I am done with Short Sales!
As someone who has now helped home owners and real estate agents complete close to 2,000 short sales over the past 6 years, plus trained thousands of real estate professionals throughout the U.S. as @mrshortsales, I would have never thought I’d utter these words.
But I am truly done, and done for good!
Since late 2007 when I first started to focus on short sales through our company GSS Title (with ‘GSS’ being an acronym for “Guaranteed Short Sales”) providers involved with helping short sales specifically have been continually and repeatedly under attack – driven to no small extent by attorneys I suspect, who would like to see only attorneys being able to assist parties with short sale transactions.
First there was a push and crackdown by the OFR (the Office of Financial Regulation, the division of the Florida CFO that regulates loan originators) on both title companies and real estate agents alike to ensure that “no additional fees” of any kind are being charged, and finally guidance was issued by both the OFR and the FL Atty. General respectively that Real Estate Agents or Title Companies providing short sale related services in the course of their business at no additional cost, i.e. incidental to their regular services, would not be running afoul of the law, ie would not be guilty of providing licensed loan originator services without a license.
Then there came another push, this time directly driven by the Florida Bar, seeking to have the providing of any short sale related services classified as “UPL” or the unlicensed practice of law. The Florida Land Title Association (FLTA) and other industry groups threw their weight behind this issue and eventually the Bar backed away from this issue and both Title Companies and Real Estate Agents were able to assist their home seller customers without running afoul of the law so long as they did not provide any legal advice. That was in early 2011.
Since that time almost every Title Agency in the State of Florida, including at least one Underwriter (incidentally the largest UW, First American Title) have routinely engaged in and provided short sale processing services as part of their core title services. As short sales became the new normal, and in some areas short sales represented the majority of real estate closings, providers have embraced and provided this service in good faith, at no additional cost in order not to be accused of performing unlicensed loan originator activities as set forth by OFR. Today very few real estate agents engage in short sale processing services at this point as the task of collecting and updating documents from the Seller and communicating forth and back with the lender until the approval is issued has become a standard practice for real estate closing attorneys and title agencies to provide.
GSS Title – the company I was affiliated with, and for several years proud to lead – was probably one of the first if not the first title agency to focus on this segment of the market, building a business that consisted almost exclusively of short sale transactions, providing services for sellers and many hundreds of agents and brokers throughout the State of Florida. Being very visible and at that point probably the largest provider apparently also caused GSS to remain on the radar of regulators and in January of this year the Florida Department of Financial Services (FLDFS), the division of the FL CFO that regulates banks and insurance companies – and a sister organization of OFR – decided to launch a full-out assault on GSS Title on the premise that GSS, as a Title Agency, in providing its short sale related services to home sellers at no additional cost – as previously blessed by the OFR – is providing an “unlawful inducement” to real estate agents. Apparently in doing so the Department alleges, GSS is providing “something of value” to the real estate agents, which is unlawful.
The Department in essence attempted to extort GSS into a stipulated settlement agreement, to both collect a fine, and in essence prevent GSS from continuing to provide its services. The resulting Consent Order would have then also become legal basis for the Department to go after any other title company in the State of Florida that is engaged in similar short sale services.
We strongly disagreed with the opinion of the Department and received clear indication from industry insiders including the FLTA that the Department’s claim is ‘ridiculous’, but unfortunately – akin to the infamous Butler ruling – there is only one way to get an actual Determination of Law, i.e. a Legal Ruling:
1. Go through the administrative proceeding with a hearing before an ‘Administrative Law Judge”. Note that this is not a trial or a court per se. If the ALJ rules against us, then
2. We can appeal to the District Court of Appeals. Now an actual ruling by a court would be made based on actual law, and
3. If we lost there then we could appeal to the FL Supreme Court
Needless to say this process costs a whole lot of money. We engaged into the fight relying on the assumption that our E&O Carrier would cover our defense but as it turns out they are apparently not willing to keep their end of the bargain and we certainly do not have the resources to fight that fight as well.
I turned to the FLTA for support in this fight but they are not willing to “get involved’ until the appeals process, and could not make any firm commitment on monetary support either.
Unfortunately this leaves us only one option, after having already incurred tens of thousands of dollars in legal fees, and that is to walk away from the fight. This will have an impact on virtually all title companies engaging in and providing short sale related services in the State of Florida, but unfortunately there is nothing else GSS can do about it.
Given this most recent attack by the State – both GSS and I have chosen to move on. Really we have no choice as the past 8 months of legal wrangling with the State has completely depleted GSS’s available resources.
Moving forward, real estate agents will be forced to either do the processing themselves, hire another title company until they get hit with a proceeding by FLDFS, or the seller will have to pay for an attorney to represent them.
My personal active involvement in the Title Industry, as well as a Title Agent with GSS Title, ended last year in 2013.
Personally, I have committed my focus and energy some time ago to my real estate company Realty Partners, and I owe it to my agents to do everything I can to ensure their success and support their business, not to fight a ‘holy war’ with the Florida CFO, particularly given that short sales today only account for a very small part of overall real estate transactions, unlike 4 or 5 years ago.
I do hope and pray that the many fine title agents out there who are making a living assisting and supporting home sellers with their short sale transaction will find someone with the resources to fight that fight on their behalf, for the sake of all title agencies in the State of Florida.
a/k/a Mr Shortsales
@mrshortsales and @thomasheimann