California Tops In Short Sale Fraud

First the FBI announced a crackdown on short sale fraud, and then Freddie Mac  they are teaming up to go after bad real estate agents.  Freddie Mac short sales have increased from 4% of completed workouts in 2000 to nearly 14% in 2010.  The California Department of Real Estate has also issued a consumer alert.

As you can see from the image above, California is in the top states for short sale fraud.

Why are they going after real estate agents?

Since short sale fraud requires the cooperation of one or more real estate professionals involved in the transactions, we have begun reaching out to Realtor associations in target markets to educate them about the latest trends in short sale fraud, the red flags to watch for, and what actions they can take to stop it. We strongly believe responsible Realtors are America’s natural first line of defense against such scams.

There should be a special circle of H*ll for agents that participate in such deception.  The article goes on to give examples of possible short sale fraud.

Falsely indicating on a new short sale listing that there is an offer on a property in order to discourage legitimate offers and protect an accomplice’s planned low bid.

Manipulating the short sale listing price by making the house look more distressed than it really is (“reverse staging”), inflating repair estimates, or using similar tactics designed to obtain an artificially low home value on the Broker Price Opinion. (Our requirements prohibit the buyer, buyer’s agent, buyer’s attorney, or a third-party short sale negotiator to be the contact point for the agents preparing the BPO.)

“Flipping” schemes where the fraudster “buys” a house at a short sale without putting down any of his own money and then sells it a few hours (or days) later to a legitimate buyer at a much higher price. These are complex multi-step schemes that use falsified title and/or loan documents to fool a lender into approving the ultimate buyer’s mortgage, which the fraudster uses to settle the earlier closing on the house he “acquired” at the short sale for a much lower price.

Manipulating the HUD-1 settlement statement so the fraudster can skim away net proceeds from the sale for himself or other parties in the transaction without the seller’s or investor’s knowledge. (The HUD-1 is the document that itemizes all fees, charges, and other funds involved in a home sale.)

Download full FBI report by clicking image below:

One of the biggest mistakes a distressed homeowner can make is to rely on advice from family, friends, or real estate agents regarding alternatives to foreclosure.  Real Estate agents are licensed and experts in real estate matters, and they are breaking the law by dispensing any legal or tax advice.  Since a real estate agent has a opportunity to make a sales commission on a short sale, and does not on a foreclosure, guess which one unscrupulous agents recommend?

One resource that I often refer is a service offered by Pete Solecki he calls “distressed property” review.

We all know that Attorney’s are expensive and work on a per hourly basis from $300 to upwards of $500.00 per hour.  What you don’t want to be in a distressed position is “penny wise” and “pound foolish”.  The “distressed property” review may save you thousands of dollars from making the wrong decision on a loan modification, short sale, or foreclosure.

For this program Pete Solecki charges $375.00 which is his normal hourly rate.  With that you get much more than an hours worth of value as the program covers the following after you have mailed or e-mailed the requested documentation.  He will take personal checks or credit cards, talk with his office regarding your payment options.

• Set up either an in-person office or telephone conference at your preference.
• Focus on the three primary questions that homeowners have which are how will this effect my credit, how will this affect my taxes, and can or will a lender come after me for a deficiency?

At our meeting I do not tell you what to do, rather I try to give you a road map of what to expect so you can anticipate issues and determine how best to proceed.  For tax issues, only your tax advisor, who knows your personal tax situation, can give you definitive answers but I tell you the tax framework so that you know what to ask your tax advisor.  That meeting or phone call usually lasts about an hour and a half.  Thereafter I take follow-up calls at no additional charge.  I have done this hundreds of times and my clients have found the information to be quite useful when facing this type of situation.

To get started on this program give Pete’s assistant Brandy a call to set up and appointment.  She will supply you in an e-mail all the documentation that you’ll need to scan and e-mail or mail into the office.  The office phone number is 877-309-4747.  They are in the process of moving from Rancho Bernardo to the Bankers Hill area.

If you would like to know more about Pete Solecki please visit his website or read a post about him that I wrote several years ago.

The important thing to remember is that you’re not along in this.

