Does "Short Sale" have to be disclosed?

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

call me 407-873-2747“There is no state or federal law that requires a seller to provide any disclosure forms for a short sale.” This is from one of the attorneys for out Florida Association of Realtors.

I wonder how he reconciles that statement with this:

A Seller of a residential property, whether a bank or an individual and regardless of whether the seller occupied the property, is obligated under Florida law to disclose to a buyer all known facts that materially affect the value of the property which are not readily observable and are not known to the buyer. The disclosure obligation can be fulfilled via either a verbal or written disclosure.

Now I know for a fact that a  property’s value is affected negatively if a “short sale” is required in order to be sold.  And this is certainly NOT observable.

So what gives?

Short Sale Basics

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 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

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Sandy Wickware of Pinnacle Realty Team
Fathom Realty - Red Oak, TX
Realtor®, Broker Associate

Why wouldn't a realtor disclose a short sale?  It is important for a potential buyer to know before making an offer.  Our MLS requires disclosure in private remarks.  We use the right to Advertise Certain Information to cover the disclosure and I have had no one refuse that disclosure.  I never have understood why someone wouldn't want to treat all parties fairly and save themselves the effort of working with an offer that the buyer can't wait around to see if it will happen.


Withholding the information just seems pointless.

Apr 20, 2009 03:31 AM #153
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

You better disclose it.  If I come in with a buyer that can and will make the purchase and you have offered to pay me a commission for bring in the buyer you better be able to close the deal.  You could be liable to my buyer for damages and to me for the commission.  By disclosing it needs the approval of the bank you take yourself off the hook.

Apr 20, 2009 04:05 AM #154
Roger Johnson
Hickory Real Estate Group - Hickory, NC
Realtor - Hickory NC Real Estate

Some comments have gotten a little off-base from the initial post.  Are you, as a listing agent, legally required to disclose a short sale.  Again. state laws concerning RE vary, but most have laws concerning material facts about the sale of the home and disclosure to the buyer of such facts.

Material facts are not limited to physical property defects (although a clouded title IS most definitely a defect), but also ANY facts, whether they are legally required to be disclosed or not, that a potential buyer would need to know in order to make an informed decision on the purchase of the property.

A short sale has several facts that any buyer, I think, would find important (and thus, material) to their decision to make an offer. 

1) The asking/offer price is less than the loan balance and the seller cannot come up with the difference and MUST get permission from their lender to be able to close.  Pretty important to a buyer.

2) Since the lender must approve, the deal could take months before it can even go to closing.  Again, could be very important to a buyer.

3) From a seller's perspective, if you're advertising an asking price that is less than the loan balance and you can't make up the difference, then fully disclosing a short sale and all the points that go with it could likely save you from a potential lawsuit later.

And there's a lot more, too.

Apr 20, 2009 04:33 AM #155
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

BB, it is an MLS rule in our area to disclose to all buyers because of a 3rd party approval required.  As others have said, we've went around and around on this for months and in my opinion sided with the buyers.  Besides, if you don't get the lenders approval - your not going to close.

No Illinois law covers the other portion of the question you ask.  Of course in Illinois, we have no time to make laws because we are constantly prosecuting our governors and throwing them in jail!

If anyone cares - Blago (impeached governor) will be on an island somewhere in Costa Rica on his new reality program. 

Apr 20, 2009 05:01 AM #156
Jeff Daniel
John L. Scott Ocean Shores - Ocean Shores, WA
Managing Broker, John L. Scott 360.581.9020

This attorney is crazy or misunderstood. Full disclosure always. 

Apr 20, 2009 05:47 AM #157
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

Barry I think Lane made a mistake on his comment. I think he meant to write buyers being on the hook for commissions because he references the buyer brokerage agreement.  I actually think you would like should read his blog.


Apr 20, 2009 05:56 AM #158
Emily Lowe
The Lipman Group | Sotheby's International Realty - Nashville, TN
Nashville TN Realtor

In Middle Tennessee, under the 'type' of listing, we hvae a selection for Short Sale.  I think it should definitely be disclosed as the curing time is so incredibly different (typically speaking) from the normal time to close...

Apr 20, 2009 06:25 AM #159
Ken Montville
RE/MAX United Real Estate - College Park, MD
The MD Suburbs of DC

You've probably heard this 159 times already but a short sale is a material fact that can affect the decision of the buyer to purchase or not to purchase the property.  In MD, that is the guiding principle.  It the same as if the roof leaked or there is a planned highway about to come through the back yard.  Disclose. Disclose. Disclose.

Apr 20, 2009 06:50 AM #160
Irene Kennedy Realtor® in Northwestern NJ
Weichert - Lopatcong, NJ


My MLS requires "subject to 3rd party approval" but we have the option to put it in Agent only remarks if we so wish.  As long as my seller(s) agree, I put it very prominently in the Client remarks. I also indicate the bank's timeframe, "Bank indicates it takes XX days to review all offers."

At least in the Garden State, there are LOTS of buyers who specifically ask to see only short sales or REOs. Unlike many of my colleagues, I see publicizing a short sale as a positive.  My track record shows I move them very quickly.  Do I lose some buyers and agents because they think it will take eons to get a response? Perhaps, but by indicating the timeframe, I get lots of calls...

Again, how publically I advertise Short Sale depends on my sellers (who still do own the home and who still call the shots!).

Thanks for giving us some heated discussion.



Apr 20, 2009 07:52 AM #161
Barry Cunningham | Real Estate Radio USA

Hye BB, you didn't delete any of my comments. At 4:30AM I was face deep into some feathery down pillows.

