It keeps getting harder and harder to get shorts sales accomplished. It is especially difficult with investors even though they are paying cash in most instances. Investors are more than one-third of current transactions do it does not behoove the industry to make matters more difficult for them.
Lenders have certainly made it more difficult for investors with restrictions in reselling, re-listing, marketing, etc. However, now the listing agents and their brokers are injecting personal feelings, emotions, and LEGAL opinions into the mix and this is REALLY hurting the industry.
Earlier today, I was on the telephone with a listing agent in Florida. I was on the call as the attorney for an investor/buyer with cash. This agent explained to me that she does not so “investor” deals. I explained to her that this is distressed real estate and she cannot afford to maintain this position. WELL!!! Missy Miss advises me that she does $20M a year in production and does not need to do investor deals! Folks, this lady would boo a cure for cancer. Could not have been more negative, condescending and arrogant.
My response to this verbal diarrhea was that she accepted a client and has a duty to the client. He position necessarily violates that duty. She then explained that her broker told her not to accept investor deals. OK, a new wrinkle. She stated that attorneys told them not to participate in them because they might lose their licenses. I advised her that NOT participating in investor deals and presenting all offers, FAIRLY (without sabotaging them) could cause her to lose her license!!!
Ladies and Gentleman, this is really getting out of hand. Not all investor deals are fraud. A small fraction of them are. Do we judge ALL attorneys and ALL real estate professionals by the bad actions of a few?? There is NO place in the real estate market for the injection of personal feelings and emotions into the process. This listing agent was clearly sabotaging the deal because she “didn’t like it”.
I then decided to review the foreclosure status online. The foreclosure is 2 ½ years old and getting close to sale. I asked what the status of the property was and the listing agent told me “pre-foreclosure”. PRE-foreclosure?? Honey, this property is half way to gone!! Did she not know the difference?? A willing buyer, with CASH, told her that there is not a good fit – and it was not because of price or terms, it was because of her!! Investors need love too!!! LOL
Paddy Deighan JD PhD http://www.homesavers.pro
Paddy Deighan is a real estate investor, attorney and advocate. This blog is dedicated to providing useful information, tips and guidelines for all of your real estate needs.
Showing posts with label listing agent duties. Show all posts
Showing posts with label listing agent duties. Show all posts
Saturday, August 20, 2011
Saturday, July 9, 2011
Scary Outlook for Real Estate Agents and Investors in Short Sales..MUST READ
As always, there seems to be good news and bad news for real estate investors. The truly great news is that recent statistics indicate that 37 % of transactions are now completed with investors. This is up from a previous average of 30% (according to NAR). I personally view this as good news since investors are clearly keeping the market alive since they are completing more than one-third of the transactions.
The bad news?? Seems that major lenders are continuing to clamp down on investor deals. Wells Fargo has recently released a new standard approval letter than includes a NINETY DAY restriction on reselling by the investor. Bank of America is thought to be ready to adopt this policy as well. Additionally, many lenders are placing real estate professionals in harm’s way by requiring them to sign an addendum that indicates that they acknowledge a fiduciary duty to the lender to disclose any higher or otherwise better offers during the course of the transaction.
This is legally not supportable because the lender is placing the real estate agent at a litigious risk to their contractual client (this would not be true in the case of a REO listing agent, however). In fulfilling the “fiduciary” duty to the lender that the lender has now created (and without legal consideration to you for this), you are sometimes violating your contractual duty to your client. In fulfilling the “fiduciary” duty to the lender (that legally you do NOT have) you will be causing the investor buyer to walk since their offer will be rejected and the home owner is now in a worse position than they were before (no buyer) and it is because of a the disclosure to the lender of a potentially higher or better offer that may never come to fruition! If you disclose and your client was the buyer, the sale will be rejected and the buyer will have a claim for lost profit against you since your action caused the offer to be rejected and your contractual duty was to the buyer. Whether you are the listing agent, transactional agent or buyer’s agent, the bank wants you to disclose higher or better offers.
I also strenuously object to the description of your new duty to the lender as “fiduciary”. It is not a fiduciary duty. It is my recommendation that you refuse to sign this and state that there has been no legal consideration for this promise; that you cannot execute that provision because it puts you at a litigious risk by potentially violating your contractual duty to your client (regardless of whether the client is a buyer or seller) and that you are not a party to the contract. We all need to stand up to lender intrusion into the market.
