Seattle Real Estate Blog by David Monroe

Unlicensed Third-Party Short Sale Negotiators - Washington Department Of Licensing’s Official Stance

Many real estate agents in Washington State use unlicensed third-party negotiators to handle their short sales.  I have always discouraged that practice (see my March, 2009 blog post, Is Your Real Estate Agent Breaking The Law?).

Third-Party Short Sale Negotiators in WashingtonThe Washington State Department of Licensing has now taken an official stance on this.  On their website under “New Real Estate Law Frequently Asked Questions”, they state that short sale negotiators must hold active real estate licenses or be appropriately licensed by the Department of Financial Institutions, and work under the authority of their designated broker.  The department of licensing is currently investigating complaints of unlicensed short sale negotiators (see Real Estate Commission Meeting Minutes).  Real estate agents who are using unlicensed short sale negotiators can be charged with aiding or abetting unlicensed activity and are subject to disciplinary action, according to the Department of Licensing.

Unlicensed third-party short sale negotiators are responding by stating that they’re really “facilitators”, not “negotiators”.  That may technically be true, but that doesn’t mean that the state sees it that way.  I certainly wouldn’t want to be standing in front of a judge trying to explain the difference between “facilitating” and “negotiating”.  And as a real estate licensee, I wouldn’t want to risk my license being suspended while my relationship with an unlicensed short sale negotiator is being investigated.

If you're a real estate agent and you prefer to use a third-party negotiator, make sure they're properly licensed.  Washington State doesn't care what they call themselves.  If they're contacting the seller's lender with the intent to get the lender to approve a short sale, they need to be licensed.  As real estate agents, we need to keep our business practices above-board and eliminate opportunities for any bad press relating to real estate agents.  Would you put your license at risk?

Authored by David Monroe, Realtor and Pre-Foreclosure and Short Sale Specialist.
Access Seattle area short sale help and foreclosure resources including selling in foreclosure, and 8 Ways to Avoid or Stop Foreclosure.

Copyright (c) 2010 by David Monroe (Home4Investment Team at Keller Williams Seattle Metro West).

Comment balloon 6 commentsDavid Monroe • February 11 2010 03:06PM


David, I suppose that each state is different in licensing practices and perhaps in what are viewed to be services that can be performed under those licenses. In Michigan I have expressed concerns that licensed real estate agents are exceeding the boundaries of what they are licensed to do if they perform loss mitigation services, which include negotiating with the banks. The danger is that they cross over into territory that is reserved for certified credit councilors and only HUD certifies credit councilors for real estate. Where the lines are between services and how to avoid crossing over is just to fuzzy to take a chance. We have third part negotiators and they are not required to be licensed; however, the smart one are allied with a lawyer.

I have expressed great reservation abot the people who took a two-day course and now get to run around calling themselves Certified DistressedProperty Experts. That so-called designation starts and ends with terms that trial lawyers have got to salivating over. It sounds like you have more legal cover from your state licensing board, so good luck to you.  

Posted by Norm Werner, Helping the first time and every time (Real Estate One) almost 11 years ago

Norm - I agree that many real estate agents are taking big risks by negotiating their own short sales.  While it's allowed here in Washington State, it puts the agent at a much higher risk for a lawsuit.  I'm with you on the "certifications" as well--It's impossible to become an expert in distressed properties just by taking a two-day class.

Posted by David Monroe, Short Sale Real Estate Agent (Keller Williams Realty) almost 11 years ago

In Oregon we have a new law which restricts what a licensed Realtor can do when modifying a loan or negotiating a short sale is the desired outcome. The Real Estate Agency has indicated that these activities are not activities contemplated under the licensing laws for Realtors in Oregon. So, if, as a Realtor you want to modify loans, you must have a loan originators license. If you want to negotiate short sales as a paid Third Party Negotiator you must register as a Debt Management Service and post a bond. Thew new law also severly restricts how much can be charged for these activities.

Posted by Nancy almost 11 years ago

Good to see this post - I did a post about Oregon just a short while ago:

I'm glad to see others discussing this and glad to see the state of Washington do something similar.

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