Can law firms fast-track short sales?

Attorneys take fee for helping agents avoid headaches

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Nov. 12, 2010

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Attorneys take fee for helping agents avoid headaches

Steve Bergsman
Inman News

Even with the Home Affordable Foreclosure Alternatives (HAFA) program, the short-sale process can be clunky and time-consuming, which is why some Realtors are turning to the legal profession for that extra oomph to get these things completed.

Granted, the last thing any real estate broker really wants to do is get an expensive attorney involved in a sale process, but when it comes to the short sale, there are some distinct advantages that property-knowledgeable lawyers bring to the table.

Here are a few things to consider:

  • An attorney can better save a short sale if a foreclosure sale is imminent.
  • As a Realtor, your job is to make transactions, not spend endless hours negotiating with a bank bureaucracy trying to knot together a deal. Let an attorney do that.
  • An attorney can improve your commission.

Still not convinced? What if I told you that as a Realtor you can accomplish all of the above with an attorney and it won't cost you or your client any money. That, I'm sure, got your interest.

This past summer, Tony Bauer, an agent with Viking Realty in Encino, Calif., called a local law firm, Price Law Group, because he heard they were helping Realtors with short sales.

Bauer had become increasingly frustrated with lenders. "I couldn't get the banks off the ground," he said. "You got someone who took down whatever was needed to get you off the phone quickly. There was no accountability."

Price Law Group stepped in. "Instead of making 40 phone calls and banging my head against the wall, it made the 40 phone calls and got results," Bauer said.

At the beginning of 2010, the Price Law Group, an Encino-based debt resolution law firm with offices in California, Arizona, Nevada and New York, decided it would help a local Realtor having trouble concluding a short sale.

It wasn't Price Law's bailiwick, but since negotiating with banks is essentially what its attorneys did, the law firm decided to give it a shot. It worked out so well that the law firm now counts nine people on staff who negotiate short sales.

"A lot of Realtors, while they may be capable negotiators regarding the sale of real estate, they aren't always the right ones to understand what banks are looking for in terms of setting up the story to show the seller can't afford more, or anything. That's my job," said Stuart Price, founder of Price Law Group.

This is particularly important if there is a second mortgage involved -- the holder of the second mortgage may demand a contribution for the transaction to get done at the close of escrow, whether it's the buyer or seller who pays (or chooses not to pay). Such a contribution would need to be negotiated, and also needs to be documented in the HUD-1 form.

"If someone takes the time and energy to present the case as to why the seller can't afford any contribution, then the deal may be better," said Price.

Sometimes, language in the contracts can be confusing. A typical Bank of America settlement usually includes wording to the effect that "you are responsible for deficiencies." What does that mean? Realtors don't know, and as Price pointed out, "Sometimes I don't even know, but at least I can get clarification from the bank."

These are legal documents, Price noted. "There are ramifications for signing legal documents and if I can help my client sort through the maze of questions that come up regarding deficiencies, that's helpful," he said.

Perhaps the biggest help from an attorney comes in the long negotiation process to complete a short sale. It might take 20 hours of Realtors feeling like they're drowning before making progress.

Or, to look at it another way, if 80 percent of the Realtor's time is dealing with the bank and 20 percent is dealing with the marketing and selling of the property, that is backwards for the Realtor.

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