Short Sale Seller You may be in violation of RESPA and not know it!!!
Is your short sale listing agent asking you to sign a listing agreement that has language similar to this:
"Seller instructs listing agent to not present any offer that is incomplete. The listing agent's non-negotiable addendum is a required addendum and if the buyer does not submit that addendum with the offer, the offer is considered incomplete and shall not be presented to the Seller."
While it may seem that this will ease some of the stress from negotiating an offer that is "incomplete", and keep a buyer tied to your house for x number of days, it actually may reduce your chances of selling the home prior to the foreclosure date.
- Knowledgeable short sale buyers agents will advise their clients to not sign a non-negotiable addendum, and most buyers will follow their agents advice.
- It prevents the seller and the buyer from being able to negotiate a mutually agreed contract
- What you as a short sale seller need most, is an offer to accept and submit to your lender
- The lender makes the final decision (must be agreeable to you) and without an offer to submit to the lender, your home will go to foreclosure
- The odds of getting an acceptable offer are greatly reduced. You can pay a small fee to someone with mls access to check the "short sales Sold to Cancelled+Expired ratio" of any listing agent.
The national average ratio of listing agent short sale success is reported to be around 30%. That is low because there are many agents who work short sales without getting sufficient education on all the bank guidelines and without gaining the necessary negotiation skills to negotiate with the banks. The average ratio for listing agents who are knowledgeable, skilled, and work hard for their clients is upwards of 80%.
- Some of these addendums require the buyers agent to sign as being in agreement with the terms of the addendum. An experienced short sale buyers agent knows that s/he is not a party to the agreement and will not sign that s/he agrees to the terms. In fact, s/he has may have advised the client to not sign.
However, it's the clients decision to accept or not. If the agent has advised the client to not accept the terms, then the agent cannot sign the addendum because s/he is not in agreement. Since the agent will not sign, the addendum is considered to be not complete, therefore, you, Mr and Mrs Seller, may never see that offer.
How is the Seller in violation of RESPA?
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection law that governs disclosures required at various stages during the home buying process.
That Act gives the Buyer the right to choose their own Closing Agent.
"Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
- Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance."
What does that mean to a Short Sale Seller?
It means that if the non-negotiable addendum the listing agent has drafted requires the Buyer to use the Sellers Title Company, that you, Mr and Mrs Seller, are in violation of Section 9 of RESPA, and that you can be sued by the Buyer for three times all charges made.
It also means that many buyers agents may advise their buyer to not waste their time considering a property that has a non-negotiable addendum unless the listing agents "short sale Sold to Cancelled+Expired" ratio is at least 80%.
Therefore, you may lose many potential buyers and never know it.