CALIFORNIA Is a Real Estate License Required to Represent the Parties to a Short Sale?

CALIFORNIA Is a Real Estate License Required to Represent the Parties to a Short Sale?

Hello DG Family,

I haven't posted in awhile, but I felt this was important to address. Last week I received my CA real estate license. I acquired the license because I wanted more control over the MLS, submitting contracts and being able to list my own properties and other people's property that did not meet my buying criteria. There are many laws that affect real estate agents, especially with the passing of the SAFE Act. I don't want to lose my license, so I have been investigating short sale laws. This is a niche that I am going after. Through my investigation, I have found that there have been tremendous real estate law changes that need to be addressed. This information can be found on the CA Department of Real Estate website. I will be quoting their Spring 2010 Real Estate Bullentin.

Is a Real Estate License Required to Represent the Parties to a Short Sale?

The simple answer is YES, with some extremely narrow and limited exceptions and exemptions.
A real estate broker license (or a real estate salesperson license where that person is working under the supervision of his or her broker) is required under § 10131 (d) of the California Business and Professions Code (B&P Code) where a person, in a representative capacity on behalf of another, “negotiates loans…or performs services for borrowers or lenders …in connection with loans secured directly or collaterally by liens on real property…” for or in expectation of compensation, “regardless of the form or time of payment”.
In addition, under B&P §10131(a), a real estate broker license (or salesperson license with appropriate supervision by the broker of record) is required of any person who, as a representative of another, “Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property…”
The exceptions and exemptions from the licensure requirement are few and narrowly drawn. For example, a California licensed lawyer is exempt when that person renders services in the course and scope of his or her practice as an attorney. Additionally, if a person is acting solely on behalf of himself or herself, or itself in the case of an entity, there is no need for a real estate license since the person or entity is not acting on behalf of another or others.
Because there is or may be mortgage loan “debt forgiveness” in a short sale, some people and entities argue that they can, and attempt to, consummate short sales on behalf of others without a real estate license by asserting that they are “debt negotiators”, “debt resolution experts”, “loss mitigation practitioners”, “foreclosure rescue negotiators”, “short sale processors”, “short sale facilitators”, “short sale coordinators”, “short sale expeditors”, or some other type of unlicensed short sale or debt specialist.
Yet it is because the loan debt is “secured directly or collaterally by liens on real property” that brings into play the legal mandate for a real estate broker license under California law.
If a real estate licensee wants to take a short sale listing and not conduct the short sale negotiations with the homeowner’s lender, then the licensee must seek to ensure that an unlicensed third party is not performing the negotiations on behalf of the seller.

I hope you find this article helpful. I know I will be changing how I negotiate short sales.

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