The National Association of Realtors® recently published a survey of their members related to short sale disputes and legal action. 55% of survey respondents indicated that short sale transactions were the basis for a significant number of current disputes. The survey is updated every two years, and 2011 is just out.
Respondents were asked about transactions in which they were involved or of which they had knowledge that resulted in disputes and/or legal action. Responses included:
• Dual agency – Since a great many short sale transactions involve only one agent or broker working with both the buyer and the seller, there can be “dual agency” issues that the agents involved are not prepared to handle. 83% of respondents stated this fact. They aren’t well-enough schooled on dual agency to understand what they can and cannot do or say. Until short sales became very common, dual agency situations were not that common in normal transactions.
• Breach of Fiduciary Duty – Agency brings with it extra duties and responsibilities for the agent as related to their clients. 71% stated that they were seeing significant increases in complaints of breach of fiduciary duties, with one stating that “Too many agents forget who they work for and the full bundle of responsibility we owe to the client.”
• Property Disclosure – 55% of respondents indicated a significant number of disputes related to disclosures of property condition. This includes both physical and non-physical conditions. 76% of respondents placed this item in the top three.
• REOs As Well – It’s not just short sales though. 60% of respondents indicated that they believe bank owned property transaction disputes will rise over the next two years due to some of the same reasons cited above. 76% believe that REO related disputes will be one of the top three issues they will face.
The survey also asked about actual damages reported, and found that:
• New York was at the top of the list with 11.39% of total monetary damages awarded.
• Pennsylvania came second at 8.86% of the total.
• California was third at 8.23%
Breach of Fiduciary Duty and Fair Housing headed the list as the leading causes of damages awarded.
Be Careful Out There
Real estate investors are finding great opportunity in short sales, but should exercise a great deal of caution. Real estate agents are falling short in their knowledge and ability to make sure that both sides in a dual agency situation are properly served. Of course, the best approach is to have different agents representing buyers and sellers, but this drives up the cost, so isn’t always what any involved party wants.
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Take Care With Short Sales
This is my "homework" assignment of day 2 in the RBBP. This cautionary commentary isn't exactly what I was looking for to get some wind behind my sails but a heads up is always a good thing. I'll pick another forum that is perhaps more inspiring??
Cheers,
DB
very informative
very informative
Great heads up
Thanks for the caution sign. Look before you leap. Just take an educated leap.
Thank you!
This is one area I have a large interest in getting into. The information provided here is great stuff to fall back on and to use caution when proceeding into these waters.
Thank you.
Susan
Just went through this
Just went through this personally with BAC.
WHAT a circus! They have three servicing companies who determine one's eligibility for HAFA. Some of them evaluate potential Home owners based on whether their loans are freddie or Fannie... some do not. Some evaluate you whether you already have an offer on the house...or not! The criteria use for Freddie/Fannie loans are "different" than criteria used for all other loans to be considered...
It took me six mos and all three companies to determine whether I was eligible! (everytime I appealed...I was flipped over to yet another servicer and had to re-submit ALL of my paperwork again!) No wonder HAFA loans are not being approved in very high numbers...
Good luck....just know that most banks now have their own incentives with which to work with at close or in restructuring loans. If the HAFA program does not approve a short sale, ask the bank, if they are willing to help out the homeowner (ie relo costs at closing) with their own funds!
patence required...
...mainly because the banks still are figuring out how to handle SS, nonetheless if you go into it knowing it could take a long time to close, all the resubmitted paperwork will be less of a big deal. I've had one SS going on for 18 months with WF -Wells Fargo - and my latest with BOA - bank of america - is getting finished up within 3 months. As long as your cash buyers are willing to stay in the game, they will walk away with a good deal.
Agents vs Investors?
When advising us to "take care with short sales", what is it exactly that requires extra care? I mean, unless you are also a licensed RE agent and a principal in the deal as well, then what is there to be concerned about? Only the agents are sued, right? Is it not business as usual for investors? What am I missing here?
Thank you in advance for your replies.
Thank you
Thanks for the heads up.
This topic has been brought up at 2 of the REA meetings I go to. Most investors in these groups refuse to deal with short sales right now because of the pending onslaught of troubles they foresee happening. They feel the same about REOs as well. Too many questions as to the legitimacy of the foreclosure procedures and clear title.
As you can imagine, this is very disconcerting to a budding investor with a town full of REOs.
Thanks for keeping us posted,
Andy Sager
DG's AndyS
Thank you for these updates!
Please keep us updated on the latest with Short Sales and REO's. I experienced a Short Sale process with Wells Fargo in 2008 and it was a very long and painful process. Much like what has been reported in this update. At that time, one department of Wells Fargo did not know what the other was doing. They were not synchronized in their efforts and it took a major amount of time with following up. Three offers were lost because of the slow response time. It doesn't sound like the kinks are worked out yet based on this update. Hopefully, they will get worked out in the near future.
Thank you again! Coco Patty