UNIT 3 - CONTENTS

1. Short Sales and Their Challenges2. Services Allowable by Licensees, Referrals and Red Flags3. REET, MARS and Oregon FAQ’sUnit Assessment

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SHORT SALES

In chapter 1 we will cover Short Sale basics and some of their challenges.

CHAPTER LEARNING OBJECTIVES

Upon completion of this chapter, the learner will be able to:• Understand and Discuss Basic Short Sales• Give examples of the challenges with short sales

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CHAPTER 1

SHORT SALES AND THEIR CHALLENGES

A short sale is a transaction in which the lender/lenders agree to accept less than the mortgage amount owed by the borrower/homeowner. The short sale lender has complete control as to whether they will or will not approve of a short sale. The short sale lender may negotiate or possibly even forgive the remaining balance. Short sales require lender approval and may negatively affect the seller’s tax obligation and credit history.

Remember that not all short sale sellers are in foreclosure or even behind on their mortgage payments.

Example:Thomas and Suzanne need to sell their home because Suzanne had a job transfer which is located out of state. They bought at the top of the market, as far as prices were concerned. They only put 3% as a down payment. Home prices in their neighborhood have been declining for over two years. To complicate the situation, there have been many foreclosures in their neighborhood, which brought the market value of their home down even more. Thomas and Suzanne are not behind on the mortgage payments, but are short sellers, since they owe way more than they can sell the property for and don’t have the money saved to make up the difference.

Despite the claims that short sale transactions are the new money-making deals for real estate professionals, these transactions can be complicated, time-consuming, and difficult to complete for all parties involved in the transaction.

The short sale process usually takes a much longer time than a normal real estate transaction. It may take several weeks or more (possibly even months) to get a one approved. Most lenders have several tiers of management, insurers, and investors that will have to approve of the Short Sale. So, it is important to explain the length of this process to the seller and the purchaser.

Far from being a perfect alternative for distressed homeowners, short sales could significantly lower the seller’s credit score. Depending on how the lender reports the situation, the damage to the seller’s credit can take a very long time to repair. In addition, short sales can involve significant legal and tax consequences, which is why you should advise all sellers considering a short sale to first meet with a legal and tax professional to determine whether a short sale is

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CHAPTER 1 - SECTION 1

SHORT SALES AND THEIR CHALLENGES

really their best option. We will discuss the potential legal and tax consequences in detail later in the course.

Generally speaking, a lender will not consider a short sale without an actual bona fide offer on the property. Sellers should compile a package with all of the paperwork required by the lender before receiving an offer.

In some cases, the difference between what is owed and what the lender will accept may be totally forgiven by the lender. This is called a satisfaction and your client will have satisfied the complete obligation of the note and amount owed after the short sale.

However, in many cases, the borrower will need to make arrangements with the lender to settle the difference of the remainder of the debt obligation (this is usually done via a personal note from the borrower given to the lender, which is not secured by the property). This is called a release and the remaining debt on the property (often referred to as a deficiency) still remains after the short sale.

The seller’s lender is sometimes looked upon as a “third party” in a short sale. The short sale lender is not a party to the transaction. Like a traditional transaction, the parties to the transaction are the seller and the purchaser. As a listing representative, your fiduciary responsibilities are to the seller.

As a licensee, you will want to make sure that your seller is willing and cooperative. There will be an abundance of paperwork the seller will be required to complete. Some sellers will be embarrassed about their current situation and may be uncooperative. Their cooperation is essential to you being able to assist them.

As a real estate professional, care must be taken not to advise your client that the debt will automatically be forgiven in a short sale.

Because of the current economic crisis, which includes a drop in home prices across the country and high unemployment figures, the number of short sales is increasing. Keep abreast of current legislation at your local government level your state level and the federal level to ensure that you can advise your clients of all of the options available to them for retaining their home.

A short sale can have advantages to the lender such as:• They are usually less costly than a foreclosure thus minimizing losses.• Can minimize legal fees• Bad loans and inventory of homes negatively affect the lender’s business.

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• Banks are in the money business and not in the business of owning homes.• The lender doesn’t have to deal with property maintenance issues should the property

become bank owned.

Example of a short sale with a benefit to the lender

Bob and Bonita were one month behind in their mortgage payments. They had both recently lost their jobs. After going to HUD Credit Counseling, they decided their best alternative was a short sale listing. They procured a buyer very soon after listing their property and approached their lender with the prospects of being granted a short sale.

Their lender took into consideration the cost and time that they, would incur having to go through the foreclosure process. They also considered the deferred maintenance on the home and the cost and possibility of having to re-sell the property. They agreed to the short sale, because it was a “make sense” business decision and would most likely cost them less than other alternatives.

A short sale may have some advantages to the borrower such as:• A short sale may or may not hurt their credit history as much as a foreclosure• A borrower may be able to avoid the stigma that is associated with a foreclosure

Challenges with Short Sales

Many licensees have experienced difficulties with unresponsive lenders, lost documentation which requires resubmission, home appraisals that were unrealistic, and delays in the processing of these loans. Many of these issues are due to:

Limited experience - Many licensees may not be familiar with the short sale process. Even if the licensee is experienced in short sales, many lenders lack a sufficient and experienced staff to be able to handle the increased volume of short sale requests.

More Than One lender - When there is more than one lender on a property, the negotiations for a short sale become increasingly more difficult. Second or third lien holders, often called junior lien holders, may hold up the! approval process to be able to receive the largest possible payment in exchange for releasing their! lien. This is also very risky for these junior lien holders because if the property does go into foreclosure, they may receive nothing.

As always, if you have questions regarding short sales, the purchase and sale agreement, or any other legal issue, please seek the advice of an attorney.

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NOTE: When you, as a licensee, are seeking real estate legal advice from an attorney, always use an attorney that specializes in real estate and not some other field of law. Also, when you advise your clients to seek legal advice, suggest they seek an attorney who specializes in real estate. Always make a distinction between you seeking real estate advice as a real estate professional and your client’s seeking advice. NEVER consult with an attorney on behalf of your clients and then try to repeat or translate this advice to your client. Make sure that your clients seek legal advice personally. It may be, however, a good idea to accompany your client when they consult with an attorney.

If you do not have experience with the short sale process you should consider referring the homeowner to a licensee who is experienced in this arena.

In most cases, lenders will not consider a short sale without an actual offer from a bona fide buyer. Once the buyer submits an offer, the seller must review and accept it before submitting the offer to the lender. During the review process, the lender may request additional paperwork from both parties. The short sale lender will require a pre-approval letter from the buyer’s lender or other proof that the buyer is qualified for the purchase Additionally, the short sale lender will want to see proof that the seller suffers from a hardship and cannot afford to remain in the home or pay what is owed.

