This is a topic that comes up from time to time and I wanted to share with everyone our stance on this important matter, and WHY we insist upon this.  If you read our Network Business Agreement, which is a requirement for all of our referral partners to sign, it states "Agent agrees he/she will not refer to a 3rd party mitigation company or processing company.  All work with sellers lenders must be done by agents stated brokerage company."

Here are a few reasons why we ask agents NOT use 3rd parties to mitigate short sales for our files.

1.) Regulation - We as brokerage companies are state regulated institutions.  3rd party mitigation companies are NOT.  Because of this, there is no standard level or expectations of services, and they have nothing to loose when it comes to licensing.  Many also work under the guise of "investors" and they also tend to act on the "liberal" side of real estate law, and can entrap agents in THEIR practices.  I've heard literally hundreds of horror stories, CLICK HERE for one I just read on our site literally today.  There is also a time factor when it comes to short sales and buyers backing out.  When it comes to getting contracts signed or documents back, the processor is just another unneeded party that if anything can ONLY contribute to further delaying the process and of course approval times.

2.) Accountability - While there are short sale processing platforms that attempt to control communication between ALL parties in the transaction, many companies don't use them, and MOST programs are insufficient.  This means that when buyers or buyers agents would like an update, they contact a 3rd party, which may not know ALL of the details of the transaction and be able to effectively commucate them to all parties.  Things are also lost in communication very frequently. Also, real estate transactions are supposed to be at arms length.  Do these negotiation companies and attorneys understand what an arms length transaction is, and who do THEY represent when a buyer or buyers agent contacts them regarding the file?  What about when it comes to negotiating a 2nd position lien, who do they ask FIRST for a contribution?  Here is a better argument, if the negotiation is a fee charged to the BUYER, it is not possible for a negotiation company to legally represent the sellers best interests in a transaction.  Anyone with law experience can then easily argue that the listing broker NO LONGER HAS A LISTING, if they have given away their fiduciary responsibility to the seller by sending the file to a 3rd party that legally MUST represent the buyer in the transaction.

These types of things make arms length transactions virtually impossible when using another party.  In addition, when WE assign a listing to an agent, it is important to be able to point the finger at THEM if things do not go well in the transaction.  With this level of accountability placed on agents, it is not possible for them to pass the blame on another party.

3.) Fiduciary Responsibilities - Due to the importance of the situation, I believe very strongly that in a short sale transaction especially, it is extremely important for brokerage companies to take their fiduciary responsibilities VERY seriously.  For me, this is a pretty simple line to draw in the sand. Either you care about looking out for your customers best interests, or you don't.  Telling them that you are there to help them in their time of need and then passing the buck to another company, most of which are not regulated, is certainly irresponsible and careless.

What does this mean for agents?  I understand that negotiating short sales is NOT part of your job description and in most situations you should NOT be negotiating them yourself if any way possible.  A good short sale team is not a one man/woman show, it takes a team.  Mitigating with lenders is not rocket science, and there is no reason an assistant, broker, or designated person in your brokerage office can't help with the negotiations.  This way, they can still be under YOUR supervision directly, and you can do what you do best - SELL REAL ESTATE!  And if you only have a handful of listings, there is no reason you can't do it yourself, it is NOT as time consuming as many would have you think.  Remember, this is coming from somebody who has done a couple hundred.

Closing attorneys and title companies are great to partner with to help with legal matters, advance title work, HUDs, and closings.  While they are a valuable part of a short sale team, There is no reason or need to pass the buck and hand off your brokerage companies fiduciary responsibilities and relationships by allowing them to actually work the short sale pfocessing. 

Of course, our agents are only required to mitigate in house for the listings we refer them.  It is a free country when it comes to their own.  Choose wisely.  This is also a way for us to help guarantee the sellers we refer out are never charged any money out of pocket, and can also receive a standard level of service.  It is also a way we can guarantee any lenders who directly use our services and organization can insure that THEY don't get charged any UNNECESSARY FEES. Yet another reason to stay away from them.

In closing, I'd like it to be known that I COULD stand to capitalize substantially from processing short sales nationally.  After all, we have literally thousands of short sale listings around the country we've referred to agents, ALL of which have agreed to not use a 3rd party to negotiate them!  If I choose, it would be simple for us to insist that they use US to negotiate all of the listings we refer to them.

That being said, it becomes obvious that I passionately believe short sales should ONLY be
negotiated and worked by licensed brokerage companies.  For these reasons, and others, I also believe to do otherwise is completely careless and unethical.  Agents in ALL forms of brokerage relationships in our state are required to use "skill, care, and diligence in ALL transactions".  Using any 3rd party to negotiate short sales shows a lack of all three of these things.

Just my two cents, for what its worth!

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Mike, I agree with you 100.

Just had 2 seperate offers that came in from other agents representing investors that had an absurd addendum attached to it that basically made the contract an option, in addition wanted a 3rd party negotiator and that if the"buyer" for some reason did not close, they seller would be responsible for the 3rd party negotiatror fees.. PLU wanted the seller to agree to take the property off the market so THEY can list it to find an end buyer.

I do not understandv how ANY listing agent, or attorney for the seller would allow this... really one sided putting the seller in an even worse position...
Yeah, those are just scammers. Here is a blogpost I wrote about that exact same scam some time ago that drew some of the slimballs out into a public forum:
http://activerain.com/blogsview/1291605/the-10-option-contract-shor...

