Who Should Negotiate a Short Sale... a Realtor and your Broker's attorney

One of the highlighted threads on Active Rain discusses the issues related to third party negotiators.

On that thread attorney Richard Zaretsky from Florida made and short but powerful post. (he has made a lot of good posts on his Active Rain blog as well.)....

"Title companies do short sales to retain business (the closing). They are not negotiators and their vested interest is to get it closed - period.

Sellers need advice on what they got themselves into. Few banks give clear cut short sale approval letters, and if you have a 2nd lender involved or mortage insurance, the transaction and seller issues usually mount.

Knowlegeable brokers and the advice of an attorney should be in every short seller's team bag when undertaking a short sale / deed in lieu."

As an attorney and brokerage owner I would like to examine his post sentence by sentence. Mr. Zaretsky's post will be in quotes. My comments follow. Note.... I have not contacted him about this post... so these are my opinions... he is invited to post his own if he wishes.

"1. Title companies do short sales to retain business (the closing). They are not negotiators and their vested interest is to get it closed - period."

A consumer or non experienced Realtor would say, sounds good to me. Why would an attorney post such an unusal sentence. This sentence is similar to the NFL coach who critiqued a receiver by saying all he does is catch touchdowns. Correct?

"2. Sellers need advice on what they got themselves into. Few banks give clear cut short sale approval letters, and if you have a 2nd lender involved or mortage insurance, the transaction and seller issues usually mount."

Experienced short sale negotiators know that many banks provide vague short sale approval letters --or worse -- approval letters which reserve the lenders right to collect on the deficiency.

In my legal and licensed Broker opinion as well as the opinion of the California Association of Realtors the first order of business for a seller should be to consider other loan workout options or bankruptcy before agreeing to do a short sale. It is highly advisable that a seller speak with an experienced loan workout attorney so that they can pick a strategy which has the best chance of minimizing financial, tax and credit damage.

For many people and many lenders in CA, the seller should consider a short payoff strategy for the junior loan before beginning a short sale. Owners might also consider loan modification, bankruptcy or perhaps consider challenging the validity of the loan or the servicer before beginning a short sale.

I wonder how many Realtors worry they are not serving their clients well when they are come back with an approval letter which reserves the lenders right or the M.I. company's right to collect the deficiency. Would it not be far better to have an attorney advising the selling of thier options? Many times a short sale is the best strategy, but not always.

I do wonder about Bank of America short sales and Real Estate Brokerages.

I wonder how the larger brokerage chains can allow their Realtors to keep doing short sales on behalf of owners with assets, when they know BofA reserves the right to collect the deficiency in Realtor negotiator short sales. Attorneys can get BofA to change the language. I just do not get why larger brokers do not care about the public or their agents. Don't they have the profits and resources to protect the public and their Realtor's future?

I note that Breach of Fiducary duty, is consider fraud under CA law. One lawsuit for breach and a Realtor is looking for a new non licensed career. My advice to Realtors... search for a broker who cares about you and your sellers. Get an attorney on your team.

3. Knowlegeable brokers and the advice of an attorney should be in every short seller's team bag when undertaking a short sale / deed in lieu."

Agreed. In my opinion it is the only way to properly discharge your fiduciary duty to the seller.

If your Real Estate brokerage does not have a short sale attorney on staff to help you and your sellers, find another broker.

The first 20% of the short sale is setting up loan workout strategy and the short sale package. .

The next 50% of the short sale is submitting the package and getting it to the negotiators desk.

The last 30% is negotiating the proper releases and properly counseling the sellers on the legal consequences of those releases.

the middle 50% seems like it can be done by any diligent professional.

However, I always wonder, who tells the sellers they should close on the terms presented, who is negotiating the wording of those releases?