As more loan modification programs become available through regulatory efforts, there may be additional options available to seller. Many sellers and lenders already involved in the short sale process may wish to revisit the possibility of modifying the existing loan to save the home. As a real estate professional, you should keep abreast of these changes.

Short Sale Packages

A short sale package encompasses all the required paperwork needed to initiate a short sale. As a listing representative, you may need to educate the seller on the process for collecting and organizing the required documents.

Requirements vary from lender to lender and from state to state, but may include:• Cover letter• Authorization to release information• Seller’s hardship letter• Seller's financial information• 2 years of W2's (most recent)• 2 months of pay stubs (most recent)• 2 months of bank statements (most recent)• Supporting hardship documentation (e.g. HOA liens, medical/disability statements, etc.)

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• Repair estimate for the property• A bona fide offer from a qualified buyer• Qualifications for getting a loan from the buyer• Comparable sales for the property• Contract (PSA)• Net sheet• First mortgage holder may ask for a payoff amount from the 2nd mortgage holder• Second mortgage holder may ask for a payoff amount from the 1st lien holder• Lender may ask for an initial title report• FHA and VA may have their own forms and special requirements

Make sure you check with the lender to find out their approach to initiating a short sale. Knowing their preference up front and submitting all of the required paperwork will expedite the process and avoid unnecessary delays for your client and the buyer.

Suggest to the seller, that you be the contact person with their lender. This could avoid duplication from you and the seller both contacting the short sale lender. This will reduce the risk of conflicting information as well.

Lenders’ responses to proposed short sale packages will vary. There is no defined response time and no guarantee you will get a reply at all. In fact, some lenders are so overworked and understaffed with the high volume of short sales they cannot take calls from licensees. You may be at the mercy of the lender’s schedule. If you do not have the necessary data readily available to discuss the file when they call, your client’s file might go to the bottom of the pile, causing extra delays. Be prepared with your client’s file to be able to discuss the paperwork when the lender calls. Always be cordial and professional.

Once the lender has all the required paperwork, they will accept the offer and approve the sale, reject the offer, or attempt to negotiate terms with one or both parties.

Remember that the buyer is not purchasing the property from the lender; they are purchasing from the seller. The lender’s approval is simply a contingency.

From the first meeting with a short sale seller, and throughout the entire transaction, documentation is important for reducing risks for you, your brokerage and your client.

You should have detailed documentation of:• Seller conversations – You should have notes from each and every meeting with the

seller. Keep track of discussions and advice that was given. You should obtain the

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seller’s written acknowledgement that they have been advised to consult with an attorney or tax professional.

• Written permission from the seller to contact their lender• Lender conversations – Keep a record of every communication with the lender,

whether by phone, fax or email. Write down the dates for each time you request a document, when the lender sends it, and when you received the materials.

• Conversations with the buyer and/or buyer’s representative – Keep detailed records of your negotiations with the buyer and/or buyer’s representative.

• All documents and notes relating to the transaction.• All marketing efforts, showings and feedback from other licensee

Working with Buyers on Short Sales

When you meet with buyers looking for or willing to consider a short sale transaction, there are specific issues that must be discussed as soon as possible.

Addressing these issues early on can help you reduce risks related to:• Failure to adhere to timelines and deadlines• Failure to close

While buyers might feel these properties are a great deal, short sales may involve a long and complicated process. It is best to address these concerns just as soon as possible.

Your role as a buyer’s representative is to educate your client on the short sale process and set clear expectations. While the seller generally hopes to sell quickly, the lender may take a long time to review the details of the transaction before approving a short sale. A short sale is a business transaction and the lender must determine if it makes smart business sense to accept a short sale offer or be faced with the possibility of foreclosing on a property.

The best thing you can do for the buyer who wants to purchase a short sale property is to make sure your client:

• Understands the short sale process from the seller’s perspective and the lender’s perspective

• Qualifies for the loan without the contingency of sale of the buyer’s existing residence • Is willing to be patient and flexible in terms of closing

Not all buyers or offers will be ideal for a short sale. If you receive a very low offer, you should work with your buyer to redefine the terms. Even though a short sale requires lender approval, the seller must accept the initial offer before submitting it to the lender. If your client doesn’t include favorable terms, the seller may not accept the offer.

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When meeting with short sale buyers, you should discuss:

Timeline for purchase – Short sales can take anywhere from 45 days to 6 months, sometimes longer. Buyers considering purchasing a short sale property should be aware that this is a significantly longer process than a traditional sale.

Property condition – Short sale lenders will generally not agree to any allowance for repairs to a property. The buyer should obtain a thorough inspection to uncover any needed repairs. Although the property is usually transferred “as is” in a short sale, the buyer can still cancel the contract due to items discovered during the inspection period, as allowed in the purchase contract. If repairs are a concern or the buyer is aware of existing damage at the time of the offer, this should be reflected in the offer as it is unlikely to be negotiated later.

If there are minor repairs to be made, the buyer may be able to negotiate the selling price downward, in lieu of these repairs. However, if there are major repairs, the buyer’s lender may require these be completed prior to granting a loan to a buyer. In this circumstance, the buyer may be forced to ask the lender for repairs to be performed.

Financing – When considering a short sale, the lender will want proof the buyer has access to the funds. They will usually require stringent documentation that the buyer has been approved by a lender and completed the initial steps to secure financing.

Closing costs – Short sale lenders do not usually allow for any buyer closing costs to be paid by the lender as part of the transaction. The buyer should understand that the short sale lender is in a disadvantaged position already; because they are not making any money (and are, in fact, losing money) on the transaction, they may not be willing to offer any incentives to the buyer. Buyers should be prepared to pay their own closing costs in a short sale transaction.

Terms – For the same reason, the short sale lender has no incentive to include or agree to other favorable terms for the buyer, such as early possession or the payment of transaction-related fees or expenses. In addition, buyers should remember that the short sale lender is not the seller; they cannot agree to the inclusion of any additional personal property or fixtures not already included. These items must be negotiated with the seller, as in a traditional sale.