The first step towards a better life is for you to take action and reach out for help – waiting only makes your options disappear one by one.  I know from personal experience how difficult, confusing, and stressful this can be.  Please read “Financial Hardship, Don’t Let Fear Keep You From Action”.

For more information on Short Sales, Short Sale Help, or Foreclosure please visit our categories.

Thought I would update everyone regarding the foreclosure timeline in California.  This information is provided by the California Association of REALTOR® and is current of March 2011.  If you want more information please visit our Foreclosure or Short Sale Category.  We also offer foreclosure search by City of Zip code here. Please keep in mind that this is subject to change without notice, but is accurate as of March 2011.

In California, lenders who intend to foreclose on a property when the loan is delinquent typically use the nonjudicial foreclosure process also known as a trustee’s sale. This process is less expensive for the lender than the judicial foreclosure process. A nonjudicial foreclosure doesn’t require a court proceeding and, thus, is a more expeditious process. From here on, whenever the term “foreclosure” is used, it is referring to a trustee’s sale.

With foreclosures being so prevalent and with so many homeowners being at risk of losing their homes to foreclosure, REALTORS® need to be able to assess whether they have sufficient time to market the property and close escrow before the property is lost to foreclosure. Therefore, this article provides a foreclosure timeline to assist REALTORS® in their assessment of the time remaining before a possible foreclosure occurs.

Several recent laws have impacted the foreclosure timeline. The California legislature added an additional 90-day extension period after the recordation of the Notice of Default (NOD)—California Civil Code Sections 2923.52-2923.55. However, those statutes were repealed effective Jan. 1, 2011.

Another law which expires Jan. 1, 2013—California Civil Code Section 2923.5–affects the foreclosure timeline but only for loans made between Jan. 1, 2003 and Dec. 31, 2007 on residential one-to-four unit owner-occupied properties. This law adds a 30-day borrower contact period before the lender may record the NOD.

“Days” in the foreclosure timeline are “business days,” defined as all days other than Saturday, Sunday, and holidays. See California Civil Code Sections 7.1 and 9 for more information.

The California Association of REALTORS® breaks the process down depending on when the loan was taken out.  The first time frame for the California Foreclosure process is January 1, 2003 to December 31, 2007.

Loans Made Between Jan. 1, 2003 and Dec. 31. 2007 on Residential One-to-Four Unit Owner-Occupied Properties:

DAY 1: CONTACT THE BORROWER:

Under Cal. Civ. Code § 2923.5(a) the lender must contact the borrower by phone or in person to assess the borrower’s financial situation and explore options for avoiding foreclosure.  During the conversation, the lender must inform the borrower of the right to meet with the lender within 14 days.  The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency.

Note:  In the 2010 case, Mabry v. Aurora Loan, the court held that a borrower can file an injunction to postpone the foreclosure sale if the lender doesn’t comply with this law, but cannot overturn the foreclosure once it has been conducted.

DAY 31:  RECORD THE NOD:

The NOD must be filed in the county where the property is located. The language of the NOD can be found in Cal. Civ. Code § 2924c(b)(1).

The NOD must include the lender’s declaration that it has contacted the borrower to explore options for avoiding foreclosure, tried with due diligence to contact the borrower, or the borrower has surrendered the property (Cal. Civ. Code § 2923.5(b)).

Within 10 days after recordation of the NOD: A copy of the NOD must be mailed by registered or certified mail to the borrower/trustor and to any parties with a recorded Request for Notice as indicated in Cal. Civ. Code § 2924(b)(1).  (Cal. Civ. Code § 2924b(b).)

Within 30 days after recordation of the NOD: the lender must mail a statutory notice to the borrower as described in Cal. Civ. Code 2924f(c)(3).

DAY 116 – 121:  RECORD THE NOTICE OF TRUSTEE’S SALE:

The Notice of Trustee’s Sale must set forth the date, time, and place of the auction.  It must also include the total amount of the unpaid balance and reasonably estimated costs, expenses, and advances at the time of the initial publication of the Notice.  It must be recorded, posted, published, and also mailed by registered or certified mail as well as first class mail to the borrower (Cal. Civ. Code § 2924f).

25 days prior to Trustee’s Auction:  Notice of Sale sent to IRS in case there is an IRS lien recorded more than 30 days before the date of the Sale (Cal. Civ. Code § 2924b(c)(4); 26 U.S.C. 7425(b)).

