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Oct 19 '09, 04:07 AMI wanted to get everyone's opinion regarding Realtors and A-B B-C short sale flips. Let me give you the scenario.
A Realtor contacts a distressed homeowner. Consults them on their situation and the homeowner determines a short sale is their only way out of foreclosure. The Realtor works with an investor who regularly buys short sales. The Realtor tells the homeowner this and that they can get a contract in 24 hours. The homeowner and Realtor execute a listing agreement with the Realtor collecting a full 6% commission. The next day the Realtor delivers a contract to the homeowner which is executed for a price of X. The negotiation is contracted out to a 3rd party negotiator and the Realtor immediately lists the property on MLS for the investor at a higher price. Before the negotiation is finalized the Realtor receives offers from C buyers for a higher price than the A-B contract price.
Because the Realtor has a listing agreement is the Realtor obligated to inform the lender of these higher priced offers before the negotiation is finalized?
What if the Realtor's listing agreement, here in Florida, is one of "No Broker Relationship" with the homeowner?
I'm sure you heard about the pair in Connecticut who were recently indicted on mortgage fraud. I wanted to make sure what I described is legal. I did some research and found the indictment which I linked to in this post. They were obviously doing all kinds of bad things (non-disclosure, non-arms length buyers, etc.) but the indictment says the accused "made material misrepresentations to financial institutions about the price buyers had offered to pay for real property."
Would failing to inform the lender of subsequent offers be considered a material misrepresentation?
I can't seem to find any guidance on this and thought someone may have already discussed this with investors, attorneys or the FBI themselves.