Condition of Title – The buyer should thoroughly investigate the condition of the title. Additional liens may have been levied on the property. These items must be resolved prior to the sale so a clear title can be transferred and the buyer can obtain title insurance. Usually, if the property is encumbered by additional liens such as a second mortgage, the listing

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representative will negotiate with the junior lien holder(s) to settle or release the additional liens prior to the sale. Often, the short sale offer is submitted to the second lien holder, who will agree to receive a smaller portion of the proceeds from the sale as settlement of the debt. For smaller liens, such as unpaid home owner’s dues or back property taxes, these are generally paid out of the short sale lender’s proceeds at closing. The listing representative will submit these items as part of the net statement they provide to the short sale lender.

Lender negotiations – Short sale lenders will often try to negotiate a higher price. While buyers often consider short sale properties to be distressed (and therefore worth slightly less than market value), the lender’s goal is to achieve the highest price possible. The nature of these negotiations can be confusing, as the lender is not actually negotiating the transaction itself, but rather the terms under which they will agree to release their lien on the property so the transaction can proceed.

Potential for default – Because short sales generally require much more paperwork and documentation than a traditional sale, the chances of one party or the other defaulting on a short sale transaction are higher. These transactions can stall out if both parties do not promptly supply any requested information. Additionally, there’s always a chance the seller will find an alternative option for saving the home and withdraw from the transaction.

Area concerns – If the property is in an area or neighborhood experiencing a higher-than-average rate of distressed properties, there is a chance the property value may continue to decrease if neighboring homes fall into foreclosure or are transferred via a deed in lieu of foreclosure. Environmental concerns - Because many short sales may be for properties that are in poor condition, there could be deferred maintenance or environmental concerns. Examples of these environmental concerns might include leaking underground heating oil tanks, poorly maintained and defective plumbing etc.

Specifying and Giving Notice of a Short Sale

Licensees should be sure to include the verbiage in the purchase and sale agreement “subject to all underlying lien holder approval” when dealing with a short sale or the possibility of a short sale.

The purchase and sale agreement is the only true contract and this contract should clearly state that it is subject to all underlying lien holder approval. The reason that this point is important is to protect the seller/listing representative from paying a commission if the bank does not approve of a short sale.

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Example:The seller owes $200,000 on a mortgage. The bank has told the seller they would accept a $180,000 pay off. The property is listed at $200,000 and after the sellers were to pay all closing costs and commissions, the net to the seller would be $180,000 which the seller was told that the bank would accept. Another licensee secures a buyer at $200,000. The listing representative, and the buyer's representative did not add the verbiage subject to all underlying lien holder approval as a contingency to the purchase and sale agreement. The bank decides not to approve of the short sale of the mortgage amount of $ 180,000. It could be argued that the buyer's representative brought a ready willing and able buyer to the table and thus is entitled to a selling office commission.

E-Mail Transmission

There is another item that is important to include in a purchase and sale agreement, especially when dealing with short sales and banks which may be located out of town or in another state. Most purchase and sale agreements state something similar to the below verbiage:

Facsimile transmission of any signed document, and retransmission of any signed facsimile transmission, shall be the same as delivery of an original. At the request of either party, or the closing agent, the parties will confirm facsimile transmitted signatures by signing an original document. E-mail transmission of any document or notice shall not be effective unless the parties to the Agreement otherwise agree in writing.

Including verbiage in the purchase and sale agreement, with the permission of your manager, and agreed to in writing by both the buyer and the seller “ both parties agree to the use of e-mail transmission” can be important. This is especially true when you're dealing with a lien holder in another state.

Further Information

Further information is provided by The National Association of Realtors’s (NAR) Short Sales Incentive Summary on the Obama Administration’s Announcement for Financial Incentives and Uniform Process for Short Sales shown below as of July 15, 2009.

Obama Administration Announces Financial Incentives and Uniform Process for Short Sales

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On May 14, 2009, the Obama Administration announced incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP). For borrowers who are unable to retain their home under the Making Home Affordable Loan Modification Program, the servicer may consider a short sale or, if that is not successful, a deed-in-lieu of foreclosure. Participating servicers must comply with program requirements so long as they do not conflict with contractual agreements with investors. Late July is the Treasury Department’s current target for issuing guidelines and forms necessary to start the program.

Further information on the Making Homes Affordable Plan can be found at:• www.makinghomeaffordable.gov

Homeowners who have loans through Freddie Mac or Fannie Mae may also have some advantages. If they would like to find out if their loan is owned or serviced by Freddie Mac or Fannie Mae can get information from:

• www.freddiemac.com/mortgage_help/index.html• knowyouroptions.com/loanlookup

Example of When a Short Sale May Be an Appropriate Solution

Jack and his wife Betty own a home. Betty does not work outside of the home and takes care of their three children. Jack is the sole earner for the family. When Jack and Betty bought their home in 2006, they took out a mortgage loan for $350,000. The outstanding balance is $300,000 and the home is currently valued at $279,000. Their current situation is known as being underwater or upside down since they owe more than the current market value of their home.

Due to the economic recession, Jack lost his job and he has been unemployed for 12 months. Even though Jack receives unemployment compensation, he and Betty have struggled to meet their mortgage payments and the remainder of their debt obligations.

They have not made a mortgage payment in several months and decide to contact a real estate licensee to pursue a short sale.

A short sale may be an appropriate solution for Jack and Betty. Their real estate representative should refer them to a HUD counselor and suggest that they seek legal advice or professional advice on tax or credit consequences to make sure this is the best solution for them.

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Example of When a Short Sale May Not Be an Appropriate Solution

The Andersons bought their home at the height of the real estate market in 2006. Since the purchase in 2006, Mr. Anderson has become severely ill. The property value declined because:

• The general economic recession negatively affected real estate prices in their area.• Three homes foreclosed in their immediate area, which lowered the market value of the

Anderson’s home.• The family was unable to maintain the home and could not afford to hire maintenance

personnel.

The Andersons need to relocate quickly to an area where he can obtain specialized medical treatment. A short sale would probably not be the best solution for them because sellers must play an active role in the short sale process. With Mr. Anderson’s illness, they do not have the time needed deal with all the details necessary to to sell the home.

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Chapter 2 covers the services licensees should and should not offer when handling short sales as well as various fraudulent activity they need to be aware of.

CHAPTER LEARNING OBJECTIVES

Upon completion of this chapter, the learner will be able to:• Describe Providing Real Estate Services and the Unauthorized Practice of Law

and Performing Short Sales• Discuss referring unlicensed individuals and Non-judicial Foreclosures, Judicial

Foreclosures and Deeds In Lieu of Foreclosure• Discuss Red Flags Involving Short Sale Foreclosure Scams

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CHAPTER 2

SERVICES ALLOWABLE BY LICENSEES, REFERRALS AND RED FLAGS

Real estate licensees are prohibited from the unauthorized practice of law without having a law degree. Furthermore, they are also prohibited from providing tax advice without being an accountant and loan modification or refinancing advice without being licensed as a mortgage professional (applies to those states which require licensure).

Example:Barry, a licensee with XYZ Investments LLC, had clients who were closing on a short sale. They asked him about the tax consequences of a short sale and he advised them of their liability. Barry is not an accountant or a tax specialist and should not have given them any advice and referred his clients to a professional.

Services That a Licensee is Allowed to Perform in Reference to Short Sales

The Do’s and Don’ts when providing real estate services in reference to short sales:

Do:• Clearly explain how the short sale process works to the homeowner• Know if the property is the homeowner’s primary residence. If the property is a second

residence or investment property, there may be additional consequences in dealing with a lender.

• Negotiate, with the seller’s permission, for the seller’s lender to take less than owed on a short sale. Obtain a letter of authorization from the seller to speak with their lender.

• Advise the seller that there are HUD counselors who specialize in alternatives to short sales and foreclosures. Because of this the homeowner should never have to pay a fee for this type of service

• Specify in the listing AND on the purchase and sale agreement that the property for sale is a short sale and “subject to all underlying lien holder approval”.

• Advise the homeowner to seek legal, tax, and credit advice• Advise the homeowner they will receive no net proceeds from the sale of the property

on a short sale• Use a Short Sale preprinted addendum if one is available

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CHAPTER 2 - SECTION 1

SERVICES ALLOWABLE BY LICENSEES, REFERRALS AND RED FLAGS

• Refer the homeowner to another real estate licensee who specializes in short sales if you do not have the experience and knowledge to handle one. Never misrepresent your expertise

• Keep the seller informed of the latest communication with their lien holder.• Do provide the bank with a broker’s price opinion (BPO) or a comparative market

analysis (CMA) to establish the value of the property• Keep current on the real estate activity in the area and how it relates to price• Keep detailed documentation on all aspects of the listing and transaction

Don’t:• Promise a short sale expert that they will get compensation. If the transaction fails to

close, they won’t get paid• Negotiate a loan modification or refinance with the seller’s lender unless you are

properly licensed in your state (if your state requires that mortgage professionals be licensed).

• Advise the seller of the tax implications of a short sale• Advise the seller of the credit implications of a short sale• Hire a non licensed person to perform any short sale real estate activity• List a property that will be a short sale if you do not have the experience and

qualifications to do so

Referring Unlicensed Individuals and Foreclosures

Never refer your clients to any individual that does not have the required licensure needed for the job.

Example #1John’s clients wanted to do a loan modification or refinance. John, a real estate licensee with ABC Realty Corp., referred his client to Joe, a real estate licensee with XYZ Investments Inc. Joe claimed to be an expert at loan modification and refinance, but he was not licensed as a mortgage professional as required by his state to do refinances or loan modifications. John should have checked this out before making the referral. This referral has the potential of putting John and his brokerage and Joe and his brokerage at serious legal risk.

Example #2Kate, a real estate licensee with XYZ Realty referred her client’s to Best Short Sale Experts LLC. Her clients wanted to do a short sale listing and Kate felt that she did not have the knowledge or expertise to do a short sale. Best Short Sale Experts LLC was not licensed to do real estate transactions in her state. Kate should have checked this out before making the referral. Again, this referral could have had serious legal implications.

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Non-judicial Foreclosure, Judicial Foreclosure and Deeds In Lieu of Foreclosure

In the United States, each state may handle real estate foreclosures differently. It’s important to understand those differences and know your specific state’s procedures. The terms used and timeframes vary greatly from state to state. Depending on the state, there are judicial and non-judicial foreclosures.

Judicial Foreclosures

Judicial foreclosures are processed through the courts. The lender will file a complaint and record a notice of Lis Pendens.  The complaint will state the amount of the debt, and reason that the default should allow the lender to foreclose on the property that was given as security for the loan.  The homeowner will be served notice of the complaint and will have the opportunity to be heard before the court.  If the court finds the debt valid, and in default, it will issue a judgment for the amount owed, including the costs of the foreclosure process.

After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale.  The sheriff’s sale is an auction and is held in a public place.  Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid later that same day up to 30 days after the sale.

At the end of the auction, the highest bidder will be the owner of the property. After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder. When that deed is recorded, the highest bidder is now the owner of the property.

Non-Judicial Foreclosures

Non-judicial foreclosure is conducted only when a power of sale clause exists in deed of trust/mortgage. This clause allows the borrower to pre-authorize the sale of property to pay off the loan balance in the incidence of their default. In such cases power is given to a lender to sell the property by themselves or their representative, who is generally referred to as the trustee.

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as specified by state law.

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If the non-judicial foreclosure process is used by the lender, then they usually cannot sue for a deficiency judgment. On judicial foreclosure sales, the borrower can be sued for a deficiency, unless the property is found to be abandoned for six months before the decree of foreclosure.

Redemption Period

Some states allow for the borrower to redeem the property after a foreclosure. Check with your individual state for the laws concerning judicial and non-judicial foreclosures.

Deed in Lieu of Foreclosure

Deed in lieu of foreclosure (DIL) is a way to be released from a home loan. A borrower who cannot pay their mortgage may attempt a deed in lieu of foreclosure transaction. Instead of going through the foreclosure process, the borrower relinquishes the deed and returns it back to the lender.

Borrowers may be able to get free from their mortgage quickly. Also, a deed in lieu of foreclosure transaction may be less threatening to the borrower's credit.

Some lenders will accept a deed in lieu of foreclosure because accepting the deed may be easier, less expensive and faster than going through the foreclosure process. In addition, they take possession of the home immediately instead of allowing the borrower to live there during the foreclosure process. However, the lender still may suffer losses, and they have to sell the property themselves.

There is no guarantee that a lender will accept a deed in lieu of foreclosure. You’ll need to communicate with them to determine if deed in lieu is an option for your client. Homeowners should communicate any financial troubles to their lender long before they start considering a deed in lieu of foreclosure.

Red Flags on Short Sale or Foreclosure Scams

When working with distressed homeowners, both you and the homeowner should be aware of “red flags” which would indicate short sale and foreclosure rescue scams such as:

• Homeowners being asked to transfer the deed of their home to someone else• A third party who is asking for payment to modify the loan. Any modifications should be

handled directly by the lender and fees should be paid to the lender ONLY• Third parties who are asking for fees for counseling services. Counseling services are

provided by HUD at no charge

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• Homeowner should be suspicious of a third party (other than their real estate representative or HUD counselor) who wants to contact their lender

Educating consumers about the signs of foreclosure scam can greatly reduce the likelihood of falling victim to these predatory schemes. The Office of the Comptroller of Currency (OCC) published a Consumer Advisory in entitled “Consumer Tips for Avoiding Mortgage Modification Scam and Foreclosure Rescue scams”

Common Types of Scams According to the OCC

Foreclosure “rescue” and refinance fraud. 

The scam artist offers to act as an intermediary between the homeowner and their lender to negotiate a repayment plan or loan modification and may even “guarantee” to save the home from foreclosure. They may suggest to make mortgage payments to the scammer directly, along with significant up-front fees, and be told that the scammer will forward the payments to the lender. In reality, the scammer may pocket the money and leave the homeowner in worse shape on the loan. The scam artist also may tell the homeowner to stop making payments or stop communicating with their lender. They definitely should not follow that advice.

Remember that the mortgage lender should be the starting point for finding options to avoid foreclosure. Homeowners also should consider contacting qualified and approved credit counselors.

Fake “government” modification programs. 

Unscrupulous people may claim to be affiliated with, or approved by, the government or may ask homeowners to pay high up-front fees to qualify for government mortgage modification programs. While government-supported mortgage modification and refinancing initiatives are legitimate, the scam artists’ claims are not. Keep in mind the homeowner does not have to pay to benefit from these government programs. All they need to do is contact the lender or loan servicer.

The scam artist’s name or website may be very similar to those of government agencies. The scam artist may use such terms as “federal,” “TARP,” or other words or acronyms related to official U.S. government programs. These tactics are designed to fool people into thinking the scam artist is somehow approved by, or affiliated with, the government. The government is taking actions to stop this fraud, but the homeowner also must protect them self. So they should be wary of claims offering “government-approved” or “official government” loan

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modifications. The lender will be able to tell them whether they qualify for any government initiatives to prevent foreclosure. They do not have to pay anyone to benefit from them.

Leaseback/rent-to-buy schemes. 

In this type of scam, the homeowner is asked to transfer the title to their home to the scammer, who will, supposedly, obtain new and better financing and/or allow them to remain in the home as a renter and eventually buy it back. If they do not comply with the terms of the rent-to-buy agreement, they will lose your money and face eviction. The agreement may be very hard to comply with, because it may require, for instance, high up-front and monthly payments that they may not be able to afford. In fact, the scammers may have no intention of ever selling the home back to them. They simply want your home and their money.

Remember that transferring the title does not change their payment obligations. They will still owe their mortgage debt. The difference will be that they will no longer own your home. If payments are not made on the mortgage, the lender has the right to foreclose, and the foreclosure and any other problems will appear on their credit report.

Bankruptcy scams. 

You may have heard that filing bankruptcy will stop a foreclosure. This is true, but only temporarily. Filing bankruptcy brings an “automatic stay” into effect that stops any collection and foreclosure while the bankruptcy court administers the case. Eventually, homeowners must start paying the mortgage lender, or the lender will be able to foreclose. Bankruptcy is rarely, if ever, a permanent solution to prevent foreclosure. In addition, bankruptcy will negatively impact their credit score and will remain on the credit report for 10 years.

Debt-elimination schemes. 

Scammers may claim to be able to “eliminate” debt by making false legal arguments the homeowner is not obligated to pay back the mortgage. These scammers will provide inaccurate claims about applicable laws and finance, such as that “secret laws” can be used to eliminate debt or that banks do not have the authority to lend money. Do not let your homeowners stop making payments on their mortgage based on those claims.

Ten Warning Signs of a Mortgage Modification Scam according to the OCC

“Pay us $1,000, and we’ll save your home.” 

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Some legitimate housing counselors may charge small fees, but fees that amount to thousands of dollars are likely a sign of potential fraud — especially if they are charged up-front, before the “counselor” has done any work for you. Be wary of companies that require you to provide a cashier’s check or wire transfer before they take any action on your behalf.

“I guarantee I will save your home – trust me.” Beware of guarantees that a person or company can stop foreclosure and allow you to remain in your house. Unrealistic promises are a sign that the person making them will not consider your particular circumstances and is unlikely to provide services that will actually help you.

“Sign over your home, and we’ll let you stay in it.” Be very suspicious if someone offers to pay your mortgage and rent your home back to you in exchange for transferring title to your home. Signing over the deed to another person gives that person the power to evict you, raise your rent, or sell the house. Although you will no longer own your home, you still will be legally responsible for paying the mortgage on it.

“Stop paying your mortgage.” Do not trust anyone who tells you to stop making payments to your lender and servicer, even if that person says it will be done for you.

“If your lender calls, don’t talk to them.” Your lender should be your first point of contact for negotiating a repayment plan, modification, or short sale. It is vital to your interests to stay in close communication with your lender and servicer, so they understand your circumstances.

“Your lender never had the legal authority to make a loan.” Do not listen to anyone who claims that “secret laws” or “secret information” will be used to eliminate your debt and have your mortgage contract declared invalid. These scammers use sham legal arguments to claim that you are not obligated to pay your mortgage. These arguments don’t work.

“Just sign this now; we’ll fill in the blanks later.” Take the time to read and understand anything you sign. Never let anyone else fill out paperwork for you. Don’t let anyone pressure you into signing anything that you don’t agree with or understand.

“Call 1-800-Fed-Loan.” This may be a scam. Some companies trick borrowers into believing that they are affiliated with or are approved by the government or tell you that you must pay them high fees to qualify for government loan modification programs. Keep in mind that you do not have to pay to

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participate in legitimate government programs. All you need to do is contact your lender to find out if you qualify.

“File for bankruptcy and keep your home.” Filing bankruptcy only temporarily stops foreclosure. If your mortgage payments are not made, the bankruptcy court will eventually allow your lender to foreclose on your home. Be aware that some scammers will file bankruptcy in your name, without your knowledge, to temporarily stop foreclosure and make it seem as though they have negotiated a new payment agreement with your lender.

“Why haven’t you replied to our offer? Do you want to live on the streets?” High-pressure tactics signal trouble. If someone continually contacts you and pressures you to work with them to stop foreclosure, do not work with that person. Legitimate housing counselors do not conduct business that way.

Foreclosure Avoidance Counseling

Hud.govU.S.Department of Housing and Urban DevelopmentForeclosure Avoidance Counseling

HUD-certified counselors can provide assistance in determining retention options. A HUD-certified counselor can provide the following services:

• Determine if a homeowner can qualify for a retention option under the Making• Homes Affordable Plan or other plans• Assist homeowners in filling out the required paperwork that is necessary to submit to

the lender• Explain the homeowner’s rights and obligations when requesting a retention option

A list can be obtained from www.hud.gov about the agencies listed in your state.

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In this chapter we will take a high level view of Real Estate Excise Tax, Mortgage Assistance Relieve Services and short sales in Oregon.

CHAPTER LEARNING OBJECTIVES

Upon completion of this chapter, the learner will be able to:• Discuss Real Estate Excise Tax and Mortgage Assistance Relief Services as they

relate to Short Sales.• Discuss some of the more common Short Sales Questions specific to Oregon

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CHAPTER 3

REET, MARS AND OREGON FAQ’S

Short Sales and Real Estate Excise Tax (REET)

An Overview of Real Estate Excise Tax

A real property excise tax could be levied upon the seller when there is a transfer or sale of property depending on the particular state. The fee is collected before the buyer’s deed is recorded.

Make sure the seller has been counseled by a tax professional about this prior to closing.

The Seller’s Credit Rating and Tax Consequences After a Short Sale

Many people mistakenly believe that a derogatory public record such as foreclosure or deed in lieu of foreclosure is somehow worse than asking the lender to accept less than owed by doing a short sale. However, most lenders interpret both of these events as “the customer did not pay as agreed.”

Whether it is a short sale, deed in lieu of foreclosure or foreclosure, the seller’s credit will most likely be blemished.

In addition, short sales can involve legal and tax consequences. This is why you, as a licensee, should always advise a homeowner who is considering a short sale to seek legal and professional tax advice. This will assist in determining whether a short sale is the homeowner’s best option.

MARS

MARS (Mortgage Assistance Relief Services) is a FTC (Federal Trade Commission) ruling to protect distressed homeowners from mortgage relief scams. FTC Chairman Jon Leibowitz said, “At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results. By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”

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CHAPTER 3 - SECTION 1

REET, MARS AND OREGON FAQ’S

This ruling not only applies to loan modifications, but also to short sales. Fines of $11,000 per occurrence and $11,000 per day may be incurred for violations, so it is important to understand the new regulations. If a licensee provides, or arranges for someone else to provide short sale services, they need to be sure that all documents, correspondence and advertising are in compliance.

Highlights of the Mortgage Assistance Relief Services ruling include:• Advance fees are outlawed. Fees may not be collected until the homeowner has an

offer in writing that they agree to accept. • The homeowner has the right to reject an offer, and no fees will be charged • Various disclosures must be included in the initial contact and throughout the process.

They need to be in writing. These disclosures are designed to protect the homeowner from being mislead, and help them make better informed decisions. These disclosures include stating that a licensee or short sale negotiator is not associated with the government, and their service has not been approved by the government or their lender.

• The homeowner has the right to stop doing business with the provider at any time, and no fee is involved.

• False or misleading claims are prohibited in advertising or communication about services or performance.

• If the provider tells the homeowner to stop paying their mortgage, they must also make them aware that they may damage their credit rating, and could lose their home.

Oregon Short Sale FAQ’s

This is the section where we take a look into Oregon Short sales on a higher level. One of the easiest ways to do that is to review some of the most commonly asked questions from the Oregon Department of Justice. The text below comes from there FAQ document and can be viewed at http://www.doj.state.or.us/consumer/pdf/short_sale_faqs.pdf.

These questions and answers represent a majority of the specific issues contained in the questions that were collected at the Fraud Symposium. The answers are a collaborative effort from DOJ, DCBS and OREA. These questions and answers will be posted on OREA’s web page.

Frequently Asked QuestionsShort Sale Negotiators & Foreclosure Consultants

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The Oregon Real Estate Agency (OREA), Department of Justice (DOJ) and the Department of Consumer and Business Services (DCBS) cannot give legal advice, interpret real estate terms, or provide strategy for real estate transactions. It is the responsibility of the licensee to ensure that his or her behavior complies with Oregon Real Estate Statutes, Rules, the Unlawful Trade Practices Act and all other applicable laws

The following FAQ’s are meant to provide general information to licensees and the public. These FAQ’s do not address specific situations as every real estate transaction is unique. All licensees and professionals should seek independent legal counsel if any of thepertinent rules or statutes are unclear.

In order to have a complete understanding of short sale negotiators and foreclosure consultants, you should read the entire list of FAQ’s.

1. What is a short sale?

A “short sale” is a term to describe a transaction where the sale price of the property will not be sufficient to generate proceeds to pay off the existing mortgage or mortgages, and where the lender(s) agrees to accept less than full payoff. It is a type of loan modification.

2. What is a short sale negotiator?

A short sale negotiator is someone who provides assistance in negotiating with the lender on the seller’s behalf. The goal is to convince the lender to accept less than the debt amount on the mortgage(s). There are currently several variations of the term “short sale negotiator.” These are just a few of the terms which exist and are not inclusive: “debt negotiator”, “debt resolution experts”, “loss mitigation practitioners”, “foreclosure rescue negotiators”, “short sale processors”, “short sale coordinators” and “short sale expeditors.”

3. May a real estate licensee act as a short sale negotiator within the state of Oregon?

Yes, but there are strict requirements that a licensee must follow. An Oregon real estate broker may handle a short sale if he or she does NOT charge any special fees related to the short sale. The handling of the short sale under this method is viewed as being incidental and is provided as a free service. If a licensee engages in short sale negotiations and charges a fee beyond a normal real estate commission, the licensee MUST be registered with DCBS. As with any important business decision, you should probably speak to your legal counsel about the license or registration that is appropriate. (For additional information on licensees acting as short sale negotiators, see Question # 10)

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4. Do short sale negotiators need to be licensed with the state of Oregon?

Generally, yes. In 2009, the legislature enacted two bills related to short sales and loan modifications. House Bill 2191 created a registration requirement for persons who provide debt management services and House Bill 2189 created a licensing requirement for persons doing mortgage loan origination. The Department of Consumer and Business Services (DCBS) is responsible for both programs. A person or company offering short sales / loan modifications in Oregon may legally do so with:

• A debt management company registration;• A mortgage loan originator license; or• A real estate broker license if they do NOT charge any special fees related to short

sales.

*Note: Banks, credit unions, and licensed consumer finance companies are also exempt.

5. Are there any additional requirements that a short sale negotiator or a debt management company must follow in Oregon?

This applies to debt settlement companies, loan modifiers, and “short sale negotiators.” Loan modification is defined as modifying or offering to modify terms and conditions of an existing loan or obligation. The law requires debt management companies to provide consumers with specified disclosures and written contracts, honor a three-day right of cancellation, evaluate whether the proposed services will benefit the consumer, and post a $25,000 surety bond. The bill also prohibits misleading advertising and limits the fees that may be charged for short sales and all other types of debt management services.

6. Are real estate licensees required to register as debt service provider or a debt management service provider when handling a short sale?

An Oregon real estate licensee is only exempt from registering as a debt management service provider if they only receive a fee that is “usual and customary” for their services. In other words, a typical real estate commission.

As with any important business decision, you should probably speak to your legal counsel about the license or registration that is appropriate.

7. How can I determine if a short sale negotiator is authorized to provide these services in Oregon?

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First, a company must be registered to do business through the State of Oregon Central Business Registry in the Secretary of State’s Office at https://secure.sos.state.or.us/ABNWeb/ or 503-986-2200.

Secondly, they must be registered with DCBS as a debt management company, licensed as a mortgage loan originator, or licensed as an Oregon real estate broker. If an Oregon real estate broker is handling the negotiation, he or she MUST be registered with DCBS if they are charging an additional or separate fee in addition to their base broker commission. No registration with DCBS is required if the licensee is handling the short sale negotiation as a courtesy, at no charge, to the buyer or seller.

Find registered debt management companies at:www.cbs.state.or.us/external/dfcs/debt_mgmt.htmlOr call 1-866-814-9710

8. What are the obligations of foreclosure consultants under HB 3630?

The legislature passed the Mortgage Rescue Fraud Protection Act (House Bill 3630) during the 2008 Special Session (see ORS 646A.700 – 646A.760).

The law is also intended to protect consumers from fraudulent mortgage rescue schemes. It protects consumers at risk of foreclosure by regulating “consultants” offering to help homeowners avoid foreclosure. (The law also regulates the activities of an “equity purchaser” who acquires a financial interest in the property.) The law includes the following provisions:

• Requires foreclosure consultants to provide a written contract to the homeowner, in the language spoken by the homeowner, with explicit disclosures and a full description of services and total costs. See ORS 646A.710.

• Prohibits advance fees, e.g., charging or receiving any fees before full performance of all services.

• Provides the homeowner the right to cancel the contract, and method of doing so.• Prohibits consultants from acquiring any interest in the home in foreclosure.• Prohibits consultants from taking power of attorney.• Other provisions designed to protect the homeowner.

The act excludes from the definition of “foreclosure consultant” the following: mortgage bankers, mortgage brokers, and real estate brokers properly licensed by DCBS or REA and working within the scope of their respective license, and attorneys licensed in Oregon performing legal services for a client. ORS 646A.705(1) to (12)

The Department of Justice is responsible for investigating and enforcing the Mortgage Rescue

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Fraud Protection Act. Instructions for filing a complaint are available here:http://www.doj.state.or.us/finfraud/engexplanation.shtml

9. How is a short sale negotiator different from a foreclosure consultant?

Foreclosure consultants help a person stay in their home, typically by working with the lender to lower monthly mortgage payments. Short sale negotiators engage in activities intended to result in the sale of the home. Helping a consumer stay in their home, with changes to their mortgage, is not a professional real estate activity and such activities must comply with the requirements of HB 3630. If a foreclosure consultant decides a short sale is the best resolution for the consumer, the consultant may not participate in the short sale negotiations or transactions unless they are properly licensed as a mortgage banker, a mortgage broker, or a real estate broker.

10.Can a buyer’s agent negotiate with the seller’s lender in the short sale transaction?

Consumers who are selling their home are, by the very nature of their ownership interest, able to negotiate with the lender as a matter of right. However, a seller may not be comfortable with negotiating the transaction and may want to have someone with more knowledge and experience performing these functions. Most lenders will negotiate with someone other than the seller if there has been a signed, written authorization for release of information. Ideally, one person should be the contact for the negotiation phase.

While the seller’s agent has more information regarding the seller’s overall financial condition, it’s possible that the buyer’s agent may have more experience in handling short sale negotiations compared to the seller’s agent. If that’s the case, and the seller does not object, a buyer’s agent, with the proper written authorization for the release of information, may negotiate with the lender(s). The seller’s agent still has the ultimate responsibility in protecting the interests of his or her client.

As a practical matter, a buyer’s agent should proceed with extra caution when negotiating on a seller’s behalf. Negotiation of a short sale may involve many areas outside any licensee’s expertise which include, among other things, ultimate liability for the debt amount reduced along with possible tax consequences for the seller regarding any debt forgiveness. The ramifications of a short sale can be far reaching and long lasting for a seller.

11.Is there a limit on the fee that can be charged for handling a short sale?

If a person or company is registered as a debt management company, they may only charge an initial fee of no more than $50 and a fee of no more than $50 within the first 120 days of the

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signing of the contract for an initial counseling or education class. In addition, if the debt management company negotiates a short sale that qualifies as reduction in a consumer’s debt, they may also charge a “settlement” fee. This 7.5 percent fee is based on the difference between the principal debt amount a consumer owes on their home (at the time the debt management contract is signed) and the reduced amount that is owed per the short sale. For example, the maximum settlement fee would be $3,750 if a mortgage was reduced by $50,000.

12.Who should pay the short sale fee?

A short sale fee can be paid by any party to the transaction, or it can be split accordingly. However, the amount of the fee MUST be disclosed up front. For instance, the disclosure should appear on the public portion of an MLS listing. There must be complete disclosure as to who is paying the fee and the amount.

13.Does the short sale negotiation fee need to appear on the HUD statement?

Any money that changes hands at closing or during escrow must appear on the HUD statement. The fee cannot be paid outside of escrow.

14.Can OREA require lenders to use an appraisal instead of a Broker Price Opinion (BPO)?

OREA does not have regulatory authority over lending institutions. It is ultimately up to a lender whether or not a BPO will be used.

15.Do real estate licensees have any responsibilities regarding lenders or banks in a short sale situation?

Real estate licensees must always be aware of their duties regarding disclosure. In addition, there are both state and federal rules regarding loan fraud which could impact the transaction and involve the real estate licensee. The real estate licensee should be aware of both the state and federal rules of lending.

16.Can OREA require banks or lending institutions to respond to offers or inquiries in a timely manner when submitted by a licensee?

OREA does not have regulatory authority over lending institutions. If a licensee is dealing with matters beyond his or her expertise, he or she should seek legal counsel.

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17.What sort of precautions should a real estate licensee take when handling a short sale transaction?

A short sale is not a normal real estate transaction. Customary timelines for offer and acceptance associated with regular sales vary from lender to lender when dealing with short sales. Lenders have their own procedures that they follow. It’s up to the licensee to be familiar with the unique procedures of the particular lender in the transaction.

Aside from some of the aspects mentioned here, several matters must be addressed to properly protect the interests of both sides of the transaction. For example, a real estate licensee should ensure that all parties know who will ultimately be responsible for paying the short sale fee, if any. Another important detail is making it clear to all involved parties that securing creditor consent to the sale is a necessary contingency. In some instances, even if the short sale was approved, the seller could still be sued by the lender or bank for the money that was “forgiven.”

Additionally, the amount that was not paid back could be considered a form of “debt forgiveness” and may be taxed by tax agencies for the “forgiven” amount. If there are other lenders or lien holders in a 2nd or 3rd position, these subordinate lien holders may file a deficiency judgment in civil court against the seller. A real estate licensee should always direct his or her seller to seek advice from an attorney and accountant when appropriate.

18.Will a seller be responsible for paying the amount of debt forgiven?

Some elements of the short sale, if not properly addressed BEFORE closing, can survive the transaction. One such crucial item is the ultimate responsibility for the debt that is forgiven. In some instances, the lender could pursue a deficiency judgment if forgiveness of the debt and all recourse was not negotiated prior to closing. Also, there may be tax consequences for the seller. If the agent and/or seller are uncertain as to the outcome, they should seek professional advice.

If a debt management registrant is negotiating the short sale, they must disclose that they cannot give tax, accounting, or legal advice, and provide a warning that a consumer’s credit could be damaged and creditors could still file lawsuits against the consumer to collect money.

19.How can I write up a short sale offer to protect my client?

No two real estate transactions are alike. This is especially true with short sales. Oregon Real Estate Forms, LLC (OREF) provides standardized, up to date, legally reviewed realty forms for use by Oregon real estate licensees. OREF has developed a comprehensive short sale

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addendum form to be used for short sales. This form details many of the unique aspects associated with a short sale. As with any real estate transaction, a real estate attorney should handle legal questions from a seller or buyer.

20.If a fellow licensee appears to be acting in a fraudulent manner, may I report the licensee to OREA?

Because the complaint process can take some time, the Real Estate Agency recommends that you discuss your concerns with the licensee first. If the licensee is an affiliated licensee, you may also try communicating with the licensee’s principal broker. Regardless, you may file a complaint with the Agency at any time.

If you believe a real estate licensee may have acted improperly, you can file a complaint simply by writing a letter to the Real Estate Agency, or using the Agency’s complaint form. Please include copies of any relevant documents you may have. Also, it is helpful if your submission includes a list of other parties that have knowledge of the facts surrounding your complaint. Please include their contact information.

While open investigations are confidential, your name will be part of the OREA investigation record, and may be disclosed as needed in the course of the Agency’s investigation. The report, along with your name, becomes a public record after the investigation is closed. OREA rarely allows anonymous complaints. Since anonymous complaints lack the identification of a complaining party, the claim may be difficult to substantiate because the Agency can’t contact the complaining party for further information.

Additional Links

Learn how to protect yourself from illegal debt management companies.http://www.cbs.state.or.us/external/dfcs/debt_mgmt.html

Summary

After completing this course, you should know the following information about:• Short sales, deeds in lieu of foreclosure, non-judicial foreclosures, and judicial

foreclosures are types of non-retention options that can seriously affect a client’s tax situation, credit score, and may carry additional legal consequences.

• You should always recommend that a client seek the advice of professionals with regard to tax, legal, and credit consequences.

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• You should never discuss specific information regarding taxes or credit ratings with your client, nor should you ever give legal advice. As a licensee, you are not qualified to discuss this information.

• Prior to conducting a short sale, make sure your client has researched and considered all retention options such as forbearance plans, loan modification, and refinancing.

• Refer your client to www.hud.gov to speak with a HUD-certified counselor.• If you do not possess the appropriate expertise or skills to conduct a short sale, it is in

the best interest of your client for you to refer them to a qualified professional.• This course does not provide all the information you need to know about

conducting short sales. The intent of this course is to inform you, the licensee, that you need to obtain the proper training and experience to handle distressed properties and/or short sales.

• You are a real estate licensee who is in the business of providing real estate services to your clients. Acting outside your area of expertise could result in:

• Civil liability• Misrepresentation claims• Fraud claims

• Do not fail to recommend that sellers obtain needed legal and tax advice• Make sure your clients are aware of predatory foreclosure rescue scams. Refer them to

appropriate resources to help them navigate the process. HUD• Short sale negotiators must be licensed as a real estate professional. • If short sale negotiators provide loan modifications or refinancing, they must also be

licensed as a mortgage professional.• Never promise to pay a fee to a short sale negotiator. If the short sale doesn’t close,

you would have to pay the short sale negotiator.

Refer to the pertinent laws in your state for a more in-depth understanding and discussion of the material presented here. Links to the actual laws are provided throughout the training. Real estate licensees are encouraged to acquire additional information and to take courses in specific, applicable topics.

With the increase in lawsuits over the last few decades, it’s safe to state that we, in the United States, have become a litigious nation. Lawsuits, or the threat thereof, within the real estate industry, are certainly not an exception.

One of the causes, perhaps, is that a party does not have to prove they were wronged before filing for a suit. To complicate this even further is that in most jurisdictions, the filing fee is very nominal. So, it becomes quite easy and inexpensive to threaten litigation.

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There are some sound risk management procedures which can minimize your exposure and reduce your risk of being threatened with a lawsuit. The emphasis is on shifting the risk to those professionals who specialize in a particular field within the real estate industry. In doing so, you’ll also reduce the risk to yourself, your brokerage and to your client as well.

Today’s consumers have increased expectations about the services that we provide as real estate professionals. Mastering some basic risk reduction procedures will assist you in meeting, or perhaps exceeding, these expectations and reduce your threat of litigation.

As with all real estate transactions there is an element of risk, however short sales can certainly have a higher potential for greater risk. Keeping up-to-date on current changes with regards to short sales helps reduce this risk

Congratulations, you’re almost done and ready to receive your course completion certificate. Let’s take a quick chapter quiz and then move directly into the final assessment.

Check your understandingUse this link to open a short unit quiz:https://www.bookwidgets.com/play/D7KDV

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