I was reading about short sales, as I do every Sunday morning on a great site for short sale information Short Sales Superstars. There was a discussion about a Bank of America Short Sale that had been approved, and then denied after the approval, a few days before closing. The reason:
The seller was a real estate broker and the listing agent works for the seller. The buyer used the listing agent to represent her.
Surprise Surprise, B of A said this is not an Arms Length Transaction and rescinded the approval.
There are multiple things wrong with transaction so let me see if I can organize the problems coherently.
1. All short sales must be an Arms Length Transaction and an afidavit needs to be signed by all parties saying they are not related to each other in any way. The listing agent works for the seller so that is not arms length.
2. The seller may be offered a closing incentive by the bank, but is not allowed to receive any money from the buyer. Since the buyer is using the the listing agent who works for the seller and would have received commission for the sale, a portion of which would go to the broker, then the seller is getting money from the buyer.
3. Again, since the listing agent works for the seller and would get commission from the sale, a portion of which would go to the broker, the seller would be receiving money from the sale outside of the closing incentive.
4. The buyer has agreed to a dual agency and is entitled to the information that the listing agent works for the seller and that this can cause potential problems with The Arms Length Transaction.
I do not know if the seller was trying to pull something over on the bank, or if he was just not familiar with short sales but this was totally avoidable.
Buyers: get your own agent to represent you.
Seller: If you are a broker, get a different company to represent you. If you are an agent, get another agent to represent you, not your broker, and ask the bank if it is ok to be represented by someone else in your campany first, not after you are about to close.