Short sales & REOs continue to frustrate

NAR reports that 40% of Realtors have been involved in the sale of a distressed property over the past year. With over a million transactions per year, inevitably a few will go bad, regardless of the type. But when a third party is brought into the transaction, and the deal is no longer just between a buyer and a seller, this tends to introduce several new ways for the deal to go awry.

We’re hearing from all over the Commonwealth, but particularly in Northern Virginia, that short sales are causing all kinds of issues. Everyone seems to have gotten past the fact that it takes the banks a looooooooooong time to consent to these transactions. Realtors also seem to understand very well that there’s a possibility that a bank will refuse to act on an offer, even if the offer seems to be a strong one.

Knowing this, some Realtors have been skirting, exploiting gray areas of, or outright defying certain sections of the Code of Ethics and MLS rules in order to hedge their bets and keep their clients’ options open in the unpredictable realm of “subject to third party approval.” Because the banks are held to a different ethical standard, sometimes the banks’ actions (or in many cases, inaction) can cause the Realtor to violate NAR’s Code.

So when it comes to distressed transactions, how can you make sure you’re on the right side of your obligations to the Realtor Code of Ethics and Virginia laws?

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5 Responses to Short sales & REOs continue to frustrate

  1. Jim Rake says:

    A couple of years ago it was suggested that legislation might help solve the disconnect between the two major players who handle Short Sales, Realtors and banks. The response from legal counsel? He suggested that by the time legislators enacted legislation to solve the problem, eighteen months or so (on a good day), the Short Sale problem would be over. And here we are.

    Until banks have guidelines they’re bound by, that involve timelines and specific coordination requirements with the other parties involved in the transaction, Short Sales will continue to be problematic. And, at the end of the day, we do you think pays the price for a process that is disfunctional? All of us.

    Thanks for the reminder that banks aren’t bound by our rules, but we are. We do have resources at our disposal (thanks Ben), and when in doubt, please don’t hesitate to ask for answers.

  2. Rules are just letters on a page if they’re not followed nor enforced. Some agents (and ultimately their brokers who are supposed to be managing them) are completely ignoring MLS rules and regulations, the CoE and sometimes, their duties to their clients. Not to mention just plain ‘ol professionalism.

    It’s the Wild West out there because it can be. It will remain the Wild West until, at the very least,

    1) Broker and agents have the proper training and education.
    2) There is more oversight of agents by their managing brokers.
    3) There is strict enforcement of the rules, regulations and CoE

    Unfortunately, I don’t see any of those three happening anytime soon.

  3. Jim — Banks effectively *are* bound by guidelines, by virtue of the fact that they usually need to market their properties through agents who are bound by those guidelines. The problem, as Danilo notes, is that agents themselves don’t understand those guidelines, and the enforcement of them is laughable. The latter issue really needs to be where the focus is, IMHO.

  4. I agree with Danilo. Some agents are doing a poor job of following the guidelines simply because they don’t understand them. Unfortunately, there are also far too many who don’t care to put an effort into gaining a deeper understanding of guidelines. After all, why should they if no one is holding them accountable?

  5. Jim Rake says:

    Sweth – are there guidelines the banks follow? Certainly there are. The “guidelines” I’m suggesting would go further. Until they’re (banks) required to follow strict timelines and communication requirements with all players, the process will lack the transparency necessary for success.
    The Realtor training issue is one of been beating the drum for since I got into this business. Please look at a couple of previous posts:

    http://varbuzz.com/has-the-code-outlived-its-relevance/
    http://militaryrealestatevoice.com/2009/06/03/cracking-the-code/

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