This week a real estate broker came in to retain me on a complaint filed by a buyer on a flip and it is important enough to understand why the Department of Professional Regulation is going to prosecute this broker.
First I need to let you know that I am critical of non-disclosure issues regarding flips. In March I wrote about my buyer client who was the last bookend on a flip. See SHORT SALE FLIP - QUESTIONABLE METHODS. The client found me through that article, so fortunately (although belatedly) he understands his problem.
Now onto the facts.
User Buyer comes into realty office to see what properties are available. He is referred to Buyer Broker. Buyer Broker shows him some listings and one in particular for sale by another agency. The current owner is Anxious Seller. The MLS listing price has been manually changed by the Buyer Broker from $150,000 to $185,000. It is an active listing.
On Monday the Buyer Broker takes the User Buyer to the home and User Buyer agrees to make an offer of $180,000, which Buyer Broker prepares, and inserts as the Seller the words "Owner of Record". The User Buyer makes the deposit which is given to the escrow agent and is deposited on Tuesday. The offer is signed by Lady Love (not Anxious Seller) that day.
On Wednesday the Buyer Broker has an investor client whose name is Lady Love and had seen the home two weeks earlier, enter into a contract for the same unit with Anxious Seller with a contract price of $148,000.
Lady Love closes on the purchase at $148,000 and about 30 days later Lady Love closes with User Buyer on the $180,000 contract.
Buyer Broker took his commission on the first sale between Anxious Seller and Lady Love, and took no commission on the Lady Love to User Buyer transaction.
User Buyer finds out from the public records about the flipped transaction and files a complaint with the state licensing board.
Since this is a pending matter (the names and numbers have been changed for the story above) I cannot comment on what is the outcome - or what I think will be the outcome. Clearly there was not any disclosure to User Buyer that the home could have been purchased for no more than $150,000, nor was there disclosure to the Anxious Seller that there was an offer of $180,000 prior to there being the offer for $148,000.
In some areas (mostly other countries) this type of transaction is not only tolerated, it is expected. What do you think the decision of the Department of Professional Regulation may be in this case?
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Michael Lampert Esq., the tax attorney who is Of Counsel to my law office has alerted me that on October 21, 2009 the IRS issued a new form, 4506T-EZ, entitled "Short Form Request for Individual Tax Return Transcript". This new form will make it easier for homeowners trying to short sale, modify, refinance or finance their mortgages to obtain their tax return transcripts.
A transcript is a computer print out that includes most line items on the original return. Many lenders accept the transcript as a substitute for a copy of the original tax return for income and other verification purposes.
Many of you that do short sales or loan modifications are familiar with the old 4506T form usually requested by lenders as part of the request documentation. This new form is a simplified ("EZ") form of the 4506T, Request for Transcript of Tax Return. It is only for obtaining copies of 1040 series (including 1040A and 1040EZ) individual income tax returns. It can be filled out online, printed, and then submitted by fax or mail. Upon the taxpayer's request, the transcript can be sent directly to a third party, such as a lender. It is expected that a request will take 10 days to process.
As a reminder, taxpayers still should keep copies of their original return in a safe place. Copies of the actual tax return can be obtained by filing form 4506, Request for Copy of the Return, usually at a cost of $57 per return and a two month time frame.
Taxpayers also should be careful to fill out all parts of the form, including the years requested and who is to receive the information. Remember that once the IRS sends the information to a third party, such as a lender, the IRS has no control over what a third party does with the information.
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
One of the great drawbacks to a broker taking on a short sale listing is the fear and often the reality that the short sale lender will demand a reduction in the broker commissions. This has created all sorts of contraptions to make the broker whole.
I have seen contracts that have inflated commissions designed to make the lender reduce it; I have seen deals to have the buyer guarantee the broker commission short fall. There are more and some not yet invented - I wrote about one 2 years ago in BUYER AGENT REMORSE - PREVENT A COMMISSION REDUCTION ATTACK!
This summer a case was decided in Iowa (and reported by the NAR) where the appellate court said the short sale lender could NOT renegotiate the commission and it is worth noting.
The case of Stewart v. All States Quality Foods decided May 29th has specific facts but I have seen this type of scenario several times and it is worth noting if you are a short sale broker.
