The Real Estate Encyclopedia
Sellers Beware of Short Sale Scams
Category - Real Estate Information Sources - Real Estate Articles
We have been doing Short Sales for almost two years now and we have been pretty successful in assisting our customers through what can be considered to be one of the most difficult times in their lives. The dream of owning a home and now that dream has come to an end at least for now. We are Realtors with RE/MAX and take our job very serious and it troubles us when we hear the stories of the people who are preying on someone in trouble.

If you don't know what a short sale is, check out a breakdown of distressed real estate terms

We negotiate all of our short sales ourselves. We try and make light of the fact that we have most of the banks on our Alltel Circle of Friends, but it is true. When we get an offer on one of our listings we have a above 90% success in closing. Between the two of us we spend a great portion of the day speaking, faxing, and re-faxing documents for the 2nd and 3rd time to the banks.

OK, now for what is bothering us. We have heard about realtors who are doing things to expedite the sale (as they say) and submitting an Option Contract on the purchase of the home in pre-foreclosure. Here is an example:

Seller (Customer) owns a home with $200,000.00 mortgage and they are 2-3 months behind in payments. The Realtor has someone or submits an offer themselves to purchase the home for $125,000 (this price is below what is now market value) and they are now (Buyer 1) for this example letís say value is $155,000.00. They record an option contract with the Clerk of Courts in the county where the home is located. And then they submit the offer to the bank and either negotiate the process themselves or use a third party to negotiate for the seller. Sounds good so far, usually the Realtor will explain that this contract will speed up the process since the banks are so overwhelmed with the number of short sale requests they are getting today.

Now the home stays active in the MLS system and the Realtor is advertising the home at $160,000.00 and listed as a short sale. Letís say Buyer 2 submits an offer for $150,000 and the person who has the Option Recorded is the signatory as Seller on this contract now. But is it really a short sale? If Buyer 1 buys the home from seller and the bank accepts the $125,000 offer is it truly a short sale to Buyer 2?

The Realtor never submits the $150,000.00 offer to the bank, why not? Isnít it their responsibility to represent their customer and submit the highest and best offer to the bank? One would think since a $25,000 difference to the bank could be the difference in forgiveness of the loss or the original Seller having to sign a promissory note for the deficiency.

But here is a scenario that can happen and sometimes it does.

Listing agent may represent Buyer and Seller for the Option Contract sale which could be between 5 or 6% commission in the short sale. $7,500.00 wow that is a lot of money right, but for some that is not enough. They think that they need to make more. Because if they are the option holder and become the Seller for Buyer #2 then they make the difference between $125,000.00 what they purchased the home for during the short sale. And then the new sales price of $150,000.00 which would be $25,000.00 more minus closing costs and if another Realtor is involved they must pay that realtors commission. What a mess right?

It astonishes us that people can justify to themselves that they are doing what is right for their customer by doing this. We have never submitted a bogus offer or an option contract in any of our short sales, the process if done correctly can take 30-45 days of price reductions to get the home within where you will get an offer on the home, this also will solidify to the bank that you did your due diligence and tried to sell the home for Fair Market Value but could not. Once an offer is received by the bank it averages 60-75 days for the banks to go through their process (baring no lost documents) that is why all of our packets go to the bank with the loan number on each page.

We can say from personal experiences that this Option Contract can be deemed a good thing, but we have actually been contacted by Realtors and investors who want to purchase our customers homes and have said to us that they will negotiate the short sale. Yeah right! I am sure that they will submit a really good offer on our customerís behalf. In one instance we explained that this Seller actually was in the mortgage industry and sat down with two or three Realtors before contacting us and chose us to represent them because of all the shady practices and they were presented during the listing presentation. These people do not represent the customer and that is our responsibility they are our customer.

We also had a company call us and say that they could free up our time by negotiating the short sale for us. We asked what their success rate was and they responded 25%. Well that is significantly below what we are doing now so we passed. We believe in what we are doing and know that it is the ethical thing and will never waiver from it. We feel so confident in what we are doing that we are willing to provide anyone who is interested or does not believe what we are saying they can contact our customers. We have completed the Certified Distressed Property Expert Course this year and can say that this one of the best course we have ever taken. The course was informative and took us through the ins and outs of a short sale. No gimmicks or tricks, just work. Yes we are professionals with a license and this is our chosen profession. Work and vacation are not supposed to be the same thing. If you are in need of any assistance please do not hesitate in calling us with any questions.

Sellers beware; bad times bring out bad people.

Real Estate Information Sources - Real Estate Articles
Home   |   About Us   |   Contact Us   |   Patrons   |   FAQ's   |   Site Map
© 2008 - All Rights Reserved.
Thank you for visiting Real Estate Wiki - the leading dictionary, directory, encyclopedia and glossary for the real estate and mortgage industries .