The bad news?? Seems that major lenders are continuing to clamp down on investor deals. Wells Fargo has recently released a new standard approval letter than includes a NINETY DAY restriction on reselling by the investor. Bank of America is thought to be ready to adopt this policy as well. Additionally, many lenders are placing real estate professionals in harm’s way by requiring them to sign an addendum that indicates that they acknowledge a fiduciary duty to the lender to disclose any higher or otherwise better offers during the course of the transaction.
This is legally not supportable because the lender is placing the real estate agent at a litigious risk to their contractual client (this would not be true in the case of a REO listing agent, however). In fulfilling the “fiduciary” duty to the lender that the lender has now created (and without legal consideration to you for this), you are sometimes violating your contractual duty to your client. In fulfilling the “fiduciary” duty to the lender (that legally you do NOT have) you will be causing the investor buyer to walk since their offer will be rejected and the home owner is now in a worse position than they were before (no buyer) and it is because of a the disclosure to the lender of a potentially higher or better offer that may never come to fruition! If you disclose and your client was the buyer, the sale will be rejected and the buyer will have a claim for lost profit against you since your action caused the offer to be rejected and your contractual duty was to the buyer. Whether you are the listing agent, transactional agent or buyer’s agent, the bank wants you to disclose higher or better offers.
I also strenuously object to the description of your new duty to the lender as “fiduciary”. It is not a fiduciary duty. It is my recommendation that you refuse to sign this and state that there has been no legal consideration for this promise; that you cannot execute that provision because it puts you at a litigious risk by potentially violating your contractual duty to your client (regardless of whether the client is a buyer or seller) and that you are not a party to the contract. We all need to stand up to lender intrusion into the market.
Saturday, June 25, 2011
Set Phasors on Stun
Yesterday, I spoke with a listing agent in Sacramento. My client and I were speaking with her about an offer on a listing. It is a short sale and the owner must sell because a sale date is approaching. We discussed the parameters of the offer that would be forthcoming in a day or so. Everything was great. The listing agent was happy and my client believed that he would be able to get a short sale approval.
Today, I receive an email from the listing agent and she advises that her BROKER decided that she would not participate in this transaction!! WHAAAAT!!! It is a cash transaction by an investor…the widowed home owner wants and needs to get out of the house!! Where in the script does it say that the broker can decide “not to participate”. In fact, there is a strong and legally supportable argument that the broker is violating her duty to the homeowner by injecting her personal opinion into a legal and financial matter. The offer was not even going to be submitted to the owner!!
Unfortunately, this type of disdain for investors is foolish and legally actionable. NAR reports that 30% of transactions today are with investors. Agents and brokers should not be taking positions on such matters because it is rarely a good idea to inject personal or emotional feelings into a real estate transaction. Especially when it is a CASH offer and likely to be approved by the lender..AND there is a sale looming.
Naturally, I am going to go around the broker and contact the home owner and advise her of the offer and the fact that the agent’s broker was blocking the transaction. I can imagine her reaction. I will also be submitting the offer through another agent and the broker better allow it to be submitted to the owner!!
It is hard enough to complete transactions today…but such ignorance makes it much worse….and an agent will lose commission on this for NO reason other than the broker’s ignorance of her responsibilities, duties and the law.
Today, I receive an email from the listing agent and she advises that her BROKER decided that she would not participate in this transaction!! WHAAAAT!!! It is a cash transaction by an investor…the widowed home owner wants and needs to get out of the house!! Where in the script does it say that the broker can decide “not to participate”. In fact, there is a strong and legally supportable argument that the broker is violating her duty to the homeowner by injecting her personal opinion into a legal and financial matter. The offer was not even going to be submitted to the owner!!
Unfortunately, this type of disdain for investors is foolish and legally actionable. NAR reports that 30% of transactions today are with investors. Agents and brokers should not be taking positions on such matters because it is rarely a good idea to inject personal or emotional feelings into a real estate transaction. Especially when it is a CASH offer and likely to be approved by the lender..AND there is a sale looming.
Naturally, I am going to go around the broker and contact the home owner and advise her of the offer and the fact that the agent’s broker was blocking the transaction. I can imagine her reaction. I will also be submitting the offer through another agent and the broker better allow it to be submitted to the owner!!
It is hard enough to complete transactions today…but such ignorance makes it much worse….and an agent will lose commission on this for NO reason other than the broker’s ignorance of her responsibilities, duties and the law.
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