Foreclosure Rescue Fraud Prevention Act
Q: Does Florida’s new Foreclosure Rescue Fraud Prevention Act (F.S. 501.1377) prohibit real estate licensees from being involved in short sales?
A: According to Florida Attorney General Bill McCollum in a letter to FAR 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 F.S. 501.1377,” according to McCollum.
Questions? Contact FAR’s Legal Hotline at
407.438.1409. Please have your real estate license number available.
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