Some short sale practices are controversial in an industry already battered by rising numbers of foreclosed or distressed properties, and a recent history of questionable mortgage practices. So, regulators and real estate brokers say homeowners must be alert to a slew of potential risks and consequences of a short sale.
There is no industry standard for best practices and there is no specialized training currently required for real estate practicioners. There are special designations that the real estate professional can receive once they have gone through extensive training on the process of Short Sales. Be sure to look for designations such as Certified Default Resolution Specialist(CDRS), Short Sales and Foreclosure Resource Certification(SFR), Certified Distressed Property Expert(CDPE) and several others. It is imperative that you have a trained professional handling your Short Sale.
Be aware of brokers or investors who get distressed homeowners to give them a legal interest in the property with little or no compensation, via such documents as an option to purchase or power of attorney.
The broker or investor then goes out and tries to find another buyer to flip the property to a new owner. In other words, the investor or broker buys it and then resells it quickly to someone else for a higher price, sometimes on the same day, pocketing the spread. That's all well and good if another buyer is found. If not, the flipper can just walk away and the home is foreclosed.
Not everyone likes the way some brokers handle such sales. "A situation like that is ripe for abuse,'' said Charles Sanger, a real estate attorney at Bradley Arant Boult Cummings.
He said options tie up the property so it can't be sold to other buyers. He would only give power of attorney to his most trusted adviser, not a real estate broker.
"That prevents you from selling it without that person's permission,'' he said. "I would not advise a homeowner to do that."
A spokesman for the Tennessee Department of Commerce and Insurance, said the agency frowns on brokers taking on power of attorney, but it's not against the rules. In some cases, a seller or buyer might be out of town and wants a broker to handle the closing sale.
Sometimes, lenders won't agree to a short sale without making the sellers sign documents promising to repay the bank's loss on the sale. That's true for foreclosures as well, where lenders can try to come back after homeowners for the bank's loss on a mortgage
Be sure to use the services of a real estate professional who is a trained professional and has received one of several designations mentioned above.
Ask questions and dont assume that because you have a real estate agent, that they know what they are doing in regards to short sales. Many are just not trained adequately to take on this type of listing.
The information provided on this site should not be used as a substitute for professional counseling and advice from certified legal or financial professionals
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