I view my tent ministry as a real estate professional as an honorable job. I am helping people who are in distress get a new piece of mind. On a broader sense, owning a piece of property is part of the American dream. Sadly, there are vultures out there that want to prey on the innocent with things that sound good but are pure trouble. I recently read an article by the Department of Real Estate of California and I thought I would share a few pointers with everyone.
(Note - this is written from a California standpoint, most pointers should be applicable anywhere in the US but check with a RE agent in your area if you have specific questions.)
Does a person who helps me with a short sale have to be licensed by the state?
Yes, any person who "negotiates loans...or perform services for borrowers or lenders...in connection with loans secured directly or collaterally by liens on real property... for or in expectation of compensation" must be licensed.
What is that in English? If a person wants to help you negotiate with a lender in regards to a property - that person must be licensed. This applies to anyone who wants to talk to your lender(s) on your behalf in regards to a loan secured by property.
Application - we are seeing 'short sale negotiators' as a new business. If they cannot produce a DRE license number then run. Also, once they give you a license number check it out against your state's real estate license database. Some of these negotiators hire a broker to list the property which is a licensed professional. However, if THEY talk to your lender(s) they too must be licensed.
What should I watch out for if I use a negotiator?
Upfront fees - It is against the law for any person to charge you up front fees in dealing with your loan; whether it is a short sale negotiator or a person helping you with a loan modification.
Signing away your rights - Some of these negotiators require you to sign a document that grants them exclusive rights to negotiate on your behalf. While it is true that you only want one person dealing with your short sale, beware of anyone that wants to cut you completely out of the loop. By law, all offers have to be submitted to you and to the lender.
The fraud we are seeing is the negotiator hides high bids from the lender and only submits low bids. They keep the high bids until after the short sale is complete. They then bring in the high bidder to buy the property.
Example, this negotiator receives a bid for $400,000. They have a friend that gives them a bid for $350,000. They submit the bid for $350,000 and get the short sale completed. Then their friend re-lists the property and they contact the high bidder and sell the property for $400,000. They just made $50,000 at your expense and at the expense of the economic recovery of this nation.
They committed fraud by withholding all offers from the lender; this is a felony. This 'short sale flip fraud' is now on the radar of the FBI who is actively seeking out these quick short sale flips.
Can I pay anyone 'under the table'?
No! In short sale situations there can be more than one lender. Sometimes the second (or more) lender will try to hold up the process and get as much money from you as they can. Payment to any lender outside of the process (under the table) is called fraud.
If a lender, an agent, or other licensed party encourages you to do something illegal do not do it. If it is a lender be sure to disclose this to your agent so they can speak with their broker to see if there is anything legal they need to do. If it is your agent that asks you to do something illegal contact their broker. Fraud in our industry cannot ever be acceptable. You can also report them to the California Department of Real Estate (or whatever your state department is called.) If the offending party is the broker then contact the Department of Real Estate and report the incident.
If you are ever unsure of an action it is best to get advice. It is much better to be safe then to get into serious trouble.
Final Thoughts
In any real estate transaction there are many items that must be done at the right time and in a specific manner. It is very important to your financial future to make sure you are being advised in a proper way. If something sounds too good to be true or it doesn't quite feel right then caution is recommended.
*Here is a site that tracks Real Estate fraud in California: http://www.californiarealestatefraudreport.com/
*Never pay up-front fees (they are illegal)
*Never work with a person who is unlicensed (they may say they do not need to be, and the answer is if it involves real estate in any form, like negotiating on loans secured by real estate, they must be licensed.)
*Be aware of any unspecified surcharges or fees
*Be cautious if contacted by a 'short sale negotiator.' This is the highest rising form or fraud and scam. As the states crack down on fraudulent loan modification scams these unscrupulous people are moving to the short sale arena.
*Some lenders might try to induce you to commit fraud. They don't care if you are violating law; they just want money. The seller, buyer, or agents cannot make any hidden payments. Anything paid in the short sale process needs to be disclosed and appear on the HUD-1 form.
*No one should ever tell you to stop making payments on any mortgage. One, you do not have to be in default in order to short sale your house. Second, you will be trashing your credit report with no purpose.
*In a short sale with 2nd or more lien holders can be very difficult. They will play extreme hardball with you. Make sure your agent can play hardball right back (like I am happy to do.)
