Agent2Agent in Las Vegas>Question Details

Eleana, Real Estate Pro in 89084

I JUST RECEIVED A SELLER WHO WANTS ME TO SHORTSALE HER HOUSE BECAUSE FEW MONTHS AGO SHE BOUGHT ANOTHER HOUSE WITH BETTER PAYMENT. SHOULD I TAKE THIS?

Asked by Eleana, 89084 Sat Nov 27, 2010

LISTING? ONE AGENT SAID THIS IS FRAUD AND HE WOULDN’T TAKE IT. BUT ANOTHER AGENT SAID HE’S BEEN TAKING LISTINGS LIKE THIS BECAUSE IT’S STILL UP TO THE BANK TO MAKE THE DECISION. HOW CAN I PROTECT MYSELF AS AN AGENT? WOULD YOU TAKE LISTINGS LIKE THIS AND WHY?

Help the community by answering this question:

Answers

19
"Strategic Fraud" - that terms really sums it up. And we wonder why things are such a mess.....

I think I'd pass.
Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
2 votes Thank Flag Link Sat Nov 27, 2010
Hi Eleana,

It is not your position to determine whether the client is or is not allowed to do this...

I would take the sale, and leave it up to the bank to determine if the client is or is not qualified.

If the buyer sounds qualified, I'd take the listing... the worst that can happen is the short sale is not approved.
1 vote Thank Flag Link Mon Nov 29, 2010
Hi Eleana- The first question to ask yourself is have you done short sales with true hardship before? How did they go? When there is an opportunity to utilize short selling as a way of investing or just saving further loss, it brings up more concerns than justifications. I was approached with this same scenario and checked this with 2 attorneys I use regularly and trust. And their answer was this.....while it may be Morally Ambiguous, it is not unethical. Truth is it is the bank's decision and they will evaluate the assets, income and Hardship letter from your client as the first step and could take many routes:
1. Full Debt Forgiveness: doubtful as your client still has money, and a job, or a decent chunk of liquid capital to buy their next home
2. Partial Debt Forgiveness w/ Money Due at Closing: common approach to short selling when true hardship is not justified, but the client can show considerable loss in value over a short period
3. Partial Debt Forgiveness w/ a Promissory Note: bank absorbs some of the loss and lessee is left with a loan to pay down
4. Short Sale Denied
This is still a negotiation with the Lessor (s). There is no way to predict which will happen as many of these loans were re-wrapped and pooled for investors. So not only do you have 1 or 2 Lien Holders, but you might also have an investor behind your clients loan. In addition, your success will depend on how much needs to be forgiven and who the lender (s) are.
Now let's look at your clients purchase. In a normal sell to buy situation, your client buying a home may have to make their deal contingent on the sale of their home. Here's where it gets really fuzzy. A short sale contingency is something that depending on your Board of Realtor's ethical guidelines is likely to have to be disclosed to the listing agent and the seller of the home your client now wants to purchase. Most Listing Agents and home owners are likely to hesitate with this type of contingency as it dances with the line a bit and is a high risk of failure. Thus, they are taking time off the market and might lose value for something that is beyond the normal level of risk. In addition, timing the purchase of this A to B transaction is a small window as the short sale will hit your clients credit report within 1-3 months. If your closing on the B property doesn't occur within this window and credit is pulled right after the short sale closes, there is a good chance that it could fail.

This type of transaction management is incredibly stressful and not for the faint of heart.

Now, let's look at your own reputation and license. Ask yourself....are you willing to take on this risk and the risk of License suspension or worse?

There are many times we are approached with new ways of making money that flirt with the line. While it is your own business decision, you still have to be fair and honest and do what is in the best interest of all including your client.

Again, the lenders make the call to approve the short sale, you make the decision on what business you take especially where questions of ethics are involved

I hope this helps answer a few questions.

Sean
1 vote Thank Flag Link Sun Nov 28, 2010
If the borrower obtained the new home loan without fraud on the application or supporting documentation then there is no fraud.

Knowing you are going to lose house number 1 and buying house number 2 while your credit is still good shows a clarity of mind lacking in many folks these days.

The ability to think is frightening to the holders of all this worthless mortgage paper because these instruments are merely a house of cards that will not withstand the slight breeze of honest scrutiny by thinking individuals

After 3 decades in real estate I have made the observation that when a loan is taken out to purchase a home the security insrument is a much larger document than the promissory note. If default on each and every loan were not a very real possibility in each and every case then this would not be true.

Lenders would do well to begin following the laws themselves rather than perpetuate the myth that they are benevolent organizations that want to help the borrower.

What legal principle makes it a crime to decide to default on a loan after the loan has been made?
If this were the case then each and every foreclosure would amount to fraud.

Wake up people, the real fraud here is the banking industry's routine use of MERS to take peoples homes away and the transfert of millions of dollars in bailout funds paid as bonuses to banking executives of failed corporations.
1 vote Thank Flag Link Sat Nov 27, 2010
Eleana,

For how much business there is available that is not in the "possible fraud" or "let's see what happens" areas, I would not touch this one.

Good for you in asking, and I would much rather spend my time with properties that won't have this type of cloud looming around it.
1 vote Thank Flag Link Sat Nov 27, 2010
"Strategic Fraud" - that terms really sums it up. And we wonder why things are such a mess.....

I think I'd pass.
Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
1 vote Thank Flag Link Sat Nov 27, 2010
I would tape every conversation you have with this client.