Here is an article that Freddie Mac also just published about the same unethical and illegal scam "ABC" short sale flips as well:
http://www.freddiemac.com/singlefamily/news/2010/0412_payoff_fraud....

Investors doing these scams are the best clients of many mitigation companies. Remember also, an option contract is NOT an offer to purchase property. It is an offer to put a lien on the property and tie the hands of the seller and lenders. And real investors take real capital risks, these scam artists risk nothing more than the $10 for the option, and will only purchase if they can find a REAL buyer to flip it to the same day.
Yes I saw that right away.... amazing as one of these realtors was my seller's brother... Don't know what he was thinking.. I had to point out the problems for his sister (the seller).

He did not even read the addendum
I totally agree. Besides I enjoy the challenge of negotiating with the banks. I've been noticing that banks are calling me ! This afternoon, IndyMac Asset Manager, Amy Melton called and asked for updates! She sounded so happy that we ended up gigling like two young girls. I told her how I negotiated the short sale to get more money for the bank. She was so impressed and said she would call me regularly!
I also had another call from BOA negotiator, Jessica sch...her last name is so difficult to remember - I answered her that I was on my way to show this listing and promised her a contract by the end of the week. She was so down to earth and a very pleasant person to talk to, she calls me regularly and email me if I missed a document.
Now, how can I give this to a third negotiator!
Excuse me, but why am I here? I am a 3rd party negotiator...you all seem perfectly fine asking me, daily, for my experience and my phone numbers...but now you are "bashing" me and telling others that they are encouraged not to use my services??

Mike, you even sent me several emails stating that we would be allowed here because of our numerous contributions that have helped others.

I find this very insulting, personally.

Wow.
Mike....just read your AR blog on this subject and boy did you bring out the creepy crawlies! I think that the major difference or "faux pas" is that these people are omitting the fact that the have buyer's in the wings who they're flipping the properties to for a profit AND the fact that they actually have Realtors continue to market the property in search of buyers to purchase after the option contract has been executed....AND they keep harping on the fact that they have a fiduciary duty to the seller, but not mentioning the fact that Realtors have a continued duty to be honest and fair to all parties involved....AND when you withhold pertinent information from a mortgage lender...it's FRAUD!!! It's simply not worth trying to defend in a court of law.

Angela: I'm pretty sure that you're on this site because your credentials, ethics, and expertise have been proven and verified. Please don't take it personally because not every Realtor, Attorney, LLC who works as a 3rd party negotiator are scumbags.
I have been deluged with 3rd parties wanting to do the short sales and as Vanessa clearly explained many of them are committing fraud by their actions and many realtors have fallen for it.


They are investors with their own attorneys and they make it clear up front their intent to lowball(offers are usually 50-70% below current market value) and bring in another buyer at end to purchase at higher price and/or to immediately place back on the market with no updates etc at market value.

What is disconcerting to me though is their claims to have "inside" help from negotiators to get their offers through.

I do not believe any lessons were learned from this mortgage melt down.......ethics is just a word to many with NO meaning.......

There are legitimate 3rd party negotiators.

As with any service one must perform due diligence and check credentials.
Exactly, the handful that do work ethically and honestly are in the shadows of the thousands that constantly bombard us agents. One of the reasons I'm so vocal about investors and mitigation companies is after getting hounded by literally hundreds of them I found that if I bash them a little in a public forum they are less likely to contact me and harass me. I know it sounds childish, but to be contacted 2-5 times each and every day is simply harassment. I sometimes think the reason they DON'T contact me is because I've told almost all of them to take a hike at some point in time!!

Its better for MANY reasons for us to ask our referrals be mitigated in house somehow.
While I understand perfectly that there are a lot of scammers out there, I agree with Angela. My husband and I provide 3rd party negotiations for other agents, who either do not have time, a team or the desire to do the negotiating.

It is a necessary part of most transactions today and it is also the most difficult. We have a very high success rate and our realtors are quite satisfied with our services.

I too feel a little insulted that we are being lumped together in one big ugly group. It's the same as saying that because there are incompetent real estate agents out there, we all are...
Julie, nobody was lumped together with anybody in my post. We are simply explaining our company policy and shedding light as to why our agents are NEVER, EVER allowed to use 3rd party companies for listings we refer them. The article doesn't have anything to do with whether 3rd party companies are all good or all bad, only with VERY real concerns and legal issues that we have witnessed, and why it is much more practical and ethical for our organization to do this.

Agents are free to do what they like.
Interesting topic. Recently, at the beginning of the year or very late last year a very large real estate firm here in Northeast Florida gave their agents the option to use their title company who would then send the package off to a 3rd party company that would handle all the phone calling, negoiating, etc and then would update the title company who would then update the agent.

When I heard about this I wondered why would anyone use a company that was only in business doing this since 2009. From my understanding the company had a good speal, won't charge the seller if lender denies, etc.

From all the gossip that went aound the community about things taking so long to close or lack of updates, I wondered why these agents chose to do that. Well, not really, I know why.

So yesterday, I bumped into someone that was coordinating this. I was told that the "partner" had been "Kicked to the curb". Being nosey, I asked why. Come to find out this company was not making phone calls was not updating the people they were supposed to be contacting. In general just giving a bunch of hooey. How'd they find out? The people coordinating were making calls right after they got updates and found that they weren't making the calls as they were supposed to. Moral to the story even large companies can be scammed. I perfer and have always preferred to do my own phone calling etc.

This was a great article, we still have to send this to agents constantly.

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