Real Estate Short Sale – should owner sign a Land Trust and Limited Power of Attorney?

Question by Caron: Real Estate Short Sale – should owner sign a Land Trust and Limited Power of Attorney?
A friend and her ex-husband are on a mortgage together for home that that the husband is trying to do a short sale on to prevent foreclosure. My friend, the wife, was told that she had to go to a Realtor’s office and sign some papers so a short sale package could be prepared (on a Saturday).

At the Realtor’s office she was told to sign a Florida Land Trust and a Limited Power of Attorney so the Realtor or whoever could have control of the property and wouldn’t need to bother and call her and also called them Internal Documents and CYA. The office has a sign out front saying “Stop Foreclosure Now”.

I am concerned that this may be a foreclosure rescue scam. I told her to talk to an attorney before signing any documents, especially the Land Trust. I am afraid she will sign away the house and then still be held responsible for the mortgage. Ex-husband already signed the documents.

Is the Land Trust and Limited Power of Attorney routine documents needed for a short sale package to be sent to the lender and/or routine “internal documents” to CYA the Realtor or whoever is really doing this deal?

Why the “Limited Power of Attorney” when my friend and the ex-husband still lives in the same city where the house is located?

Thank you for all your help!!!

Best answer:

Answer by ali2inc
I had a similar situation with a house I owned I didn’t need to sign any documents until the sale went through. You can ask realtors to sell it for you quickly or some companies buy it now but for less money.

Know better? Leave your own answer in the comments!

3 Comments/Reviews

  • teran_realtor says:

    Yeah. What satarnag said. Do that.

  • satarnag01 says:

    You are correct to be concerned. I am very experienced and knowledgeable in short sales and schemes. Here is what I think they are doing. The company is trying to get ownership of the property (not good) so they can lowball the lender (which is fine) and then rent it back to a tenant buyer. They might bring the mortgage current and not even do a short sale or just short sale the second and bring the first current (depending on what makes sense). So basically they will either rent it back to the ex-husband and promise that he can buy it back in 1-3 years (or whatever) or rent it to another tenant who will purchase it in the future. Using a land trust is smart as it protects the owner in case if the tenant doesn’t pay rent. It also hides the owner’s identity and it allows the tenant to write off the mortgage interest which I am sure they will have the tenant pay the property taxes.

    In California, it is illegal for a real estate agent or broker to ask for a power of attorney. Seeing how a licensed agent or broker has a fiduciary duty to their clients, I think a law like that might exist in your state as well.

    I would advise against signing a power of attorney and to read over every contract BEFORE signing it. This company is out to make money and they could care less about the ex-husband or your friend. In fact maybe the ex is hoping to get the property back without having to deal with your friend. There is just too much potential for both the company and the ex and I would tread carefully.

    One last thing: Power of attorney and a land trust are not needed for a short sale. A short sale only needs the following:
    1. HUD-1 (expense sheet)
    2. Financial Worksheet of borrower including tax returns, bank statements and paycheck stubs.
    3. Hardship letter explaining why you can’t pay the mortgage
    4. Listing agreement
    5. Purchase offer
    6. Authorization to release information

    Good Luck and it’s good that your friend has someone smart like you watching over her.

  • mjohnsonre1 says:

    First of all no Realtor should put them selves in that situation. You did right by telling your friend that she should do that. I would go to the Real Estate Division and talk to them and to their association that they belong to. She need to talk to an attorney and yes she and her ex are still responsible for the home until something is done. There is other ways that they can save the home by either a loan modification but have them not do that. In this case I would say SELLER beware. I am a Realtor and my gut feeling says something is wrong with this picture. There is a site called http://www.justanswer.com can help I believe. They can ask an attorney there.

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