Q: Does Florida’s Foreclosure Rescue Fraud Prevention Act prohibit real estate licensees from being involved in short sales?
A: According to Florida Attorney General Bill McCollum in a letter to FAR President Chuck Bonfiglio, the answer is no, provided the only compensation sought by the licensees is the commission on the sale. The law seeks to protect homeowners who face the threat of foreclosure from individuals who would prey on them.
McCollum’s interpretation is based on the following scenario: A licensee secures a listing agreement on a home for sale, ascertains that the fair market value of the home is less than the loan amount, and lists the property at the lower amount. If a buyer agrees to pay less than the loan amount, the licensee then asks the lender to accept the lesser amount in order to avoid foreclosure.
“As long as there is no upfront or other fee for the negotiating service other than the normal real estate fee charged for the sale of the property, that activity [participating in a short sale] would not appear to fall under the provisions of F.S. 501.1377,” according to McCollum.
Q. If a real estate licensee lists a property at a below-market-price that he knows the seller probably won’t accept, is the licensee in violation of Florida real estate license law?
A. A violation of the Florida real estate license law is a matter to be determined by the Florida Real Estate Commission, says Florida Association of Realtors General Counsel Randy Schwartz. However, FAR attorneys believe that, if a licensee lists a property for a price the licensee and the seller know is not acceptable, a case of misrepresentation and false advertisement can be made under Chapter 475.25(1)(c) Florida Statutes. It would not make any difference if the listing indicated that the selling price was subject to a third party lender or not.
Q. Is the seller in violation of any law if he states he would sell a property at a certain price even though he knew it would not actually sell at that price?
A. FAR attorneys do not believe the seller would be violating any license law because Chapter 475, Florida Statutes, does not regulate the public, says Schwartz. However, Chapter 817, Florida Statutes, might come into play for the licensee and a member of the public. Whether the seller could be held accountable for civil damages, due to his or her misrepresentation, would be completely determined by the individual facts of the case.
Q. The FAR Short Sale Addendum says the seller may “accept” other offers and submit them to the lender. Does the MLS status stay as “active” until the lender approves the short sale?
A. No. The FAR addendum, and ones like it, is designed to alert buyers under contract that the seller may continue to solicit offers and hold them in a back up position, and may share them with the lender.