Distressed properties continue to be a major factor in the real estate sales environment. These types of transactions are fraught with problems that can be extremely costly to your business.
When you work with a distressed property situation you have to be unusually careful. Part 1 of this series outlined issues with your Realtor Code of Ethics obligations, responsibilities for agents around providing financial counseling, as well as issues with blanket indemnification and recourse vs. nonrecourse loans.
Regardless of whether you can participate directly in the loan modification, it’s still important to be aware of how these important tools work for your clients. (Please note the level of agent involvement in a loan modification varies dramatically from state to state. Check your state laws to determine what is legal in your area.)
1. Tread carefully
There are numerous pitfalls when dealing with a client who is seeking a loan modification. First, if you are attempting to obtain a short sale and the owner submits an application for a loan modification, the application will often stop the short-sale approval process.