Is It Really a Short Sale?

Some properties are being advertised as a short sale when they really aren’t in an attempt to lure bargain-hunter buyers. A new book,Foreclosures, Short Sales, REOs, and Auctions: Tools for Success in Today’s Real Estate Market, published by Dearborn, provides guidelines for using the term correctly. Here’s an exclusive excerpt:

There are a number of licensees who are attempting to attract buyers by using the term short sale in marketing property. It is very similar to the furniture stores that are constantly advertising that they are going out of business to draw purchasers. The fact that a home has lost value or that the loan has increased in amount and is now more than the value of the property does not automatically make the transaction a short sale.

It’s important that a licensee conduct a thorough analysis, not only of the property value and loans but of the prospective seller’s financial condition as well. As was indicated, according to some licensees who are experts in the field, only a small percentage of short sales are approved by lenders.

What is to be gained by these licensees who advertise properties as short sales when they really aren’t? The answer is attracting more buyers, of course.

Some licensees are describing properties as preforeclosure listing or short sale and use the terms synonymously. Appropriately, a preforeclosure sale of property would involve one where the owner is in default. The property may or may not be worth less than the loan amount. Read more

Author Chat: Barbara Nichols

Real estate legal expert Barbara Nichols, author of The No-Lawsuit Guide to Real Estate Transactions (McGraw-Hill, 2007), responds to your questions.

What’s the most common reason agents get sued?

NICHOLS: The most common reason agents get sued is failure to disclose material facts related to the transaction. These usually relate to physical defects. Buyers do not like surprises. They want to know what they are buying before the deal closes.

Is there a statute of limitations after completing a transaction where a buyer or seller can no longer bring a lawsuit against you?

NICHOLS: In most states buyers or sellers have two years after the deal closes to sue for misrepresentation. If the accusation is fraud, they have three years after the fraud is discovered. I recommend holding all transaction files at least five years.

Can you really get sued if you don’t tell a buyer the house is rumored to be haunted? Would that really stand up in court?

NICHOLS: When I ask agents attending my risk management course if they have haunted houses in their area, they almost always say yes. However, I have never consulted on a lawsuit which involved non-disclosure of a haunted house. I don’t think most courts would consider that claim reasonable or provable. Read more

The No-Lawsuit Guide to Real Estate Transactions: 5 Ways You Could End Up in Court

By Melissa Dittmann Tracey

QUICK SKIM

One in five real estate practitioners will be involved in a lawsuit during their career, says real estate broker Barbara Nichols in The No-Lawsuit Guide to Real Estate Transactions (McGraw-Hill, 2007). The effects can be just as damaging to your reputation as it is to your pocketbook. So how do you make sure you don’t end up in court? There are some obvious lines you know to never cross, but there are far more gray areas that can land you in trouble for nondisclosure, steering, or even false advertising. Nichols gives advice on navigating these potentially risky situations. Buy the Book

FROM THE BOOK: 5 WAYS YOU COULD END UP IN COURT

Real estate lawsuits often stem from what you say — or don’t say — to your client. Bottom line: You’re obligated to report any property information, both onsite and offsite, that could impact the property’s price or a buyer’s decision to buy. Nichols outlines these common legal mishaps for practitioners:

1. Not disclosing property stigmas. Prospective buyers need to be told if a anything in a home’s past could potentially scare off future buyers or hurt the property’s resale value. What counts as a stigma? It could be a murder that once occurred in the home, a rumored haunting, or a history of foundation problems (even if the seller spent thousands of dollars fixing the foundation, future buyers could be hesitant to make an offer). If you don’t disclose any potential stigmas, you could be held liable when the clients find out. So do your research and be sure you know the home’s history. Read more