I found myself very disturbed by an article published in the April 2010 REALTOR (R) magazine, page 26 and 27 bottom half of the page titled "Short Sale Ethics: 6 Temptations to Avoid". The article focuses on what real estate agents/brokers SHOULD NOT do in a short sale transaction and avoid at all costs.

Hope everyone is seated when reading this because you WILL be taken back by this verbage.

Number 4 on the list is what caused an outrage within my mind and reads: "Selling to a flipper. Unless the investor in a flip is prepared to add substantial value by fixing up a property, don't participate in a flip. Short sale flips benefit only the investor, who's clipping off money that could could go to an already bleeding lender."

Investors are the devil right? That's what I read in the statement above.

After I located my head that exploded off my shoulders, I then read the teeny, weeny fine print at the end of the article. This lovely article was the wonderful dogma of Scott Thompson, a vice president of ServiceLink, a national lender platform in Rancho Cordova, California. As I did a little research I found that they provide full suites of origination and default related products and services to leading national and regional mortgage originators and servicers.

I would like someone, anyone to explain to me how it would be unethical for real estate agents/brokers to allow an investor to contract and purchase a property from their client that is in default of their mortgage, under water with their bills, their hardships could fill a warehouse, they are loosing everything they have worked for and would rather sell for an agreed upon amount and have a paid as agreed on their credit vs. a foreclosure. At the end of the day, everyone wins. As long as the Seller is aware they will make NO money at the end of the transaction and that the investor buys to make a profit (hence the term investor) and everything is disclosed and agreed upon up front, no one is harmed. The bank can send the 1099C to the Seller for the difference, or obtain a judgement for the difference, whichever route they take. I am not an accountant, nor an attorney, but I am sure for the bank they get some sort of write off for this difference.

Banks have been given support and if there is any bleeding, let the vice presidents and higher ups that get multi-million dollar bonuses, luxury vacations, spending accounts, overpriced cars and toys, bandage that cut with a crisp $100 dollar bill from their pockets.

This type of persnickety information provided to real estate agents/brokers is a little misleading and only makes the uninstructed agents/brokers more afraid of their chosen profession when published in a magazine from NAR. What they read is deemed gospel. It's hard enough to conduct a short sale transaction without the agents/brokers second guessing everything beacuse of an article they read.

I have included some wonderful information about "flips" provided by the HUD website http://www.hud.gov/

HUD No. 10-011 Lemar Wooley(202) 708-0685
FOR RELEASE FridayJanuary 15, 2010

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties
WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website or cut and paste the below address to your URL address line

www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

I am getting down from my soap box now.....