20 days prior to Trustee’s Sale:  Notice of Trustee’s Sale must be recorded at least 20 days prior to Sale (Cal. Civ. Code § 2924f(b)).

20 days prior to Trustee’s Auction: Notice of Sale publication begins (must run once a week for 3 consecutive weeks in a newspaper of general circulation) (Cal. Civ. Code § 2924f(b)).

20 days prior to Trustee’s Sale:  Notice of Sale must be mailed by registered or certified mail to everyone who is entitled to receive a NOD.  In addition, the Notice of Sale must also be mailed by 1 st class mail to the borrower (Cal. Civ. Code § 2924b(b)-(c)).

DAY 135:  LAST DAY TO CURE DEFAULT:

Up to 5 business days before the Trustee’s Sale, the borrower may reinstate the loan (bring the loan current) by paying the missed payments plus allowable costs. Note:  If the auction is postponed the date that the borrower may reinstate is postponed accordingly. (Cal. Civ. Code § 2924c(e).)

DAY 141:  TRUSTEE’S SALE FORECLOSURE:

After the last day to cure the default, the borrower still has the right to redeem the property but he/she must pay the entire debt, plus interest and costs before the bidding begins at the Sale (Cal. Civ. Code §§ 2903, 2905).

At the Trustee’s Sale, the property is sold through a public auction to the highest bidder.  Title is transferred to the successful bidder by Trustee’s Deed.

All Other Loans:

DAY 1:  RECORD THE NOD

The NOD must be filed in the county where the property is located.   The language of the NOD can be found in Cal. Civ. Code § 2924c(b)(1).

Within 10 days after recordation of the NOD: A copy of the NOD must be mailed by registered or certified mail to the borrower/trustor and to any parties with a recorded Request for Notice as indicated in Cal. Civ. Code § 2924(b)(1).  (Cal. Civ. Code § 2924b(b).)

Within 30 days after recordation of the NOD: the lender must mail a statutory notice to the borrower as described in Cal. Civ. Code 2924f(c)(3).

DAY 86 – 91:  RECORD THE NOTICE OF TRUSTEE’S SALE

The Notice of Trustee’s Sale must set forth the date, time, and place of the Sale.  It must also include the total amount of the unpaid balance and reasonably estimated costs, expenses, and advances at the time of the initial publication of the Notice.  It must be recorded, posted, published, and also mailed by registered or certified mail as well as first class mail to the borrower (Cal. Civ. Code § 2924f).

25 days prior to Trustee’s Sale:  Notice of Sale sent to IRS in case there is an IRS lien recorded more than 30 days before the date of the Sale (Cal. Civ. Code § 2924b(c)(4); 26 U.S.C. 7425(b)).

20 days prior to Trustee’s Sale:  Notice of Trustee’s Sale must be recorded at least 20 days prior to Sale (Cal. Civ. Code § 2924f(b)).

20 days prior to Trustee’s Sale: Notice of Sale publication begins (must run once a week for 3 consecutive weeks in a newspaper of general circulation) (Cal. Civ. Code § 2924f(b)).

20 days prior to Trustee’s Sale:  Notice of Sale must be mailed by registered or certified mail to everyone who is entitled to receive a NOD.  In addition, the Notice of Sale must also be mailed by 1 st class mail to the borrower (Cal. Civ. Code § 2924b(b)-(c)).

DAY 105:  LAST DAY TO CURE DEFAULT:

Up to 5 business days before the Trustee’s auction, the borrower may reinstate the loan (bring the loan current) by paying the missed payments plus allowable costs. Note:  If the Sale is postponed the date that the borrower may reinstate is postponed accordingly. (Cal. Civ. Code § 2924c(e).)

DAY 111:  TRUSTEE’S SALE FORECLOSURE:

After the last day to cure the default, the borrower still has the right to redeem the property but he/she must pay the entire debt, plus interest and costs before the bidding begins at the Sale (Cal. Civ. Code §§ 2903, 2905).

At the Trustee’s Sale, the property is sold through a public auction to the highest bidder.  Title is transferred to the successful bidder by Trustee’s Deed.

