California Realtors get Heads-Up on Short Sale Complications

A short sale program for propertiesrnserviced by Nationstar, which bills itself as one of the nation’s largestrnindependent loan servicers, is the subject of a new member advisory from thernCalifornia Association of Realtors (C.A.R.). rn C.A.R. is acquiescing to the programrnabout which it has been in talks with the servicer for the last year but which itrnhas been told by the California Bureau of Real Estate (BRE) does not violaternany laws. </p

Nationstar requires most of itsrnmortgaged properties to be listed on auction.com before a short sale is finalized.  The company says it utilizes this businessrnmodel as a verification system to insure owners receive the best possible price.  </p

As a practical matter all potentialrnshort-sale properties are put through the appropriate MLS by their listingrnagents just as they do for properties managed by other servicers.  However, once a Nationstar listing receivesrnan offer acceptable to the seller, the servicer requires the property to be listedrnon auction.com for a three week period. rnDuring that period the original offer will remain valid as long as thernbuyer along with the buyer’s agent have registered with both Nationstar andrnauction.com. </p

This appears to be a ratherrnstraightforward practice albeit one that extends the already lengthy time itrntakes most short sales to close compared to a market rate sale, but C.A.R.rnmaintains there are complications.  First,rnduring its lengthy discussions with the servicer C.A.R. says it learned thatrnauction.com tends to list the starting bid significantly lower than the actual amountrnof the accepted offer in order to encourage bidders. </p

If a higher bid comes in through thernauction site of course the original buyer will lose the property unless he/shernplaces a second and higher offer with auction.com.  The ultimate buyer is charged a 5 percentrnbuyer fee although the original buyer is exempted if he has properly registeredrnas above.  </p

C.A.R. maintains that a buyer onrnauction.com may be unable to use FHA or VA financing to purchase as those bothrngenerally prohibit a buyer from paying a premium such as required by the site.  This would not apply to the original buyer ifrnhe or she has properly registered so the fee is waived. </p

C.A.R. reports that Nationstar saysrnthat foreclosures may start or continue on a seller in default while the propertyrnis in its “market validation program.” However, the foreclosure date will bernsuspended until the property is sold in an approved sale or otherwise removedrnfrom the program. </p

The Realtor association is advisingrnits members who take seller listings where Nationstar is the servicer tornimmediately contact the servicer to determine if the property will be listed onrnauction.com and whether buyers’ agents should be notified accordingly.  Also the agent should determine if there is appropriaternlanguage that should be inserted in offers or counteroffers. </p

Agents working with on the buyer arernadvised to inform their clients of the possible additional steps that may bernneeded to complete transactions on these properties.  Buyers who are using government-back mortgagernprograms should also be told to check with their lenders about the required buyerrnpremiums before bidding on an auction.com property.</p

C.A.R. also told its members thatrnthis validation program requires both the listing agent and seller to signrndocuments which could impact their legal rights.  Agents should adviserntheir clients to seek legal counsel to interpret any clauses in such agreementrnthat may raise concerns as to possible costs or risks to sellers forrnparticipating in the process. </p

C.A.R. said that the servicer hasrnnot, to date, changed anything stated in the MLS with regards to agentrncommissions, unless it does not meet the requirements of the loan investor.rnHowever, this could change based on servicer guidelines. </p

Nationstar claims to be the fastestrngrowing of the top 50 servicers in the U.S. rnAs of December 31, 2013 it had $391 billion loans in its portfolio.  It is a “high touch” servicer which meansrnthat it handles many distressed loans.

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