David Cooper 702-499-7037
http://www.lasvegaswinner.org
1 vote Thank Flag Link Sat Nov 27, 2010
You can take a listing, but whether or not a short sale is an option is a bank decision, not your or the seller's decision. If she just bought another house, I don't see how the bank would see her as being in a hardship situation. She obviously is in a position to be able to make house payments or she wouldn't have qualified to buy the other house.
0 votes Thank Flag Link Mon Nov 29, 2010
Hi Eleana,
You should definitely discuss this with your broker.
If you feel unsure then contact legal assistance at the GLVAR.
Good Luck,
John J. Longeway
Web Reference: http://www.JJLVRealtor.com
0 votes Thank Flag Link Sun Nov 28, 2010
"Strategic default is a viable option and is no less fraudulent that the practice of the banks that are at the very conception of this crisis"

I know that Bankrutcy is a "legal " viable option: I know deed-in-lieu is a "legal" viable option". I know foreclsoure is a "legal" viable option.
Where in the stutues is STRATEGIC DEFAULT a "legal" viable option. I believe the term "fiduciary responsibility" might put your license and your career in jeopardy when you operate in the murky areas of "the banks are doing it, why can't I"

David Cooper 702-499-7037
http://www.lasvegaswinner.org
0 votes Thank Flag Link Sun Nov 28, 2010
Should the bank be unwilling to 'short' the home, is the current owner willing and able to pull from their stash of other funds to pay the difference? If yes, proceed. If they REQUIRE a hardship forgiveness of the debt, and such hardship is fabricated, you will become a party to the process. If the owner has indeed suffered a documented hardship, why would you entertain the thought you should selectively with-hold your service to a seller in need?

As William's warning revealed, 'Don't drink the cool-aid' of deception the banks are promoting and bribing the leaders of our country into agreement. Strategic default is a viable option and is no less fraudulent that the practice of the banks that are at the very conception of this crisis. Strategic default is the last opportunity of the homeowner to influence the economic viability of their family to the tune of 100's of thousands of dollars. Most wage earners can't make such change through a lifetime of working. To many have capitulated to the idea that only Joe Lunchbox taxpayer is required to act ethically, while the Bank of America's, Chase's, Wells Forgo's can continue making the law of ethics up as they go. It's a tough decision and I'll support Joe in his motive to make such difficult decisions.
0 votes Thank Flag Link Sun Nov 28, 2010
Eleana you did not provide enough information to provide a good answer.

Have the owner/sellers financial circumstances changed since they were qualfied for and purchased the second property? If the answer to this is yes there would not be a problem for me.

Is they owner/seller just trying to do a buy and bail? If this is the case I wouldn't touch it.

The FBI is running Operation Stolen Dreams to prosecute people that intentionally defraud lenders. Here is a link to their site.
http://www.fbi.gov/news/stories/2010/june/mortgage-fraud-swe…

HUD is running Operation Malicious Mortgage here is a link to the latest press release.
http://portal.hud.gov/portal/page/portal/HUD/press/press_rel…


Good luck and it depends on the circumstance.
0 votes Thank Flag Link Sun Nov 28, 2010
One more point -

Once you "touch it", you are a "participant"........... BE VERY CAREFUL !
0 votes Thank Flag Link Sat Nov 27, 2010
Probably won't get approved, as others have said it's strategic fraud. However you could take it for the buyer leads it may produce. Maybe a few sign calls and exposure in advertising (Internet). Disclose everything to potential buyers and other agents just to cover you.

Good Luck....that's a tuff one!

Chris Blasic
0 votes Thank Flag Link Sat Nov 27, 2010
Eleana -

If you take the listing, be up-front and absolutely clear with the seller that you are going to tell the bank (disclose) that the seller bought another house while intending to default on this one since you know that is the scenario. The seller committed "fraud-for-housing" when they did what they did.

You did not commit fraud unless you were their agent on the new house and knew what they were doing / intending to do.

If it were me, I would NOT take the listing. This will be full of scrutiny and you may find yourself in front of a jury defending your actions - No Thank You !

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
THOM@THOMCOLBY.COM
DRE# 01398570
0 votes Thank Flag Link Sat Nov 27, 2010
This scenario leaves the possibility of an audit by either the lender of the second home (purchased) or the one you're being asked to do a short sale on. The lender of the short sale my evaluate the ultimate sale from the standpoint of what happened to get the owner from owning one (underwater) house to buying a second. Obviously from the description, unless the second house was bought under someone else's name and credit, will still show up on a credit check. That being the case, the lender of the short sale may opt to not allow the short sale just because it will reflect that somewhere along the lines the owner intentionally did a second purchase intending to let go of the first. Circumstances may warrant this outcome, but it will appear a bit suspicious to anyone evaluating the ethos and thus put the owness on the party attempting this sort of strategy. On the other hand, whenever a bank evaluated a short sale of a mutli-home owner, if the other property had equity, they might also want to "transfer" the shortage onto that property as another possibility rather than "forgiving" that debt. Evaluate it all thoroughly, and when in doubt, question directly -- you have much to lose if you try to be an accomplice to something that would on the surface appear to be a dishonest deal.
0 votes Thank Flag Link Sat Nov 27, 2010
The Greater Las Vegas Association Realtors office would consider your scenario as "Strategic Fraud" so I would pass on it. Best of luck!
0 votes Thank Flag Link Sat Nov 27, 2010
I agree with Melina. Short sales are already hard enough to close. Let someone else have it. I've had this situation happen to me before
and it didn't work.
Web Reference: http://www.sgsellsvegas.com
0 votes Thank Flag Link Sat Nov 27, 2010
That sounds like a buy and bail situation. It is up to the bank to grant the short sale or not, but I don't see how you are going to prove the hardship. I personally wouldn't take it just because I think it is highly doubtful it would ever get approved. I don't waste my time on houses I can't get to closing.
0 votes Thank Flag Link Sat Nov 27, 2010
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer