Foreclosure Rescue Bill Yes! You Can do Short Sales
Confused about the new Foreclosure Fraud Rescue Prevention Act? We clear it up.
Does Florida’s new Foreclosure Rescue Fraud Prevention Act (Florida Statute 501.1377) prohibit real estate licensees from being involved in short sales? According to Florida Attorney General Bill McCollum in a letter to Florida Association of Realtors® 2008 President Chuck Bonfiglio, the answer is no, provided the only compensation sought by the licensees is the commission on the sale. The new law, which took effect Oct. 1, 2008, seeks to protect homeowners who face the threat of foreclosure from individuals who would prey on them.
McCollum’s interpretation is based on the following scenario: A licensee secures a listing agreement on a home for sale, ascertains that the fair market value of the home is less than the loan amount, and lists the property at the lower amount. If a buyer agrees to pay less than the loan amount, the licensee then asks the lender to accept the lesser amount in order to avoid foreclosure.
“As long as there is no upfront or other fee for the negotiating service other than the normal real estate fee charged for the sale of the property, that activity [participating in a short sale] would not appear to fall under the provisions of Florida Statute 501.1377,” according to McCollum.
To view a copy of the letter from McCollum, go to floridarealtors.org/learn
. Exclusive Relationships Tread Carefully
Realtor® John received a call from a potential buyer who wanted to see his listing. He set up the appointment and met the buyer at the house. The buyer inquired about how to write an offer, John provided the information and asked if the buyer had a buyer’s agent to which the buyer replied, “No.”
Later that day Realtor Joan contacted John’s office and cautioned him to never speak to her client again—all communication should go through her.
Why it’s not a violation: While this action is not unethical, you may run right into a procuring cause dispute. However, it’s always advisable to tread carefully. Realtors are ethically barred from interfering with an exclusive relationship between another broker and his or her client.
Standard of Practice 16-13 requires that you ascertain whether or not a buyer is a party to any exclusive representation agreement. Exclusive is the key word as that determines whether or not you can work with a potential customer.
It may not be enough to ask whether or not a prospect is working with another real estate licensee or if the prospect has an agent. The better, more direct question is: “Are you a party to an exclusive agreement with another real estate licensee?”
Once you ascertain that a buyer is exclusively represented you should not interfere, the exception to this rule is if the party directs you to provide other services aside from their obligation to their agent.