A licensing clarification: no special real estate license designation or endorsement is required for real estate licensees to list a negative equity property for sale or arrange a loan payoff discount on a short sale. Any licensed real estate broker (or agent employed by a broker) may be employed by a California negative equity homeowner to sell their home by negotiating a short sale (i.e., a sale contingent on the lender consenting to a full satisfaction of the mortgage by accepting the net proceeds of a sale).
Brokers and agents engaged in listing property or negotiating offers for a short sale need to do nothing more than maintain their licensee status. They are simply employed to locate a buyer for a seller’s property or to locate property for a buyer in expectations of a fee to be received upon closing.
The only endorsement currently available to California real estate licensees is under the federal National Mortgage Licensing System (NMLS). The NMLS registration and mortgage loan origination (MLO) endorsement only applies to those brokers and agents who make or arrange consumer loans secured by one-to-four unit residential properties since they are subject to the Real Estate Settlement Procedures Act (RESPA). [For more information on the NMLS endorsement, see the July 2010 first tuesday article Endorsement requirements for RESPA mortgage brokers.]
Likewise, some brokers and agents listing short sales are confused by recent unnecessary clarification of advance fee rules. A broker or agent who accepts an advance fee for negotiating a short sale is not required to register with the NMLS or receive a DRE MLO endorsement. Instead, before an advance fee agreement may be entered into with a seller or a buyer, the broker must apply to the California Department of Real Estate (DRE) and receive a “no objection” letter for the use of an advance fee agreement. [See the DRE website for further information on obtaining “no objection” letters.]
Lastly, brokers and agents assisting homeowners with loan modification services in expectation of a contingency fee payable only on completion of the modification must advise the homeowner of the free loan modification counseling services offered by nonprofit government approved agencies, such as the Federal Housing Administration (FHA) and the Hope Alliance. [For information on the prohibition of advance fees for loan modification services, see the January 2010 first tuesday legislative watch Disclosure of free counseling prior to loan modification agreement.]