Bottom Line:  The minimum time for a trustee’s sale foreclosure (nonjudicial foreclosure) is 110 days after the NOD is recorded for most loans (plus 30 days for loans made between Jan. 1, 2003 and Dec. 31, 2007 on owner-occupied residential one-to-four unit properties).

If you would like to preview or download a printable version of this document please check here.

If you are looking for alternatives to Foreclosure visit out short sale help category including Deed For Lease Option, and know your options before loosing your home.

Readers who require specific advice on the California Foreclosure Process should consult an attorney.

Deed For Lease  - Another Know Your Options

Many people don’t realize that Fannie Mae has a Deed-for-Lease Option available for those homeowners that want to stay in their home.  This program may be available for those that:

• Are ineligible to refinance or modify their mortgage.
• Facing long-term hardship.
• Several months behind on your mortgage payments.
• Owe more on your home than it’s worth.
• Have not been able to sell your home.
• You want to remain in your home and neighborhood.

The first step is to find out who owns your loan.  Other lenders may or may not have similar programs so be sure to check with your lender.  You can find out if Fannie Mae owns your loan and the Deed for Lease Option on the loan lookup page.

So what are some of the benefits of the Deed For Lease Option?

• Eliminate or reduce your remaining mortgage debt
• Resolve your delinquency and avoid foreclosure
• Stay in your home and neighborhood—no need to move or relocate
• Lease at current market rate rent for up to 12 months with a possible option to extend the term
• Pay no security deposit
• Assistance for relocation may be available at the end of your lease
• Start repairing your credit sooner than if you went through a foreclosure
• May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) by executing a DIL than if you went through foreclosure (at least 7 years)

How does the Deed for Lease Program work?

• Your mortgage must be owned by Fannie Mae
• Your mortgage company will refer you to a property management company that will inspect your property and review your financial information
• You will sign a lease agreement (if you qualify for the program)
• You will sign a Deed-in-Lieu of Foreclosure (DIL) to transfer title to the property to them
• Your lease becomes effective once the DIL is complete/accepted by them
• You will remain in the property according to the lease terms paying monthly rent
• The property management company will manage the property and collect the monthly rent

If you want to know your options visit the Fannie Mae website or our HAFA short sale page.  More information can also be found in our Short Sale and Foreclosure categories.

Short Sale HAFA Changes

As guessed the Treasury Department has changed the rules regarding a short sale and the HAFA program.  You can read complete details on the HAFA program on our HAFA resource page.

Will the short sale actually be true to its name?

Currently short sales are taking many months with many of them not being approved or loosing buyers that finally wander off.  No one would call them short.

In a nutshell here are some of the changes:

• Those seeking a short sale must get an answer within 30 days.
• Servicers will no longer be required to verify a borrower’s financial information.
• Servicers are no longer required to determine if the debt-to-ratio incomes exceeds 31%.
• Second lein holders no longer must accept 6% of the unpaid balance.

The Government is clearly focused on making short sales a viable option.  This does not appear to be the case with the Banks that sometimes pass up a short sale offer and end up with less proceeds on a Trustee sale.  Only time will tell if the program will actually start to work but I am currently working on HAFA certification to understand the whole process.

Below are some of the basics of the HAFA program for short sales.

HAFA Basic Eligibility Eligibility Requirements For Short Sales

The home must be owner-occupied principle residence.

• It must have a first trust deed mortgage(loan) in place prior to January 1, 2009.
• The mortgage must be delinquent or delinquency is likely.
• The unpaid loan balance is no more than $729,750 for a single family home.
• Your monthly payment is more than 31 percent of your gross income.

HAFA short sale advantages.

• Buyer’s will know where they stand in the purchase.
• Seller’s will walk away from the property more dignity.
• Fewer deals with fall through at the last minute.
• Uniformity of forms used in the process.
• 10 day business response from lender upon presentation of executed offer.
• If Seller not approved for HAFA may be considered for deed-in-lieu of foreclosure.
• Mandatory deficiency release.
• $3,000 in moving expenses.

Stayed tuned for more HAFA short sale updates.

Photo courtesy of  Hans Kylberg on Flickr

Fannie Mae has just announced www.knowyouroptions.com.

