BiggerPockets

http://www.dailyreportonline.com/Editorial/News/singleEdit.asp?origin=EmailRefer&l=em52306861103498323

Sam is right. This is the same story that is being used over and over again.

While a realtor, I bought several properties. By disclosing there were no problems and a FSBO were happy to pay me a 3% commission back on the purchase instead of the standard 7% larger companies mandate to be charged.

Bill,

The answer to your question is easy. It is due to the lack of common sense. Most people will not ever actually take the time to read the article. Instead, they will regurgatate what others have expressed. And then you will have those that just simple do not understand and since they do nto understand, it must be illegal.

My broker just used this case in his short sale workshop as an example to prove that realtors should not be a principal to buy or flip short sales, but to act as an agent only. He said the only legal way is to do it with option contract or assignment. I need to know what is actually "legal" because it seems every day someone comes up with a new advice against realtors investing in short sales apart from becoming the listing agent. I am all confused. Do I need to give up my license in order to invest in short sales? Is it possible to do it while licensed and avoid potential legal problems? I'm a new investor but I don't want to get cut off at the knees before I even have a chance to begin. Someone point me to the right direction please.

Hi Lily,
Sam is right about full disclosure! That is a must in these types of transactions if you are a Realtor or not.
As far as being a Realtor buying and selling short sales....no problem! My wife Jackie (also a BP member) and I are both Realtors and we do it. As far as using an option contract or assignment in your transaction structure, option contracts are being denied by lenders more and more now and I am told that assignments are not being accepted by title companies and lenders. We use a sales contract that is full of complete disclosure. If there is an issue with you getting a commission on the sale, maybe it would be possible for you to refer it to another agent? I'd check with your broker on that one if I were you.
Good luck and have a great 4th of July weekend!
Bill

Happy 4th of July! USA rocks! Thanks for all your input. According to my broker, the issue seems to be how you as B investor present your lowball offer to the bank while trying to market the same property to a C buyer at a higher price. He said it's fraud if we don't report the higher price offer to the bank, and as Realtors we are held to higher standards and scrutiny, and that even if we're not the listing agent or principal, as long as someone out there is willing to pay more for the property, we have a duty to "disclose" -- tell the bank; failure to do so is fraud. This flies in the face of common sense and agency rules. I can't wrap my head around this. I agree on full disclosure, but I think this is going too far.

Where are the short sale rules found with regard to presenting offers to the lender? Obviously if the bank asks if there are any higher offers and there were it would be fraudulent not to disclose. But I disclose up front that resale for a profit is indeed my intention as well as throughout the negotiations and a final disclosure on the final HUD1…..

This is one thing I don't get about traditional short sales. If I have an offer in and accepted by the seller is this contract not binding because the bank can accept a higher offer even after I have waited for months in first offer position? A "backup offer can bump me out without me rescinding my offer? If this is true it is no wonder traditional short sales don't happen.

The agent has no fiduciary responsibility to submit all offers to the lender. They are not representing the lender, they are representing the home owner. Sam is correct. We also disclose upfront our intention to resell for a profit. The Connecticut case is a whole other story as K John and others ably pointed out.