California Business and Professions Code 10131 sets forth those activities that require a real estate license. Subsection (a) refers to selling and buying and negotiating the purchase or sale of real estate. Subsection (d) refers to negotiating loans or performing services for borrowers or lenders in connection with loans secured by real estate. If your real estate agent is using a third-party short sale negotiator, that negotiator is conducting licensed activity under either 10131(a) or (d). Thus, that person needs a valid, active real estate license in order to conduct those activities.
In the Fall 2008 Mortgage Loan Bulletin, the DRE explains on page 1: Unless otherwise exempt, a real estate license is required to solicit, market, or provide loan modification, SHORT SALE and other loss mitigation services that involve the negotiation or renegotiation of the terms of a loan or sale of a property. A real estate broker who pays a non-licensed short sale company that is performing licensed activity, or even a licensed company that is knowingly paying an unlicensed individual who is performing licensed activity, may be violating Business and Professions Code section 10137. Violations of 10137 may lead to the suspension or revocation of a real estate license.
The DRE goes on to state in the same Bulletin referenced above: Licensees have a duty to determine that the company is properly licensed (or has a bona fide exemption). The Department of Housing and Urban Development (HUD) has advised the DRE that referral fees paid or received in a loan modification transaction would constitute a violation of the Real Estate Settlement Procedures Act (RESPA). Although the statements are made in the context of a loan modification, there is no reason to believe the same approach would not apply to a short sale, which in fact also involves a modification (reduction) of the loan in the context of a sale. A short sale is also the settlement of the mortgage default. Therefore, the language included in the short sale approval is the equivalent of a legal settlement. Those terms can only be reviewed by a licensed attorney.
A real estate license is a bare minimum requirement, but it is far better and much more protective for homeowners to have an Attorney/Realtor® representing them in a short sale transaction. With Lawyers Realty Group, homeowners are assured full and complete protection of their interests throughout the short sale process to help them begin their financial recovery.