It should be obvious to many that a buyer of a short sale property cannot be related to the seller. A prerequisite of a short sale transaction is that the market dictates the price, and the lender is escaping further loss by reducing the principal balance rather than foreclose (and bear foreclosure and carrying costs). If, however the buyer is a relative of the seller, we cannot assume the sales price is "market." The fear is that the seller is really just escaping indebtedness while continuing to enjoy possession (if not defacto ownership) of the property.
But what about a real estate agent's relationship with the seller? We are finding that many (if not all) lenders also prohibit the payment of a commission to the listing agent who is related to the seller. Why? The principles are the same as described above. In short, the fear is that a related listing agent will just take his commission and give it to the seller. Remember that in a short sale a seller should walk away with nothing (or perhaps even bring in money). If the potential exists for a seller to earn some money from the sale, the short sale would not likely be approved.
As a real estate agent or broker, what do you do with this information?
If you (or one of your agents) are going to represent a relative seller in a short sale transaction, do not expect a commission. Be up front with the lender, and provide all agreements, disclosures and addendums with the short sale package, including the disclosure of any relationships between the parties. Ask - up front - what the lender's requirements are for a short sale. Spending a little time in the beginning of the process can save headache and miscommunication further down the line.
