Understanding The Real Estate Agent’s Role In The Short Sale Process
The seller’s agent has two main responsibilities in a short sale:
- To market the property and obtain a market price offer
- To be present at and prepared for the appraisal or broker price opinion (BPO) appointment ordered by the lender
The buyer’s agent’s main responsibility is to make sure that the buyer is qualified financially and will be able to close within 30 days of the short sale approval. If the buyer is getting a loan, the pre-qualification letter must be submitted in the short sale package. If the buyer is using cash, they will need a proof of funds.
The Good News Is That The Lender Pays The Real Estate Commission
The only thing we know for sure is that the lender or loan servicer will pay the real estate commission, taxes and tax stamps at closing, so the agents don’t have to worry about getting paid for their hard work. The guidelines for most lenders allow for 6% real estate commission. The exception to that is on offers over 1 million dollars. At that price point we find that the investor on the loan reduces the commission to 5% about half of the time.
We Help Real Estate Agents Steer Clear Of Legal Challenges
Real estate agents are licensed and appropriately hired to negotiate the financial terms of their clients’ contracts. However, because short sales are complex, legal questions often arise in the course of the transaction. Legal questions are meant for attorneys to answer. Examples of legal questions include:
- Will the deficiency be forgiven along with a complete release of liability?
- Should the borrower stop paying their loan payment and go into default?
- How does the borrow stop or delay a pending foreclosure?
When an agent attempts to answer these questions or negotiate these matters for their client, they may be attempting to offer legal advice. The State Bar of North Carolina indicates that this is out of a real estate agent’s scope and would be considered the unauthorized practice of the law.
Additionally, in North Carolina as well as in some other states, negotiating a client’s debt, or negotiate a legal settlement, is the practice of law so real estate agents are prohibited from the practice because one of the primary functions of a short sale is the negotiation of the borrower’s debt and future legal obligations. Even in states where they have not specifically designated short sale negotiation as the practice of law, it is still not recommended that real estate agents handle these on their own.
Finally, since negotiating short sales is beyond the scope of the agent’s license in most States, their E&O insurance does not usually cover them in such an endeavor.
When your client is contending with a short sale, call Wilde Law Firm at 888-615-1443. There is no cost to the real estate agent for our attorneys to facilitate the short sale.
Unauthorized Practice Of The Law May Subject An Agent To Criminal Liability
Undertaking short sale negotiations when the foreclosure process has already commenced leaves agents open to additional liabilities and responsibilities normally associated with an attorney. There are issues concerning the unauthorized practice of law. The unauthorized practice of law is a Class 1 misdemeanor criminal offense that may be prosecuted by the local district attorney.
There are also issues with agents undertaking short sales as related to the North Carolina Debt Adjuster Statute. The violation of this statute also could expose an agent to criminal liability. Get in touch with us for further explanation on why hiring Wilde Law Firm to work on your short sale protects your interests.
Contact Us Today For Knowledgeable Guidance With Short Sales
At Wilde Law Firm, our attorneys are highly skilled in the sophisticated details of short sales. We have built a solid reputation our clients rely on. It is all we do. Let us work with the lenders to obtain an approval for the short sale in order to get the subject property sold. Email us or call our office at 888-615-1443 to schedule an appointment.