In simplistic summary (you can read the case by the link above and it is not too complicated to understand even on a first read!), the broker brought a contract to the lender and in the contract the lender knew that the seller was to get a commission of 10%. The lender said it needed more money and made a counter offer of a specific amount. The broker got that counter offer. Then the lender said it needed to net more and the broker offered to cut its commission to help get part of the way to that number. The lender balked and denied the sale.
The broker sued on its contract for the commission based on bringing a buyer ready, willing and able who met the counteroffer price asked by the lender. The legal theory that won was interference with advangeous business releationship - the listing agreement.
The key issue here is that the lender actively participated in the transaction by making the counter offer request and it being met. Also important is the knowledge by the lender of the existing listing agreement.
In all short sales that we handle we provide a copy of the Exclusive Listing Agreement to the lender, so knowledge in our situations would be met. If the lender makes a counteroffer then the lender is bound to accept it or it has violated at least one legal theory - if you are in Iowa. However the law and doctrines cited by the Iowa appellate court are in comport with many other states caselaw, Florida included.
Be aware of the rights and obligations of the parties to a short sale - especially when the lender oversteps its position as a lender and becomes an active participant.
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Is my mortgage lender guilty of misuse of manpower?
I just received a Saturday morning telephone call from GreenPoint Mortgage wondering why my mortgage payment was late. I asked when it was due and of course was told that it is due the 1st of the month and I have a "grace period" until the 15th of the month.
I realize that if I get the money to the lender on the 1st of the month or the 15th of the month there is no difference. I get no gold star for getting it to the bank before the 15th. In fact the amount of interest I am charged is no different whether I get the money to the bank before the 1st or after the 1st of each month. It is a 15 year amortizing mortgage and in 10 years I have never been late (past the 15th).
So why is GreenPoint Mortgage having precious personnel calling me instead of using that manpower to deal with people actually late on their mortgages or needing and waiting endless months for modifications?
Grrrrr!
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660
RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Does anyone in Versailles have any decency? Two years ago a potential client working as a mailroom clerk for 35 years - came into my office regarding a mortgage modification. He and his wife each made $35,000 annually and he purchased a new Versailles Wellington Florida home costing $1,400,000 for his family and in-laws to live in. He already had a home in Miami with a $170,000 mortgage that he wanted to keep. The 100% financing mortgage was a 1.4% pay-rate negative amortization and had no escrows.
Taxes alone on the house were more than either of their salaries, not to mention insurance, homeowners' association fees and maintenance costs.
His desire was to keep the home and although he was unable to pay my modest legal fee, he came to me 3 times - each time I told him he had been swindled. On top of that, we was about to have mandatory retirement from his long time job.
It seems that this community - the swankiest looking over the top community in the Wellington community in Palm Beach County - is not littered, but now choked with foreclosures with buyers with similar stories. Over 15% of homes in this relatively small community of under 450 homes built beginning in 2005 are in foreclosure. Many of these foreclosure homes never saw a single payment of the mortgage - yet it took lenders 9 to 33 months to file a foreclosure action. Many of these foreclosed homes have never been lived in (buyers take note!).
Now it comes out that most of these buyers all came from areas in the Miami area and many purchased not one, but more than one home - each time qualifying for a mortgage financing while keeping their already mortgaged modest home in the Miami area.
Who benefited? The builder sold the homes at double today's prices as if they each had $10 million dollars hidden in the attic. The mortgage broker fees were significant on the loans. And the poor purchaser sitting in front of me was still dreaming that this home was going to be his retirement paradise.
The Palm Beach Post newspaper this morning has an investigative article on the development "How Foreclosures Hit Versailles" with names, mortgage amounts, addresses of the buyers' modest home and foreclosed home, and lots of pictures. This is the beginning of a valuable investigative effort by the newspaper well worth reading.
The frightening issue is not just that this potential client - and all the others - "qualified" for these mortgages. I could understand if these were "flips that flopped" - but this buyer at least expected that he could afford to keep the house!!! This expectation was not from an insane person, but he had been convinced by an apparently slick sales person that he could achieve an impossible dream and ensconce his family for their retirement in a palace - all on $70,000 a year. I would bet that a good percentage of his co-foreclosed neighbors (that never even moved into their new home - probably because they could not afford the move) had that same dream.