Another resource for people in real estate financial hardship was launched the other day by Fannie Mae called Know Your Options.  The Fannie Mae site has lots of information links and an interactive video.

Here are a few of the major links to resources:

• Contact a housing counselor at 888-995-HOPE.
• Check to see if your loan is owned by Fannie Mae here.
• Financial Checklist from Fannie Mae.
• Refinancing options or loan modification options.
• Deed for lease program.
• Options for leaving your home like a short sale or Deed-in-Lieu.

Unfortunately many of the people offering hope and assistance are frauds.  Check out loan scam alert and prevent loan scams.

Most important find out how you can take action.  Nothing will get better by delaying the process, but taking the first step towards getting help will.

A HUD-approved housing counselor is an experienced, trained professional who can advise you on preventing foreclosure, buying a home, protecting your credit, and other issues. The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country and counseling is available in many languages.

A housing counselor can talk to you about your situation and help you decide what mortgage options are best for you, whether you are concerned about falling behind on your mortgage or are preparing to buy a home. There is no charge to work with a HUD-approved housing counselor—help is free!

If you have missed any mortgage payments, are about to miss a payment, or if your loan already has been referred to an attorney for foreclosure, a HUD-approved housing counselor can help you assess your circumstances, identify your options and prepare you to talk with your mortgage company.

The U.S. Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country and counseling is available in many languages.

Foreclosure Avoidance Counseling

There is no charge for working with a HUD – approved counseling agency.  Before calling you should have the following information together.

• Mortgage statements including any 2nd or Junior mortgages.
• Other monthly debt like car, student, or other loans.
• Your income details including pay stubs and income tax returns.

Fannie Mae has put together a handy form to gather this information.  Financial checklist or Contact Information Sheet.

The Worst Thing You Can Do Is Nothing!  Please Don’t Let That Happen To You.

The past years have been a really tough time for most everyone.

However, it has effected folks that purchased real estate at the top of the market the most.  Faced with bad mortgages, no equity, lost jobs, and other financial challenges it is easy to want to jump in bed and pull the covers over your head.  I know that I did.

A article in “Fear of losing one’s home a powerful force” the other day on Sign On San Diego had this tragic story:

As San Diego discovered on New Year’s Day, Michael Cour of Santee was one of those desperate people. Staggering under a worst-case scenario pileup that included unemployment, bankruptcy and foreclosure, Cour set his house on fire and shot his wife before turning the gun on himself. The situation was extreme and his response was horrifying, and if you are a veteran of San Diego’s boom-and-bust real-estate wars, the story of Cour’s homefront nightmare probably still haunts you.

“Your home is your shelter, and that fulfills one of your basic needs in life,” said Gabe del Rio, a senior vice president at Community Housing Works, a local nonprofit whose services include foreclosure intervention. “But people have also been taught that their home is their wealth. And when you think about your shelter and your wealth being taken away, you are really getting to a very emotional place.”

I know how hard this can be from personal experience.  After working for 10 years through some of the best times for real estate sales, the management position in the Company that I worked for came to an abrupt end.  Big changes in ownership, leadership, and culture caused many managers to unexpectedly “go back into sales.”

Having recently purchased a condo in The Grande South which was near the Coaster so I could commute back and forth to Rancho Santa Fe I found myself unemployed with a large mortgage and high HOA fee.  In addition I was in the process of a divorce that went on for 3 years, with mounting attorney fees, and heath issues.

Suddenly I was back to being a self-employed real estate agent thrown into a crashing real estate market after being out of sales for 8 years.

Let’s just say these were some very dark days and I cannot tell you how hopeless I felt as things spiraled out of control for me in almost every aspect of my life.  Without some close friends and family I would not have survived after loosing most everything that I had worked for over my 20 year real estate career.

If I can give you one piece of advice please take action.

Many people are in desperate financial hardship and you are not alone.  Even better there are many resources out there to help you make some touch decisions.  Start today by calling a HUD certified housing counselor, real estate attorney, and a trusted real estate agent. Family and friends can be some good resources for referrals.

Options include loan modifications, short sales, bankruptcy, foreclosure, and deed in leu of foreclosure,  Depending on who owns your mortgage you might even be able to lease you home making it possible to stay in your home at an affordable rental rate.

