California Real Estate Fraud Report

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27
Feb

Bank of America Backpedals on Misleading Short Sale Directive

On February 11, Bank of America issued a dictum regarding the management of its short sales that most real estate agents immediately recognized as misleading and unethical.

The BofA Short Sale Agent Update required listing agents to keep the MLS (Multiple Listing Service) status of any short sale properties which the seller had accepted to “current and active” until a short sale approval letter has been issued. The benefit to BofA is obvious: this would significantly reduce the amount of time its staff would appear to have taken to evaluate the sale and issue approval, generating a substantiating paper trail, should any nosy state or federal agencies audit the files.

C.A.R. Legal (California Association of Realtors Legal Deparment) reviewed the Update and notified Bank of America that its directions to Realtors® was not only a violation of MLS rules, but would convey a false representation of the property’s actual status. Once a seller accepts an offer, the status should always be changed to “back-up” or “pending,” depending on the circumstances of the purchase contract.

On February 14, Bank of America posted an “Update: Multiple Listing Service Requirements” on its website. There is no link to the February 11 directive because Bank of America removed it from its agent website.

I take issue with the second paragraph on the February 14, entitled “The listing requirement demonstrates that the property was listed on the open market and the offer received represents an open market transaction. ” One of the current short sale fraud scams, definitely perpetrated by crooked listing agents, is to place the property on the MLS but refuse to allow buyers’ agents to show the property. The reason, of course, is that the “seller” and his/her listing agent, have no intention of conducting an arms-length sale and have already worked out an agreement to “sell” the property to a relative, friend or business associate and has no intention of moving.

Note: on March 4, 2013, the powers-that-be at the Southland Regional Association of Realtors issued a directive to its membership, which I have cut and pasted below in italics:

One of our most common MLS Rules violations, involve short sales.  MLS Rules are very definite about reporting of sales.

Short Sale listings are to be treated just as any other listing.   Listings with accepted offers shall be reported to the MLS or input into the MLS database as “Pending” Or “Back-Up” within 2 business days of the acceptance by the Listing Broker. (Rule 10.2 “Reporting of Sales”)    

In a Short Sale, the homeowner is still the legal owner of the property, not a bank.  When the Seller accepts an offer, that listing is to be reported as “Pending” or “Back-Up”.   Agents who do not report a sale within 2 business days will be assessed.

I assume that other Realtor® boards will be taking a similar position, if they have not done so already, in order to prevent short sale fraud being committed by listing agents on behalf of their sellers.

© Copyright 2007-2017 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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