I received an email over the long weekend from an agent who had a short sale question. It seems that his sister needed to sell her home as a short sale. He wanted to buy it, and he wanted to represent both sides in the transaction (remember that California allows dual representation).
All I could think about when I was reading the email was Tom Hanks in Apollo 13 saying, “Houston, we have a problem.” While a transaction of this sort may have been acceptable several years back, buying a home from a relative is not always okay when it comes to short sales.
Many times banks do not like the buyers to be related to one another as this might be an indication of fraud. That’s why many of the short sale lenders have special short sale addenda and arm’s length transaction agreements, which they require to be signed (and often notarized) as part of the short sale process.
Other lenders prefer that the real estate agent not be a party to the transaction. So, in the case that I mentioned above, this agent may opt to find another agent to represent him.
While the rules do vary from lender to lender, it is generally not a good idea for agents to represent themselves in the purchase or sale of short sale property. And, due to bank requirements and regulations, it’s also not always viable when the buyer and seller are related.
Despite all of these ‘buts’, short sales will continue to be a hot transaction in 2012. It’s just a shame that they take so long to close!
Photo: flickr creative commons by wwarby