All the awful things buyers have done to you over the years, it's now your turn. I'm just kidding, of course. But it's often a good idea to hire an agent to sell your home, regardless of whether it's a short sale or a traditional sale. The reason is liability. You want to transfer some of that liability away from yourself.
A real estate agent is held to a higher level of knowledge. It might not be true, but that's the premise. So, when it comes time to sell your own home, you might want a bit of space between you and the buyer. We live in a sue-happy society in which everybody and their brother points fingers at the big pockets, and the big pockets happen to be real estate brokerages.
Short Sale Agency and the Arm's Length Affidavit
A popular form used in many short sale transactions is the arm's length affidavit. This form is generally signed by the buyer, the seller, the buyer's agent and the seller's agent. There are many types of affidavits but these are the basic requirements:
- The parties have no relationship with each other
- The seller will not profit from the short sale
- There are no under-the-table agreements
It can be argued that if you represent yourself, you might have violated all 3 of those requirements. The primary reason is you cannot receive a commission. To keep the transaction clean and simple, you may have to hire an agent to represent you.
Short Sale Banks and Dual Agency
I have had banks argue with me because my brokerage, which I do not own, has 15 offices throughout Sacramento. The argument consists of whether the agents are in cahoots if they work for the same broker. We could have a buyer's agent who works in the foothills, 50 miles away from an Elk Grove agent who represents the seller, and even though they don't know each other, the agency created is dual agency.
When a short sale bank spots dual agency, the bank often wants to reduce the commission to the percentage that would be earned separately by either the listing agent or the buyer's agent. This would mean about a 50% reduction in the commission.
Dual representation, on the other hand, involves one agent representing both the seller and the buyer. Dual representation is also dual agency, but the terms are not really interchangeable. An agent involved in dual representation generally will earn double the commission because the agent will get both the listing and the selling commission.
In these instances, the short sale banks will often reduce the commission, sometimes by 50% as well. It's as though the banks are saying the agent is not doing any extra work, even though that is not true. It is impossible to represent two parties and not do extra work. But the bank will often penalize the agent.
Since you could end up getting your commission cut anyway, you may as well hire your own agent and hope that your agent does not represent the buyer as well. You will have an easier time if there are at least two agents involved in the short sale, each with separate agency.
Of course, there are other states in America in which dual agency is against the law. Some states change an agent's status to that of a transaction agent who has no fiduciary relationship with either the seller or the buyer and is simply there to facilitate the transaction. There are also exclusive buyer's agents who never represent sellers. But regardless of where you live, to do a short sale, you should not represent yourself.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
