Scott Thompson works as an independent consultant for several national default industry vendors, specializing in agent networks, agent to homeowner mapping and short sale process workflows. Scott works out of Roseville, Ca. He can be reached at firstname.lastname@example.org.
Short Sales Ethics: 6 Temptations to Avoid
As frustrating as the short sales process can be, there's no excuse for taking ethical short cuts to get transactions closed.
April 1, 2010
Here are ethical temptations you want to avoid at all costs when working with a client whose property is on the market as a short sale.
1. Standing in the way of home-retention efforts. Lenders’ first responsibility is to help owners who want to stay in their home do so. If the lender approaches them with a good-faith effort to modify their mortgage, let them out of the agreement.
2. Embellishing the hardship letter. Your job is to help your clients be as accurate as possible when they describe their degree of hardship to their lender. Helping to prepare a letter and other documents that aim to mislead or obfuscate is never justified.
3. Shopping the buyer’s offer. Short sale transactions require too much of a commitment on the buyer’s part to try to get a better deal for your sellers at the last minute. If a buyer has made a good-faith effort to offer market value, don’t seek higher offers.
4. Selling to a flipper. Unless the investor in a flip is prepared to add substantial value by fixing up a property, don’t participate in a flip. Short sale flips benefit only the investor, who’s clipping off money that could go to an already bleeding lender.
5. Shifting funds off the HUD-1. If a junior lien holder or other party to the transaction asks for payment, undisclosed on the HUD-1 statement, as a condition of approving a short sale, advise your client to say no. That can constitute mortgage fraud.
6. Manipulating the BPO. It’s appropriate to control access to the information that goes into your broker price opinion but not so you can get a house on the market for less than it’s really worth.