Can Minnesota real estate agents negotiate short sales?

21 Nov

Yes.  The short answer to the question of whether properly licensed real estate agents/brokers in the state of Minnesota can negotiate short sales is yes, presuming a few basic rules are followed.  One such rule (and among the most important) is that the agent/licensee has to be performing this role pursuant to the listing of the home for sale by that licensee’s company (rather than as a third-party negotiator).

This subject has been somewhat controversial lately, with various attorneys or companies opining on what the Minnesota Department of Commerce does or does not allow, and what licensing is required to serve the role of negotiating the release of a mortgage lien (and possible satisfaction or partial satisfaction of the underlying debt) in the event a homeowner is selling a home with insufficient property value to satisfy the outstanding debt, and cannot otherwise satisfy the debt with his/her own funds.

The Minnesota Association of Realtors® (“MNAR”) and this author have participated in discussions with representatives of the Minnesota Department of Commerce Enforcement division to try to ascertain whether a listing broker/agent (properly licensed under Minnesota Statute Chapter 82) may list a short sale property for sale and, pursuant to that listing agreement and the agent’s fiduciary and contractual relationship with the seller, work on the seller’s behalf to negotiate the release/satisfaction of liens attached to the property.

The Department of Commerce has indicated that such a scenario is permissible, so long as certain rules are followed, which are explained in more detail in a substantive memo published by the Minnesota Association of Realtors® at their website:  Or, find the memo directly via this link.  Separately, Chris Galler (CEO for the MNAR) has created a summary video that identifies the key issues and practice tips.  View the video here.

Real estate licensees in the state of Minnesota must be aware that having a real estate license does allow a certain degree of latitude in negotiating the release of a lien as part of the licensee’s efforts to assist the homeowner in selling the home the licensee has been engaged to sell, but such a license does not provide blanket authority to negotiate short sales on properties that the licensee or the licensee’s company does not have listed for sale.  The “third-party negotiator” role is one the Department of Commerce suggests requires a Chapter 58A (mortgage loan originator) license, as the negotiation of the release of lien or satisfaction of debt will be considered by the Commerce Department as a negotiation of the terms of the mortgage loan (as defined in Minn. Stat. Sec. 58A.02) .

Certain exemptions from such licensing requirements (such as for attorneys representing the property owner and engaging as the negotiator in the attorney’s role) exist, provided this is also done properly without improperly using a title company or other entity in the role of short sale negotiator on the premise that an attorney within such a company may serve as the negotiator.

These issues, and the nuances that may arise in any individual circumstance, are complicated, so this overview should not be considered as a definitive set of all the rules applicable.  Each scenario as to what licensing is proper is ultimately a case-by-case analysis.  Readers interested in this issue who want to assess their own specific scenarios should speak with an attorney.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.


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