CA renter and I saw this new listing hit the market at about the same time yesterday, and had the same reaction – you gotta be kidding!
It’s a 34-year old house with no upgrades on an 11,000sf lot in Old La Costa. In January, 2004 the homeowners paid $580,000 using a 3% down payment, and then did a cash-out refi in 2005, bumping the loans to $657,000.
They’ve made about $70,000 profit on the deal.
Now they are in foreclosure.
Yesterday the new listing pops up, and is marked ‘contingent’ immediately, awaiting lender approval of short sale. It appears that the listing agent must have had their own buyer, and put the short-sale deal together prior to MLS input.
CA renter posted it on Piggington as fraud, because of the ultra-low price of $450,000.
A number of issues arise:
1. Do the sellers and/or realtor have any legal or fiduciary duty to the lender, Wells Fargo, who is facing a haircut of approximately $230,000?
2. What’s the real value of the house if it’s not exposed to the open market?
3. Do taxpayers take a hit on these? Or just Wells Fargo shareholders – or MBS holders?
4. As a realtor representing a buyer, am I compelled to search out these deals?
The first three questions have the same answer – it’s up to the bank to protect themselves and their shareholders or MBS owners. Just getting an appraisal done probably isn’t enough protection.
The fact that the agent inputted the listing onto the MLS must mean he represents the sellers too, which gets touchy if you ask me, especially regarding the potential liability of short sales. Will the banks chase around old borrowers of recourse loans some day in the future? They might, nobody knows for sure.
If the agent formally represents the sellers, then he should do what’s best for them – obtain the highest-and-best offer. That way they’ll have the best chance of getting bank approval, and minimize the loss that the bank could try to collect in the future.
I think we’ll agree that it’s not likely that any agent puts much thought into these, they are just looking at picking up a 5-6% commission in the next few months. There hasn’t been any guidance issued by any government entity, and, of course, nothing from NAR, CAR, Sandicor, or local boards on what is acceptable, or how to properly handle these cases.
Let’s drop down to point #4 – aren’t buyer’s agents compelled to search out these deals? The house in question is offered at 2000-2001 pricing, doesn’t every buyer want that? CA renter said she’d pay $450,000 for it, and that’ll tell you something right there!
The buyer-agents have a fiduciary duty to their buyer to get them the best deal possible. These are some of the best deals, if you can get them closed.
There are hundreds of these happening now – I know of one agent alone who has 32 of these in process currently. He inputted all of them as pending listings, not contingent, and he also marked that he is representing the buyer too. Since November he has only closed four and had at least three get foreclosed, so getting them done must be a challenge when you have 32 on your desk.
This type of guerrilla salesmanship is where the realtor profession appears to be heading – to find these deals for their buyers, secure them at favorable pricing, and get them closed. The REO sales are just as challenging – wait until the frenzy breaks out over seeing bank-owned SFRs in Carmel Valley listing for $300/sf!