The unfortunate result in this market shift is it has brought out many scams and charlatans pretending to be experts.  Preying on the most desperate the take a bad situation and make it worse.  It is really frustrating and sad the horror stories I hear every day from folks that have reached out to the wrong people or have been given bad advice.

If you want resources for short sale information please visit our HAFA page.  Information on foreclosures can be found in our foreclosure category. These article have links to Fannie Mae, Freddie Mac, and HUD for help and information.

Take a moment to read the California Department of Real Estate warning regarding the so called experts out there.

The DRE has noticed an increase in the use of questionable and possibly misleading terms such as “expert”, “certified”, and “specialist” in the marketing and advertising of assistance to anxious homeowners in connection with their home loans and foreclosure rescue services and short sales A growing number of individuals and companies, many of whom are unlicensed, purport to be “experts” in the area of short sales, “certified” forensic loan auditors, short sale “specialists”, loan modification “specialists”, loss mitigation “experts”, “fraud investigators”, and the like, and many of these designations and claims seem to be nothing more than marketing ploys by unscrupulous fraudsters to capitalize on the desperation and vulnerability of unsophisticated and/or financially strapped homeowners.

One good friend told me during this time, “Jeff, if you are marching through hell…you better just keep marching!”

I am so glad that I did and reached out to the many resources out there.  Today is a much brighter day and a much better option than Michael Cour.

Please pass this article on to friends and family.  Let them know there is hope out there and the best thing they can do is take the first step on the journey back.

Photo courtesy of Flickr

Department of Real Estate Issues Another Consumer & Industry Warning

Short Sale Specialist – Loan Modification Expert – Forensic loan auditors – Loss Mitigation Experts

The list goes on and on.  Many of the same people that did sub-prime loans and loan modification services have moved into the latest scams as experts.

Just having the word specialist, certified, or expert in marketing and a business card does not make it so.

The DRE has noticed an increase in the use of questionable and possibly misleading terms such as “expert”, “certified”, and “specialist” in the marketing and advertising of assistance to anxious homeowners in connection with their home loans and foreclosure rescue services and short sales A growing number of individuals and companies, many of whom are unlicensed, purport to be “experts” in the area of short sales, “certified” forensic loan auditors, short sale “specialists”, loan modification “specialists”, loss mitigation “experts”, “fraud investigators”, and the like, and many of these designations and claims seem to be nothing more than marketing ploys by unscrupulous fraudsters to capitalize on the desperation and vulnerability of unsophisticated and/or financially strapped homeowners.

Sad but true, the real estate consumer needs to be extra careful in reaching out for help in today’s real estate market.  Be both wary and cautious in selections that you make, many of these people are not experts and are just looking for quick money from desperate situations.

Here are some questions that you can do to protect yourself.  The DRE states that the list is not exhaustive but will give you good information to make an informed decision.

1. How many transactions or services of the type you are advertising have you successfully performed.  Real estate agents should be able to give you MLS printouts of prior transactions.
2. Do you have a list of your last 10 customers?  Call them and do your own background check and remember that even if they are so-called satisfied customers the risk of a scam is not eliminated.
3. Ask if they are licensed by the California Department of Real Estate.  You can search for active real estate licenses here.  If they are not licensed, what exemption from the licensing laws do they claim?  Many are not licensed.
4. What qualifies them as an expert?  How did they get the expertise?
5. For those that state they are a specialist, what qualifications do they have and what do they mean?
6. If they say they are certified who has issued the certification?  Do any government entities or recognized industry trade groups (Such as the California Association of REALTORS® or National Association of REALTORS® recognize the certification.  If so you should verify the certification from the association.
7. How much course work or study did it take to become certified or specialized?
8. What were the requirements for certification or specialization?
9. How many hours of coursework were involved?
10. What professional organization gave them the designation or certification?  Check out that entity with the California Secretary of State, Better Business Bureaus, California Association of REALTORS®, or National Association of REALTORS®.  See if any complaints have been noted by doing a Google search.
11. When did they get the designation?
12. Did they take a examination, and is so when?

A search today on Google for “San Diego short sale specialist” resulted in 176,000 matches.  Please be careful out there.

