The Real Estate Division of the Washington State Department of Licensing and the Department of Financial Institutions have issued two memos about short sales. The DOL Short Sale Advisory is for home sellers but really should be for both sellers AND their Realtors/real estate brokers. DFI’s companion advisory is titled “Short Sale Guidance for Licensees” and contains many Q&As for both loan modification and short sale negotiation services. It is unfortunate that both PDFs were issued separately because I worry people will read one and not the other. Both PDFs need to be re-issued as ONE Advisory with the redundancies removed.
The DOL Seller Advisory contains basic education about short sales, the deficiency, “walking away” by letting the home go into foreclosure, options for homeowners in financial distress, warnings about predatory loan mod firms and other scams, and where to go for free help. The DOL Advisory also offers a signature page for the seller.
The DOL advisory is two years late. At the end of this blog post, I will offer some recommendations for what to start working on now, so that we won’t be two years late on issues facing homebuyers, home sellers and real estate brokers today. But first here are a few honorable mentions.
From page 4 of the DOL Advisory: “Contact a Qualified Real Estate Professional…Interview several real estate professionals and ask about their experience in short sales…their education and training…and inquire about any pending lawsuits or disciplinary action.” Okay. That’s a nice start. How about this: ONLY qualified, licensed real estate brokers with X years experience listing short sales and NO pending lawsuits or disciplinary action are allowed to represent home sellers. It is not in the best interest of consumers (nor is in the best interest of the real estate industry) for home sellers to be represented by an un-experienced broker on a short sale.
Predatory short sale negotiators have been completely left out of the DOL Advisory! Yes, the new Federal Trade Commission Ruling on MARS (Mortgage Assistance Relief Services) will kill off a handful of the predators but many will just go underground with their tactics. More on that in a minute.
There’s not a place for the real estate listing broker to sign the DOL Advisory. I’d also like to see the Advisory offered in different languages.
I understand there was a short sale task force working on the Advisory bulletins. A big thank you to all those who served on the task force. I hope the task force does not disband but instead continues to work on the next version as well as current short sale problems. The DOL Seller Advisory tackles basic homeowner education. Next are my recommendations for what the task force ought consider working on now, so the problems can be addressed a little bit sooner than a 2013 DOL Seller Advisory.
Department of Licensing….please define exactly what “qualified” and “experienced” means on page 4 of the Seller Advisory. We can start with what it doesn’t mean. As I’ve been saying for 4 years, a newly licensed real estate broker or a broker who only works part time should in no way be allowed to take a short sale listing. A minimum number of years of experience or a minimum number of closed transactions should be required and an internship; co-listing a specific number of short sales with an experienced broker could also be required to define the word “experienced” as it relates to short sale listings. “Qualified” should be defined as a licensed real estate broker with NO disciplinary actions related to short sales at any time. “Qualified” could mean a licensed real estate broker who has taken a short sale course approved by DOL during his/her current renewal cycle. Short sales are a moving target. A licensee who took a short sale class 5 years ago is no longer qualified to list short sales. All short sale classes currently approved by DOL should be immediately required to be re-approved to include the content in this new advisory, similar to what was required when the Distressed Property Law was approved in 2008.
The Department of Licensing should make it mandatory that homeowners in financial distress obtain their own pre-paid legal counsel (for example, paying in advance for 2 hours of legal advice) prior to the home being listed for sale. Homeowners who are financially destitute would qualify for free legal aid through the Northwest Justice Project.
Third party short sale negotiators should be completely banned with only attorneys or attorney-backed law firms allowed to negotiate, for a fee, as a paid third party. If an attorney is not desired by the seller, then the seller can work with a free, HUD-approved Housing Counseling Agency for short sale negotiation assistance. The subprime lenders barfed out hundreds if not thousands of predators in 2008 desperately looking for fresh victims and the loan modification industry was created out of that puke and bile. With Attorney Generals doing Mortal Kombat on the loan mod scammers in 2009 the predators came back to life like a bunch of zombies and suddenly became “expert!” short sale negotiators….the same sociopaths using the same tactics on yet another group of vulnerable consumers. Yes, I know there are current rules about short sale negotiators needing to be licensed by DOL or DFI. However, socipaths believe rules and laws are for other people. Subprime lending attracted the worst of humanity. I’ve met only 2 non-attorney loan mod/short sale negotiators worth their fee. That’s it.
My solution: Home sellers should only hire educated, experienced,full-time listing brokers who, in exchange for only their regular listing fee, are able to competently guide their clients through a short sale from start to finish. These short sale listing brokers would make it mandatory that the home owner have paid legal counsel for all legal questions. Period. Cut out the short sale negotiator middleman completely. They must die now or we will be dealing with massive consumer complaints in all 50 states by 2012.
Good news for home sellers: Many Realtors and real estate brokers are already very competent in representing homeowners who must sell short. More good news: All of the Realtors and real estate brokers have already been taught everything in the DOL Seller Advisory if their name shows up on this page.
Instead of making home sellers try to figure out who’s competent, educated and ethical, the real estate industry can and should do this for the consumer, so consumers can select a licensed real estate broker with confidence, and without any third party trying to peel off several thousand dollars from the seller, buyer, agents, or lender for doing real estate-related work that could otherwise be done by a competent listing broker and legal work that could otherwise be done by a person who is a member of the WA State Bar Association.