suite? Or ethics complaint? Is there a breech of fiduciary? Or complaint with the state against the licenses of the original agent? The agents on the short sale team? The broker where both the agent and the short sale experts hang their licenses? When did brokers stop taking responsibility for the actions of their agents?

And what about the so called short sale specialists, who are licensed agents, and Realtors? Are they incompetent or evil? Don’t they have a responsibility legally and/or ethically to inform this potential seller of her lack of liability for the deficiency? I have to assume they actually KNOW how this works. So the only thing I can conclude is they clown agentsput a potential paycheck ahead of the good of their client. And I say potential pay check because about 2/3 of the short sale listings in this area never close. If my conclusion is wrong and these specialists actually don’t know the potential consequences of a foreclosure or short sale then they are complete, incompetent clowns. Either way- they shouldn’t possess a real estate license.

An agent can specialize in short sale listings and not take every listing that comes their way, but I’m not seeing that in my area. I’m seeing short sales not closing when the seller takes the terms of the short sale to an attorney and find out they can still get sued. I’m seeing short sales not close because the listing agent never informed the seller they may need to bring some money to the closing or possibly sign a note. I’m seeing short sales that ARE closing with no release of the liability for the deficiency and listing agents sitting at the closing telling their client that the banks have too many short sales to bother coming after them.

When I get a call from a potential seller and determine that they are upside down on their mortgage and don’t have the funds to make up the difference, I go over their options and ask that they talk to an attorney and an accountant. The short sale route IS NOT always the best course of action and the seller should know this BEFORE going on the market and accepting an offer. Before stringing along a buyer for 5 or 6 months to only find out that their(the seller) own options are less than they were before listing for sale. I figure over half of the potential short sale sellers I talk to don’t go up for sale at all after our conversation and checking with an attorney and accountant about the pros and cons of the alternatives- deed in lieu of foreclosure, foreclosure, mortgage modification, bankruptcy…

If you can no longer afford your home and owe more than your home is worth, please please do not just jump on the short sale band wagon without doing your homework first. Please feel free to contact me; I will be happy to go over your options and discuss what may be the best course for you. And why should you trust me after what I just wrote above about what I consider typical behavior? Because I don’t want to list short sales and if you choose to go the short sale route I probably won’t agree to list your house.

Jackie Hawley
Keller Williams Realty
cell: (248)736-6407
email:
Jackie@JackieHawley.com

Is a short sale the right course of action for you?

Information for the distressed homeowner/seller

Information for the non distressed homeowner/seller     

 

Michigan Association of Realtors legal update regarding short sales

Copy of the law regarding time frames for mortgage deficiencies

photo from Flickr courtesy of:
see, hear, speak no evil monkeys- Alison Curtis
evil eyes- Kim Morten Olsen
clowns- carf

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