Disclaimer: Seek licensed help from a tax lawyer or CPA before making any decisions regarding your house. The information in this article is to assist you in understanding real estate transaction and cannot be construed as legal, tax or financial advice. This article is for informational purposes only.
(Note - this is written from a California standpoint, most pointers should be applicable anywhere in the US but check with a RE agent in your area if you have specific questions.)
Does a person who helps me with a short sale have to be licensed by the state?
Yes, any person who "negotiates loans...or perform services for borrowers or lenders...in connection with loans secured directly or collaterally by liens on real property... for or in expectation of compensation" must be licensed.
What is that in English? If a person wants to help you negotiate with a lender in regards to a property - that person must be licensed. This applies to anyone who wants to talk to your lender(s) on your behalf in regards to a loan secured by property.
Application - we are seeing 'short sale negotiators' as a new business. If they cannot produce a DRE license number then run. Also, once they give you a license number check it out against your state's real estate license database. Some of these negotiators hire a broker to list the property which is a licensed professional. However, if THEY talk to your lender(s) they too must be licensed.
What should I watch out for if I use a negotiator?
Upfront fees - It is against the law for any person to charge you up front fees in dealing with your loan; whether it is a short sale negotiator or a person helping you with a loan modification.
Signing away your rights - Some of these negotiators require you to sign a document that grants them exclusive rights to negotiate on your behalf. While it is true that you only want one person dealing with your short sale, beware of anyone that wants to cut you completely out of the loop. By law, all offers have to be submitted to you and to the lender.
The fraud we are seeing is the negotiator hides high bids from the lender and only submits low bids. They keep the high bids until after the short sale is complete. They then bring in the high bidder to buy the property.
Example, this negotiator receives a bid for $400,000. They have a friend that gives them a bid for $350,000. They submit the bid for $350,000 and get the short sale completed. Then their friend re-lists the property and they contact the high bidder and sell the property for $400,000. They just made $50,000 at your expense and at the expense of the economic recovery of this nation.
They committed fraud by withholding all offers from the lender; this is a felony. This 'short sale flip fraud' is now on the radar of the FBI who is actively seeking out these quick short sale flips.
Can I pay anyone 'under the table'?
No! In short sale situations there can be more than one lender. Sometimes the second (or more) lender will try to hold up the process and get as much money from you as they can. Payment to any lender outside of the process (under the table) is called fraud.
If a lender, an agent, or other licensed party encourages you to do something illegal do not do it. If it is a lender be sure to disclose this to your agent so they can speak with their broker to see if there is anything legal they need to do. If it is your agent that asks you to do something illegal contact their broker. Fraud in our industry cannot ever be acceptable. You can also report them to the California Department of Real Estate (or whatever your state department is called.) If the offending party is the broker then contact the Department of Real Estate and report the incident.
If you are ever unsure of an action it is best to get advice. It is much better to be safe then to get into serious trouble.
Final Thoughts
In any real estate transaction there are many items that must be done at the right time and in a specific manner. It is very important to your financial future to make sure you are being advised in a proper way. If something sounds too good to be true or it doesn't quite feel right then caution is recommended.
*Here is a site that tracks Real Estate fraud in California: http://www.californiarealestatefraudreport.com/
*Never pay up-front fees (they are illegal)
*Never work with a person who is unlicensed (they may say they do not need to be, and the answer is if it involves real estate in any form, like negotiating on loans secured by real estate, they must be licensed.)
*Be aware of any unspecified surcharges or fees
*Be cautious if contacted by a 'short sale negotiator.' This is the highest rising form or fraud and scam. As the states crack down on fraudulent loan modification scams these unscrupulous people are moving to the short sale arena.
*Some lenders might try to induce you to commit fraud. They don't care if you are violating law; they just want money. The seller, buyer, or agents cannot make any hidden payments. Anything paid in the short sale process needs to be disclosed and appear on the HUD-1 form.
*No one should ever tell you to stop making payments on any mortgage. One, you do not have to be in default in order to short sale your house. Second, you will be trashing your credit report with no purpose.
*In a short sale with 2nd or more lien holders can be very difficult. They will play extreme hardball with you. Make sure your agent can play hardball right back (like I am happy to do.)
Disclaimer: Seek licensed help from a tax lawyer or CPA before making any decisions regarding your house. The information in this article is to assist you in understanding real estate transaction and cannot be construed as legal, tax or financial advice. This article is for informational purposes only.
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