- Associated Press - Wednesday, April 23, 2014

RENO, Nev. (AP) - A Nevada agency will review practices in the real estate industry following an investigation by a Reno newspaper that showed dual-agency short sales involving a prearranged cash buyer accounted for more than 10 percent of home sales last year.

Such transactions occur when the same real estate agent or entity represents both the buyer and seller and collects commissions from both.

An investigation by the Reno Gazette-Journal found that many of the properties were sold below market value, allowing investors to see a larger appreciation when the properties were resold.

Nevada Department of Business and Industry Director Bruce Breslow tells the Gazette-Journal (https://on.rgj.com/1lFqZ1q ) that his agency will look into the practice to see if real estate agents or firms are taking advantage of distressed homeowners for their own gain.

“It’s always a concern if someone can manipulate a system for their own personal gain at the expense of someone else,” Breslow said. “It’s important that consumers have legal and proper representation in real estate transactions.”

The Gazette-Journal analysis reviewed thousands of records from Washoe County and the Northern Nevada Regional Multiple Listing Service involving single-family homes sales last year.

It found that many of the short-sale properties also were sold below market value, allowing investors to see a larger appreciation when the properties were resold. Five-figure gains were the norm for such transactions, with some posting more than $100,000 in appreciation after being resold just a few months later. In some cases, the resale price was higher than the short seller’s original mortgage.

Dual agency is legal in Nevada, provided all parties involved are informed of the representation. For some in the real estate industry, dual agency is seen as a valuable tool. Breslow, however, noted that it also comes with challenges.

“It may not be illegal, but I see problems with having a buyer on one hand and approaching a homeowner to short sale their home and represent them as well,” Breslow said. “If the seller is more concerned about a quick sale and is not focused on the price, the buyer gets the advantage of a great deal and the one who loses is the original lender.”

The state investigation was welcomed by the Northern Nevada Regional MLS. The group has heard concerns from its member agents about such short sales for some time, said Bob Getto, NNRMLS president.

“It’s about time,” Getto said. “Some say that once the market changes to where sellers have equity once again, the problems will go away. But real estate goes up and down, so there will be short sales in the future, and this needs to be repaired now.”

The Reno-Sparks Association of Realtors also welcomed the state investigation.

“Any time a situation of this nature comes forth, we are all affected,” said Mark Ashworth, association president. “It’s important for us to discover if there has indeed been a violation of our code of ethics and consumer trust. We want to ensure that everything is being done to properly to benefit our clients.”


Information from: Reno Gazette-Journal, https://www.rgj.com



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