Saturday, October 8, 2011

An Update on RESPA

I am compelled to write a blog about an admittedly boring but very important topic. RESPA has been a part of our world for decades but it is frequently misstated and misinterpreted. An example happened this week.

I became the attorney for a distressed homeowner and there is a variety of legal and practical issues. I contacted the listing agent who had the listing for all of an hour. She stated that she advised the client that he could not embark on an intended strategy because "it, violated RESPA". I asked her what aspect of the strategy violated RESPA. She replied that certain items could not be placed on the HUD-1. I asked where she heard this….."I took a two hour course" was the reply. Surely, the course did not specifically mention the strategy of this home owner and this was the agent's interpretation. I also noted on this agent's website that she is a Certified Distressed Property Expert although she admitted to me that she has done "very few” short sales. I understand that she took a two hour course and obtained this designation, but there is nothing like experience to become an expert in anything. An expert is not someone that has done “very few” of the expert area.

Well, to make a long story short, RESPA does not apply to this transaction and in fact, it does not apply to a number of transactions - especially today. RESPA has several exclusions to its applicability and does not apply to cash transactions as an example. In fact, you would not even need to utilize a HUD-1 in a non RESPA transaction (although practically speaking, this will be problematic).

The listing agent lost the listing to this home owner as a result. She caused extreme anxiety to the family because she indicated to them that they could go to jail!!!
Paddy Deighan

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