Short Sales in Washington: Licensing, Compliance, and Best Practices for Brokers

December 16, 2024

Key Information

According to Washington’s Real Estate License Law (Chapter 18.85 RCW) and related statutes, assisting with short sales involves more than guiding buyers and sellers—it often requires:

1. Navigating creditor agreements.
2. Ensuring regulatory compliance.
3. Maintaining professional integrity.

Definition of a Short Sale

A short sale occurs when a property’s sale price does not fully cover the outstanding debts secured against it. Key considerations include:

• Creditors must consent to accept less than the full amount owed.
• This agreement generally does not forgive any remaining debt unless expressly stated.

Managing these negotiations may require proper licensing under:

1. The Mortgage Broker Practices Act (Chapter 19.146 RCW).
2. The Consumer Loan Act (Chapter 31.04 RCW).

Professional Boundaries for Brokers

Licensed brokers should:

• Be aware of limits to their professional authority.
• Avoid unlicensed short sale negotiations, as they may violate laws.
• Collaborate with licensed entities if necessary to handle lien negotiations.

Regulatory Bodies

Real estate activities are overseen by the Washington State Department of Licensing (DOL), while loan modifications and creditor negotiations fall under the jurisdiction of the Department of Financial Institutions (DFI).

Compliance with Federal Regulations

Brokers offering mortgage assistance relief services must adhere to:

• Federal Trade Commission’s Mortgage Assistance Relief Services (MARS) rules.
• Requirements for disclosures, suitable fee arrangements, and accurate performance claims.

Best Practices for Brokers

To ensure compliance and professionalism, brokers should:

• Encourage sellers to seek tax and legal advice regarding the implications of deficiency judgments.
• Maintain transparent communication and promote fair market pricing.
• Avoid deceptive practices like presenting unrealistic offers.

For Brokers and Aspiring Licensees

Staying informed about evolving regulations surrounding short sales is vital. Review official guidance from the DOL and DFI, and strive to prioritize integrity and client protection in your professional practice.

Engaging Snippet

Learn how Washington’s licensing requirements affect short sale negotiations, discover which services brokers can legally provide, and understand how to stay compliant with state and federal rules. This guide addresses the complexities brokers face when assisting clients through short sales. Gain insight into best practices that keep your transactions both profitable and legally sound.