Legal Updates

I asked Al Czekaj for clarification on some of the points he made at our sales meeting this week. Here is his response:

First of all as discussed numerous times in the past, any time we have a short sale it involves consent of more than just the buyer and seller to make the transaction work. Therefore it is imperative that anytime we do a Purchase Agreement or receive a Purchase Agreement in respect to a short sale, there has to be language in the Purchase Agreement or Addendum to the Purchase Agreement indicating that the "Purchase Agreement is subject to the consent of the lender allowing a short sale. Without the consent, the Purchase Agreement shall be null and void." The reason is to make sure that our Client is not bound to a sale in the event we represent the Seller that cannot be accomplished because the bank will not allow the short sale. Without that language the Seller could still be bound to sell and would be responsible to pay the difference on any loans to allow the sale and transfer of warranty deed. This has in fact happened in situations where the protective language was not included and the Seller was required under specific performance not only to sell and convey, but was under a Judgment and Court Order to pay the difference.

In respect to the other language, this is language which we want to procure in behalf of our Client from the lender that not only will they agree to the short sale, but in consideration of the short sale they will waive any deficiencies and not seek liability on the Promissory Note. Our first desire would actually be receipt of a letter from the lender confirming this fact. Unfortunately often lenders vacillate in sending any written responses and although they may confirm by telephone, our concern is that later they will renege on the telephone conversation. Therefore in a situation where we are not getting the letter from the lender, but have had confirmation orally that they will not seek a deficiency, then in that event our agent should send a letter with the following script.

"Confirming our recent communications, this is to acknowledge your agreement wherein you have approved the short sale of the property, (address)__________________, in respect to (owner/mortgagor)_________________, that you will not seek and will waive any deficiency on the mortgage debt and will not seek any collection on any remaining balance on the Promissory Note executed and secured by the mortgage."

In this circumstance if the lender does not send a written acknowledgement, this will at least put the lender in a position where they must respond if our understanding is incorrect or otherwise they will be estopped from seeking further collection against our Seller/mortgagor.

I also did indicate that there are a number of circumstances wherein lenders or assignees of notes and mortgages are proceeding here in Michigan in violation of the law. I had suggested that if any of our agents clients run into the circumstance of deficiencies that they should seek advice from their attorney as there may likely be defenses. Alternatively, if we are satisfied that there is no claim against Preview or its agents, I too could represent those clients.

Al also reminded us it is our duty as buyer's agents to review title commitment as soon as it is received after offer is accepted. If title commitment references other documents, be sure to obtain them and review. Don't assume anything.

Purchase agreement addendums from banks for buyers of REO properties - your duty as buyer's agent is to read them and make sure any contingencies in the original purchase agreement stand or are agreed to amend.

Al would like us to gather up all contracts and guidelines for REO services from asset managers so he may review and identify any potential issues we need to resolve.

He also reminded us that if we end up making a personal offer to purchase on a home that our buyer has been interested in (or written an offer that was not accepted) we need to notify the buyer that we plan to personally make an offer on the property. If our client raises an issue with this, Al suggests we walk away from the deal to make sure we haven't compromised our responsibilities to our client.