Who pushed these buyers to purchase homes that they absolutely could not keep? What were these buyers thinking? What was the seller thinking? And what was the mortgage broker thinking? Did none of these people have any decency to see what they were participating in was wrong?
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to understand articles at:
TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
Richard Zaretsky is a Florida Bar Board Certified Real Estate Attorney practicing in West Palm Beach for over 33 years, and President of Automated Land Title Company for 27 years.
Richard Zaretsky has been practicing law for over 33 years.
If you have a particular problem or question regarding a listing, a buyer or a seller - or even a contract - please don't hesitate to call me. If you are a homeowner with difficultly paying your mortgage, in a foreclosure or considering foreclosure alternatives, you absolutely should contact me! Perhaps I can be of some assistance or at least give you some friendly advice. Brokers - why waste your time doing the paper work and qualifying a short sale? You should be doing what you do best - selling! We have a special program to assist brokers and sellers in the short sale procedure. Call me for information. Want to Buy a Foreclosure - we can assist you and your broker in the process and help prevent legal headaches in the future.
We can help with a short sale nationwide - so call and find out!
"We do not represent a client unless a written retainer agreement is signed by the client and us and the agreed retainer fee is received. Any discussion on this Blog is not legal advice and you should not act upon it without the advice of your attorney."
"The Hiring of an attorney should not be undertaken without a review of the credentials of the attorney - further infomation about Richard P. Zaretsky is available from this office and on the company website www.florida-counsel.com".
We are specialists in the Short Sale and Foreclosure process. Foreclosure and Bankruptcy should be considered absolutely last resorts to any borrower's mortgage problems!!!! Modification, Short Sale or Deed in Lieu and other "outside the box" solutions can avoid a homeowner in trouble from making a big mistake. Don't chop off the toe if you only need to cut the toenail!!!!
We provide Real Estate representation and advice for Buyers and Seller and Realtors regarding commercial and residential real estate. We also provide Business consulting and corporate representation for businesses including buying and selling of businesses and companies. We accept representation for litigation matters relating to real estate, including foreclosure, ejectment, and commercial eviction.
Caution: We provide frank counsel and "tell it like it is". We do not want our clients to waste their time nor ours on matters where we do not believe we can achieve our client's goals and expectations.
Recently, we successfully litigated a real estate breach of contract case against Mobil Land Development Corp and received a jury verdict having a value in excess of $20 million.
Our title company, Automated Land Title Company, has operated in the same location serving all of Florida for over 20 years. Here is a good link to explain the closing process for home closings.
BOARD CERTIFIED IN REAL ESTATE LAW BY THE FLORIDA BAR
Richard Zaretsky settled in West Palm Beach, Florida in 1975 after obtaining his law degree cum laude from Delaware Law School of Widener University. He is a graduate of Syracuse University, earning his BA in Economics. First working as an Assistant Attorney General for the State of Florida, he opened a private practice of law in 1978, and continues his practice today in the same West Palm Beach location. Although Mr. Zaretsky started his practice with the general practice of law, he strove to specialize in real estate matters. The result is that Mr. Zaretsky was Board Certified in Real Property Law in 1995 by the Florida Bar, and now practices in the areas of real estate law (both transactional and litigation) and commercial transactions. He is principal in the law firm of Richard P. Zaretsky, P.A., whose attorneys provide legal services in real estate and business transactions, state and federal taxation, estate planning and administration, family law, immigration, and civil litigation. Mr. Zaretsky is AV rated by Martindale-Hubbell, their highest rating for attorneys.
Mr. Zaretsky and his wife, Esther, have three children. Esther is a litigation and immigration attorney practicing in West Palm Beach.
For two decades Mr. Zaretsky has operated Automated Land Title Company, a Florida title insurance agency and real estate settlement company serving the entire state. Its office is located adjacent to his law offices in the Forum office complex. Automated Land Title Company handles transactions for acquisition, refinance and construction of homes, land and commercial properties.
In 2003, drawing on 28 years of experience representing financiers, Mr. Zaretsky and his oldest son, Max, created Zemaso Management Company, a private "bridge loan" lender. The company has offices in West Palm Beach.
Presently, Mr. Zaretsky's community involvement includes:
• Chairman of WPB-TV, West Palm Beach Government Television Channel Citizen Advisory Board.
• Serving on the Board of Directors of WXEL television and radio, the local PBS and NPR television and radio affiliate. He is also a lay leader representative to APTS, a Washington lobbying group representing the Public Television industry.
