The Power of Sale, the Prescriptive Easement, and the Short Sale
A listing agent in Greenville takes a listing from an owner facing foreclosure. The owner received a notice of default and the sale date is 45 days out. The owner tells the agent, 'Just price it high and promise the buyer we can guarantee a quick closing - and my cousin, who is not licensed, will host the open houses and answer questions so you don't have to drive over.' The agent also learns the seller's lender has not approved a short sale. Meanwhile, an unrepresented buyer submits an offer through the agent, and the agent wants to write the purchase contract herself to save the buyer an attorney's fee.
1. Evaluate the 'guarantee a quick closing' promise and the unlicensed cousin hosting open houses.
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Two separate violations, both avoidable.
The guarantee: a licensee may not promise a closing date or outcome the licensee cannot control. Here the closing depends on the lender's short sale approval, which has not even been requested, and on a foreclosure timeline. A 'guaranteed close' in advertising or in conversation is a misrepresentation and a licensing problem, and if the deal fails the buyer has a claim. Say instead: 'The seller is pursuing lender approval; the timeline is not within our control.'
The cousin: unlicensed persons may not perform acts requiring a license - hosting open houses, answering substantive questions about the property or terms, quoting price or terms, or soliciting buyers. A non-licensed assistant may do clerical, administrative work under the licensee's direction: placing signs, distributing pre-approved flyers, scheduling. The licensee must be present for showings and handle all negotiation and property questions, and the licensee remains responsible for anything the assistant does. Advertising must name the brokerage.
Also verify whether the listing agreement's term and the seller's authority to sell during foreclosure create conflicts - and put the seller's instructions and your correct advice in writing.
2. What should the agent do about the short sale status and the 45-day foreclosure sale date?
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Do not market a property as a short sale without a lender package in motion.
- Confirm in writing the loan balance, the payoff, the lender's short sale department, whether a package has been submitted, and whether the seller has any other liens (HOA, taxes, second mortgage, judgment). Nothing in the file supports a listing price yet.
- Advise the seller to seek the lender's approval and independent advice - a short sale has tax and deficiency consequences; the agent cannot give that advice. Refer to a CPA and an attorney.
- Disclose the foreclosure timeline to every prospective buyer in writing. A buyer who learns of the sale date after signing has a strong misrepresentation claim, and the short sale approval contingency must be in the contract.
- Watch the clock. If the foreclosure sale occurs before closing, the seller loses the ability to convey and the contract fails. Build a contingency for the lender's approval and a drop-dead date that precedes the sale date.
Business point: this listing may not be sellable at all in 45 days. That conversation belongs in the listing appointment, in writing.
3. The unrepresented buyer wants the agent to draft the purchase contract. What are the agent's limits in South Carolina?
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South Carolina is an attorney-closing state, and licensees may not practice law.
- The licensee may fill in the blanks on a promulgated form the brokerage is authorized to use, at the direction of the parties, and may explain the brokerage's services.
- She may not draft custom contract language, add or rewrite clauses to fit the buyer's situation, give legal advice about the effect of a clause, or advise on title, liens, or the short sale's legal consequences. Those are attorney tasks; the closing itself is handled by an attorney.
- If the buyer is unrepresented, the agent must be clear about whom she represents. If she represents the seller, she owes the buyer honesty and fair dealing but not advocacy; the buyer should be advised in writing to get their own representation, including an attorney for contract review.
- Dual agency with an unrepresented buyer is not the same as dual agency; do not slip into representing the buyer by accident through helpfulness.
Best practice: hand the promulgated form to the buyer, explain that the brokerage represents the seller, and recommend the buyer retain an attorney before signing. Note it in the file.