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First my disclosure:  I am not an attorney.  This is a Part 1 of 4 RE-Blogs from one of my consulting attorneys regarding a important subject on fiduciary responsibility for those of us who do short sales as a licensed agent.


Jeff Watson, Attorney


A growing issue among Realtors regarding short sales is their concern over what are their fiduciary duties, as well as what are their legal responsibilities, when they choose to represent a party involved in a short sale transaction.

While the language may vary from state to state, the common principle is that licensed professionals must only handle professional matters upon which they are adequately trained and/or have adequate resources and supervision to make sure that these matters are competently handled by the licensed professional. This is a principle that applies to lawyers, doctors, accountants and real estate agents.

The first area is to whom does a Realtor owe a duty? The real estate agent owes a duty; a fiduciary responsibility and/or legal responsibility,  to whoever they choose to represent in a transaction. Often it will be a homeowner in distress, default or foreclosure. The duty that flows from the agent to the homeowner does not extend to the lender who has started the adverse or hostile foreclosure action against the homeowner in default or distress.

This is important because some Realtors mistakenly believe that they are responsible for keeping the lender abreast of any new offers on the property that are received during the short sale negotiation process, even after the property is under contract and the initial short sale package has been sent to the bank for evaluation.

Houston TX and Spring TX short sale specialist
Realtors must understand that they work for the homeowner or the buyer. Not both, and not for the Bank. While the Bank has the veto power over the offer, it is the homeowner who makes the decision regarding which offer to accept. Furthermore, it is up to the homeowner to decide whether they choose to pursue a short sale.  Realtors who choose to work in the world of distressed properties and work with homeowners who are either in default or foreclosure must understand that there are two inevitables that change the entire landscape. Number one, they are in the world of negative equity, i.e. the property is worth less than what it owed.

Secondly, as a result of adverse financial circumstances being experienced by the homeowner the inevitable foreclosure is coming.  It is not a question of if, it is only a question of when. The train is coming down the tracks, it will arrive, but we don’t know exactly when.  Therefore, all actions and decisions must be made in the perspective of a) the home has negative equity, and b) the homeowner is going to lose their house.

Sellers that lose their home to foreclosure and are forced then to file for bankruptcy in order to discharge all of the hundreds of thousands of dollars of personal debt end up in the worst situation possible. Sellers who are able to successfully sell their house via a short sale and have avoided the actual foreclosure from completely occurring, and have paid off via the short sale hundreds of thousands of dollars of indebtedness that they were personally responsible for, are in the best situation. Homeowners can fall into any one of these categories or anywhere in between.

It is absolutely critical for a Realtor to realize that once they are dealing with a property that has negative equity with an inevitable foreclosure date the traditional rules of seeking to sell to a buyer who provides the highest and best offer go out of the window and getting the property sold is more important than the purchase price.

The Trademark Loss Mitigation team includes a multi-state network of real estate agents, attorneys, title companies, short sale negotiators, credit repair providers, mortgage providers, inspectors and investors. Together, those professionals act as a NO COST short sale outsourcing solution for Realtors and Homeowners.

Jim McNinch, Certified Distressed Property Expert (CDPE);

short sale agent, short sale specialist



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