WASHINGTON - April 25, 2008 - When the National Association of Realtors®' Multiple Listing Issues & Policies Committee meets in May, members will discuss a standard definition of "short sale." The discussion stems from disagreements within the industry with regard to when properties can be labeled as short sales, and how to disclose them in the Multiple Listing Service.
Committee Chair Colleen Badagliaccosays that most MLSs allow Realtors to disclose real estate-owned properties, and whether sales are "subject to lender approval" or "subject to court confirmation." However, banks often discourage disclosure of potential short sales because more potential buyers submit low-ball offers.
Badagliacco says that listing agentshave a fiduciary duty to sellers, including REO properties, and suggests that encouraging a short sale might not be in the seller's best interest. On the other hand, as potential buyers focus on the properties currently available for sale, they want to know which ones have the potential to be a short sale. Disclosing "potential," however, can be difficult. "Are you potentially pregnant?" asks Badagliacco when describing the problems Realtors face if selling possible short sale properties.
"The (issue) that we've really been trying to focus onand pin down for discussion at the May meeting is: ‘How do you define a short sale?'" says Badagliacco. "Because technically you don't have a short sale until it comes to closing, and there is not enough money to pay off the lender."
Source: Inman News (04/24/08) Roberts, Jr., Glenn
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I'm buried in short sales now, 25 listed, 8 pending/contingent, showing buyers on a regular basis now. I'm confused as to why we need a rule for this.
Is it because most areas of the country have not dropped 35-50% in value like here?
If I go into a listing appointment knowing the customer is going to be short at closing, does that count?
or should I wait to find out they doen't have the money?
How do you evaluate a listing for a short sale?
When do you label it a short sale?
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I don't know what your property appraiser site is like down there but in Marion County it discloses what the seller paid for the house and when they bought it. It is a simple deduction from there. When you sit down with them and the bank comes into the discussion along with the numbers owed vs current market value, that is the time to recognize that it is a short sale and must be disclosed.
The debate in disclosure is 2 basic elements. 1. Bank Approval 2. Commission cuts.
The first one is important for the selling agent to disclose to the buyer so that there isn't any challenges with the time factor and issues that may come up with that.
The second is a case of liability to the listing broker. Should a bank decide to pay 4% at close instead of 6% the listing broker can be held responsible for the additional commission. THAT WILL RUFFLE SOME FEATHERS!!!
Make sure you disclose ALL!