Before taking a short sale listing, every Realtor (and Broker) should consider the following 7 questions:
- Have you as the Realtor asked the Client if the Client has consulted with their accountant or tax advisor on the issues of capital gains (and losses if nonresidential property) and debt forgiveness?
- Have you as the Realtor asked the Client if the Client has discussed with their accountant or tax advisor the tax consequences to the Client of the short sale?
- Have you as the Realtor considered (or consulted with their Broker) whether the failure of the Realtor to ask the foregoing questions before taking the listing could result in adverse consequences to the Client for which there may be unintended consequences and possible liability to the Realtor (and Broker)?
- Have you as the Realtor asked the Client if they have consulted with a Financial Lawyer (a bankruptcy lawyer) about how a short sale may impact other financial planning decisions, including minimizing or eliminating the tax consequences identified by the accountant or tax advisor?
- Have you as the Realtor asked the Client if the Financial Lawyer has discussed bankruptcy as part of an overall financial restructuring in which the short sale is part?
- Have you as the Realtor discussed with the Financial Lawyer the timing of a short sale and a possible bankruptcy filing. A short sale that precedes a bankruptcy filing may adversely impact whether a Client qualifies for relief under Chapter 7. If the short sale takes place before a bankruptcy filing in some jurisdictions it could result in a Client "failing" the Means Test, and therefore qualifying only for a Chapter 13; a much more rigorous, costly and onerous alternative to Chapter 7 relief?
- Have you as the Realtor considered (or consulted with their Broker) whether the failure to include a Financial Lawyer (a bankruptcy lawyer) in the process and failure to have considered the adverse impact on whether the Client can get relief under Chapter 7 may give rise to liability for the Realtor (and Broker)?
Remember, you as the Realtor, are often the neighbor, friend, relative, or confidant of the Client. You are being untrusted with some of the most daunting financial stress that any Client could be going through in their entire life. Consider the "Big Picture" and what is in the best interest of the Client. Even if a bankruptcy filing precedes closure of a sale, all may not be lost. If the Chapter 7 Trustee abandons the real property, the sale may continue and be closed. There is no requirement for a court order in that instance; although the title company may say otherwise. Where the real property is subject to a short sale the Chapter 7 Trustee will likely abandon the real property, as there is no equity from which proceeds can be recovered. No court will grant even a title company demanded motion to authorize a short sale, as there is no asset to be administered.