April’s Realtor Magazine has an article about short sale ethics and six temptations to avoid. Here’s a summary of the main pieces of advice. These are all written for agents involved in short sale transactions. And, if you read Ken Cook’s blog post today, it’s possible that many agents will not be negotiating those short sales at some point in the future.
Anyway, here is a recap of the main things to avoid when working short sales with my commentary in italics.
Realtors® should avoid the following:
Standing in the way of home retention efforts. Obviously, if a seller qualifies for a loan modification and is able to obtain one, then we should let sleeping dogs lie.
Embellishing the hardship letter. No, lying to the bank would not be cool. That’s what got America into this mess in the first place.
Shopping the buyer’s offer. I do not quite understand this point. If you are ‘shopping’ the offer to get the best deal for your seller, you would not be doing so in a short sale. In a short sale, the bank only approves the deal. The bank is not the seller. We represent the sellers, and in most cases our fiduciary duty is to get this deal closed a.s.a.p.
Selling to a flipper. There are many investors who are buying short sales for cents on the dollar. However, many banks and investor/note holders have so many guidelines that they will not accept cents on the dollar. If the deal falls through and you do not have a retail buyer ready, willing, and able to close, the property may go to foreclosure. That wouldn’t be too cool.
Shifting funds off of the HUD-1. No can do unless you want to hang out at San Quentin.
Manipulating the BPO. It certainly is nice to go to the BPO and open the door to assure that the BPO gets done. However, manipulating the outcome of the BPO could be construed as defrauding the lender. Not good.
When you take a short sale listing, be careful to avoid these pitfalls. They will put you on a rocky road to no good!