• Mr. Zaretsky is a Board of Director and former First Vice-President of The President Country Club, and serves on the By-Laws and Long Range Planning committees.
• Founder and President of the Community Broadcast Foundation of Palm Beach and the Treasure Coast, which is a public foundation charity that has successfully contracted to obtain ownership along with WNET of New York, of the WXEL radio and television public broadcasting stations and is awaiting FCC approval.
• Advisory Board Member for the City of West Palm Beach WPB-TV (appointed 2007) which is the city public access television station.
RICHARD P. ZARETSKY
Biographical Sketch
Richard is a great source of terrific information
Richard, This is an awesome article. There is so much incorrect information out there about promissory notes and "deeds in lieu of" that it's great to get the real scoop. Have you thought about writing a book? - Bryan in Florida
You've created THE SHORT SALE WIKI! I'll be back to keep reading. Thanks for taking the time and sharing. Great info!
A great read on Short Sales - Michael E in Washinton
It's like I was back in Real Estate School again. I will save this article for future referance. - Wayne in Oregon
You are what blogging is all about.!!!!
Fabulous compendium.
Richard, you're always a wealth of fabulous information. I so appreciate the time that you take to share your abundant knowledge. Lynda in Florida
It's also a good explanation of why agents should not negotiate short sales and leave the consulting on behalf of the client to an attorney. Tina in Virginia
from Lisa in New Jersey - Richard, this is the most thorough and detailed Active Rain post I have ever read - great job!
from Amber in Alabama - An excellent well written post that really gets to the heart of short sale transactions. Thanks for getting the information out to the AR community.
from Alan in California - Richard, this is by far the best material I have ever read on short sales, your post and your comments.
from Lisa in California - An excellent well written post that really gets to the heart of short sale transactions. Thanks for getting the information out to the AR community.
from Rick in Illinois - Richard, I am a private shortsale consultant for a small law firm in Chicago, IL. I perform shortsales for the law firm and their shortsale clients only. I Just want to say that by far your blog and your information has really impressed me. I appreciate the post about IRS form 982- Discharge of Indebtedness, and I especially like the post about the discounted deficiency judgements sold at about 5 or 10 cents on the dollar.
Richard, this is by far the best material I have ever read on short sales, your post and your comments. As a mortgage loan officer, I often talk with people who are upside down and only can recommend that they talk with a lawyer of a CPA with experience in short sales. I now have a much better sense in how I must approach them. These are trying times. There are so many people that need help. AJ
Should I have known this information two months ago, I would have been able to provide a better and firmer counter responce to a bank loss mitigator from GMAC that told me if I didn't accept her $11,800 net offer, on a $96,000 loan, she would get more money than what we were offering from a private investor at a discounted rate.
Well now, after I did some basic math I realized we were offering her $2,200.00 more on the shortsale for the 2nd note payoff than then the $9,600.00 GMAC would potentially receive at 10 cents on the dollar from an investor. Now, I can actually calculate and anticipate their responce on this specifically, thanks to your story.
Negotiating is an art not a science, but we definetely have to have key knowledge and information, be methodical and have some stradegy to negotiate with leverage on behalf of our clients. I look forward to the rest of your blog education.
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http://activerain.com/blogsview/237714/Foreclosure-Homes-Short-Sales
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Very informative post, thank you for sharing and the extra effort.
03/11/2008 12:56 PM by Matthew Heavener
Richard, Your posts are always enlightening. As a Realtor serving many short sale customers I appreciate your information and insights.
03/07/2008 05:45 AM by Bradenton Florida Real Estate - Dan Forbes REALTOR®
Thank for your invaluable insight Richard. I always learn something from your blogs.
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03/07/2008 10:10 AM by Klarque Garrison, "Mr. Short Sale"
That was a great breakdown. Thank you.
01/12/2008 09:52 PM by Mike Pahua
great job, very informative, we have got to get together soon. Call me.. Sharkey
01/12/2008 09:19 PM by Brian Sharkey South Florida Realtor
Awesome post Richard. Thanks so much.
01/01/2008 08:11 PM by LaNita Cates
Richard, Great Clear Cut Advice.
11/12/2007 05:51 AM by Matthew J Blum - MyFavoriteMortgage.net
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