Do you really think I'd be up at 4:30AM reading Active Rain? Not likely. You may have my pictureless comments confused with the anonymous guy...but it ain't me. Check the IP address if needed but I never post anonymously.

If I have something to say, whether someone likes it or not, you'll ALWAYS know it's from me. As for the other guy...sounds like he really has a problem with some real estate agents. While I can surely understand his frustration, I choose to engage in discourse.

So didn't delete any of my commentary.


Apr 20, 2009 10:23 AM #163
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Hey Barry. Cool deal! When you going to start buying in Poinciana? We've just about bottomed out here....finally.

Apr 20, 2009 10:32 AM #164
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

IMHO, a Short Sale definitely "materially effects the value of the property", and therefore, should be disclosed. Besides, the process is much different when buying a short sale. Agents and buyers may choose to have nothing to do with Short Sales. There's a good chance that they'll be angry at having wasted their time, if they have adverse opinions of Short Sale properties.

Apr 20, 2009 10:41 AM #165
"The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Geesh Darlin'...

You be picking up and blasting out your fair share of trolls on this one. Did someone feed them or what? Don't they know we're not supposed to feed the trolls? :)


Apr 20, 2009 10:42 AM #166
Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker


Interesting question for sure.. but in Florida it is illegal for a Realtor to disclose the motivation of the seller.. Laws of agency, aren't they fun?!?

A short sale is distress in the part of the seller and it is not different than a divorce, death, murder, and it does not materially affect the value home. It is not a leak, or a roof issue, etc, that is what "materially effects the value of a property" refers to, not the motivation of the seller

A short sale might affect the price of a home, but that is not the same thing, by any means.

The board I belong to has a mandatory field that needs to be marked yes or no for short sale when listing a home. That is, however,  all the short sale information they allow, if the listing agent mentions short sale on the client remarks they will be warned and then fined.

All that said.. it does not solve the issue.. as practicioners in this market, it would be almost imposible not to let buyers know that the home is in a short sale situation since there are disclosures that need to be signed and time frames that need to be negotiated accordingly.

Help lots of people and have a great day!!!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®

CERTIFIED DISTRESSED PROPERTY EXPERT© and Real Estate Short Sale Specialist®
Licensed REALTOR® & Mortgage Broker - Senior Financial Advisor

Visit for SouthEast Florida's best properties.

Apr 20, 2009 01:16 PM #167
Rich Kruse
Gryphon USA, Ltd. - Columbus, OH

Forget it.  This response would take forever to write.

In short, follow the requirements of stigmatized property.


Apr 20, 2009 01:30 PM #168

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Apr 20, 2009 01:49 PM #169
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Considering the majority of public remarks on MLS contain verbage dislosing the nature of the sale, compounded by the reduced prices which are so dramatic it is not difficult to determine that the property is likely to be distressed.    Mortgages afterall are public record.

FSBO's for example typically do not provide a seller's disclosure (as none is required by law)

Apr 22, 2009 11:47 PM #170
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Lenn- The time period in which to deposit the earnest money is a negotiable item in our contracts. So most buyer agents write in the contract that the deposit money will NOT be deposited until they receive written notification from the seller that the third party has agreed to the short payoff.

Here in Florida, we use the FAR BAR AS IS with right to inspect. The inspection rights are NOT taken away from any buyer in any of our negotiations. The buyer does not have to buy the house if they don't like the inspection report. They don't waive any rights.

In REOs yes, short sales, NO.

Of course we tell our sellers to disclose or else their listing can not go into our mls. That would not be very beneficial to them from a marketing standpoint.

I was restating the sentence that Bryant started off his post with, which most agents commenting did not even answer or address. 

When you are a buyers agent you look after the buyer. When you are a sellers agent you look after the seller. From the comments here, most agents sound and act like they are buyers agents, most likely they are. :)

Apr 24, 2009 04:12 PM #171
AMBER NOBLE GARLAND - Top Real Estate Expert, Property Tax Appeal Specialist & Author
Strategic Marketing Expert & Relocation Specialist Serving New Jersey and nationwide! - Marlboro, NJ
- The Agent You Can Trust To Deliver REAL Results!

Here is the key line "all known facts that materially affect the value of the property which are not readily observable and are not known to the buyer." AND the magic word that makes this statement stick is "MATERIALLY."  I would put money on it that a home being in "short sale" status (if the short sale is due to loan default) is a fact of MATERIAL nature, thus warranting disclosure.

Apr 27, 2009 03:28 PM #172
Kimberly Dotseth
Blend Real Estate, broker/owner - San Diego, CA
Try Our "Cancel Anytime" Listing!

Thank God we have to disclose it on the MLS in San Diego so I can avoid them like the plague. San Diego agents also use a contract addendum with lots of short sale fine print. It's all about protecting the buyer.  I even check the loan balance on a property that isn't listed as a short sale.  If the loan amount doesn't look like it will be in line with the sales price, I call the agent immediately and ask.

Two deals I did in the past year (one was my listing, one was my buyer) would have been a short sale," but from Day 1, both sellers planned to come to escrow with funds to close. Those were dream deals.  Both closed on time.  Money was paid, money was lost.  The property was resurrected and buyers are happy.

A short sale is a materially known fact but I have no proof that mentioning it is California law.  It probably isn't.  But disclosure is, according to the DRE.  Behave yourself agents, call it what it is and please don't take the listing if you have no idea what to do.

Ah heck, I will just continue to avoid them!

Apr 28, 2009 11:53 AM #173
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