Read full DRE Consumer and Industry Warning.

Photo courtesy of Ludovic Bertron on Flickr

Short Sale consumer alert just released by the California Department of Real Estate.

Several months ago, the California Department of Real Estate (“DRE”) issued a publication on residential Short Sales which provided an overview of the practice area, and a warning to the real estate industry about legal and ethical minefields and the growing fraud in this area. The publication also discussed and pointed out certain egregious and unlawful practices of short sale flippers, and it was followed by a DRE Consumer Alert on Short Sale transactions.

Unfortunately, Short Sale fraud is growing, and it too often seems that licensees and those counseling licensees may wrongly conclude that unlawful or questionable practices “cannot be bad” because “everyone is doing it.” Licensees must understand that fraudulent and unlawful practices will invite disciplinary action by the DRE and possible civil and criminal liability.

It goes on to say:

Many brokers have noticed and reported a sharp increase in the number of Listing Agents and SSNs who are requiring that Buyers pay the SSN’s fee. The Buyer’s agents are sometimes told (either in the Remarks Section of the MLS and/or in a pre-sale instruction sheet) that Buyers must sign a special Addendum created by the SSN in which the Buyers agree to pay the SSN’s fee if they intend to present an offer.

Buyer’s Agents may also be told that their clients’ offer will not be presented if the Buyer does not agree to sign that SSN Addendum and include it with the offer. If the requirement for the Buyer to pay the SSN fee is being driven by the Listing Agent and/or the SSN1, and is really not a requirement of the Seller, there is potentially an ethics violation and a breach of the Listing Agent’s fiduciary duty to the Seller by stifling and limiting the presentation of legitimate offers.

Please read or download the full consumer alert.
Find out more at our Short Sale or Short Sale Help category.

According to an article in The Seattle Times a large real estate brokerage has been suspended by regulators.  Marketed as short sale experts they appeared on CNBC and Fox Business News.

State regulators have suspended the real-estate license of a Pierce County broker touted as a national expert on distressed property sales, charging that he engaged in a host of dishonest practices that took advantage of struggling homeowners.

The Department of Licensing last week suspended the licenses of Michael Hellickson; his wife, Tara Hellickson; and their Bonney Lake firm, Hellickson.com, after a 17-month investigation prompted by more than two dozen complaints.

Many of the same people that participated in the sub-prime lending practices, them moved to the loan modification business, and are now in the short sale business.  The California Department of Real Estate has issued a consumer alert “Warning, Residential Real Estate Short Sales”.

Be aware that in response to this new program there may be an increase in the number of companies soliciting homeowners in distressed situations and offering to conduct the short sale negotiations with your bank/lender in exchange for charges and fees. Their interest may not so much be to help you as it may be to try to be the vehicle through which they could “flip” the short sale for a profit.

The Brokerage in Washington State has been accused of the following practices.

• Promised to buy Seller’s homes if they did not sell within 30 to 90 days – then not following through.
• Encourage Homeowners to stop making mortgage payments.
• Listed homes for sale for less than the lenders or owner’s would accept.
• Misrepresented listing agreements and listing expiration dates.
• Had Client sign blank agreements.
• Added language to steer buyers to specific lenders.

The article went on to say:

Most of the charges against the Hellicksons are fleshed out in a 44-page declaration filed by Robin Jones, an investigator with the licensing department’s Real Estate Investigations Unit.

In the document, Jones provides details of her investigations of a dozen complaints against the Hellicksons.

One homeowner said Michael Hellickson told her her listing agreement was for six months, but actually wrote in an expiration date of 2013, Jones writes.

Another short-sale client said he told the Hellicksons his bank would not accept any offer below $240,000 — but later learned the home had been listed for $175,000 without his permission.

Jones’ declaration also notes that the Hellicksons’ advertising materials indicate Michael Hellickson is the top real-estate agent in Hawaii and Oregon — but actually he is not licensed to sell real estate in either state.

Yesterday I posted some resources on Short Sales for San Diego homeowners.  Please visit our Short Sale or Short Sale Help Categories for more information.

Please be careful out there, if it sounds too good to be true, you know what they say….

Photo courtesy of Flickr.