New Short Sale Disclosures From MARS

No, not that Mars.

I am talking about the new short sale disclosure requirement that comes from the Federal Trade Commission's January 31st ruling on parts of the Mortgage Assistance Relief Services (MARS).

On February 23, the National Association of Realtors published a summary of the ruling and their recommendations in a report titled "New FTC Rule Requires Short Sale Disclosures" (log in required). NAR continues to work with the FTC to clarify whether the typical real estate brokerage office who is NOT specifically engaged in mortgage assistance relief service, but rather our normal business of listing and selling real estate, can best comply with these requirements without violating existing obligations under the listing agreements.

In the meantime, legal advisors for Coldwell Banker Residential Real Estate LLC and most other reputable brokers have incorporated the MARS disclosures into our short sale addendums. Ours reads:

IMPORTANT NOTICE: You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your Lender (or servicer). If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us the amount provided for in your Listing Agreement and this Addendum for our services.


Coldwell Banker Residential Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.


If you stop paying your mortgage, you could lose your home and damage your credit rating.

I know that the idea of yet another new disclosure has a lot of people in the industry groaning, but I think the overall purpose is important. I have met with countless homeowners who have been taken by unscrupulous third party short sale negotiators. One family, in particular, called me after months of dealing with just such a company. They had paid this company several thousand dollars up front to help them negotiate a loan modification as they wanted to stay in their home if at all possible. They then, on the advice of this 'short sale negotiator', stopped paying their mortgage and instead put the money into the negotiator's escrow account. After several months, the company disappeared with their money, and they were in default on their mortgage.

The homeowners were in tears when we met, but saw no other way out than to have me list their home as a short sale. Long story made short, this family got a happy ending. After we submitted a short sale package and the bank finished their BPO, they reconsidered their earlier decision and offered to modify the existing loan so the homeowners could stay in their dream home.

True, I didn't get a commission or any other compensation for my part in this happy ending. I am a real estate agent - not a short sale negotiator. But I have the deep satisfaction of knowing I was able to help this family... and the three closed referrals since then have certainly been profitable!

The point, though, is that had the MARS requirements been in place and well publicized, this family and so many like them would not have been ripped off by opportunists. I think that it is in everyone's best interest to not only to comply with the disclosure requirement, but to also do everything we can to make sure the general public is aware of its provisions so they don't sign with a non-compliant company.