Short sales are being touted by some as the ""go-to"" alternative to foreclosure, but that doesn't mean there aren't risks involved in completing these transactions.[IMAGE]
In order to warn consumers and real estate agents about the potential perils and pitfalls of short sales, the ""California Department of Real Estate"":http://www.dre.ca.gov/ (DRE) has issued a consumer alert, Jeff Davi, DRE commissioner, announced Thursday.
""The number of short sales is on the rise and many consumers do not understand the consequences of such a transaction,"" Davi said. ""Moreover, the consumer alert[COLUMN_BREAK]
educates consumers and real estate agents to recognize the elements of a fraudulent or questionable deal.""
The ""alert"":http://www.dre.ca.gov/pdf_docs/ca/ConsumerAlert_ShortSales.pdf, posted on DRE's Web site, highlights a handful of key factors a homeowner should look out for when entering into a short sale negotiation.
First and foremost, DRE said consumers need to be sure that their short sale negotiator is a licensed real estate broker or a licensed real estate salesperson working under the supervision of licensed broker. In addition, the department said it is important to ensure that any and all payments are fully disclosed and made part of the escrow documents. If there are any fees to be paid ""outside"" of escrow, this may be a red flag that the payment is illegal, DRE explained.
DRE also said it may be a red flag that fraud is involved in the transaction if an agent explains that the buyer is a fictitious person or entity or that the buyer is purchasing the property under a power-of-attorney or a limited liability company. And if a consumer is told that an unlicensed processor, negotiator, or facilitator is handling his or her short sale, it is a red flag that an unlicensed activity is taking place, the department said.