Short Sale Lawsuits Stemming from Agent’s Short Sale Talk
Agents are giving authoritative advice while failing to realize that it’s opening them up for a lawsuit—a lawsuit they will lose! Short sales are a risk management nightmare that has yet to be addressed by most brokerage firms.
I noticed a huge issue when agents started to trickle into my office one by one, asking questions about the ins and outs of a short sale and its ramifications. To my surprise, they hadn’t a clue and, in most cases, had already quoted their clients implied “facts” that were completely wrong.
Who bears the burden of liability when a seller receives a 1099-C at the end of the year and has to pay taxes on upwards of $150,000 that his agent stated he didn’t have to pay? Would the seller have chosen a different path if the agent he hired hadn’t stepped over his boundaries and given him wrong information?
The courts may have to decide who is at fault when thousands of previously distressed homeowners once again become immersed in debt they can’t pay. This time, though, it will be debt owed to the government, and they don’t mess around!
A real estate agent is supposed to be an expert in selling and buying real estate; when did it become an agent’s responsibility to keep abreast of ever-changing government sponsored programs, as well as civil and tax laws? Please, if we were all expected to be experts in every area, we could expect our drycleaners to fix our cars! I feel for my agents and all agents out there who find themselves needing to take on additional risk as a means to win business in a struggling economy. It doesn’t make sense for agents to open themselves up to potential litigation that could wipe out their entire livelihood in one suit, yet they are.
As a broker who is also liable for agent misrepresentation, I immediately put a halt to all short sale talk. I then began to look around and found that there are plenty of programs charging a pretty penny that teach agents how to pick up and conduct a short sale, yet none of them explain the risks associated with short sales and other risk mitigation tactics. I then started to look for articles or programs within NAR (National Association of Realtors) and my local board, OCAR, which explain short sale risk management solutions or support training, and I couldn’t find anything. These would be the same organizations we pay top dollar to keep us abreast of topics just like this.
So, I had to take measures into my own hands. Now, all of my agents are required to utilize a third party source—The Agent Center—so they can provide sellers with accurate information and relieve our brokerage firm of any possible liability. I may take risk management a bit seriously, but I don’t have a choice. Like most of America, I need to keep a roof over my family’s heads too!