There seems to be a lot of short sale confusion as to when short sale properties should be listed as pending in the MLS. The discussion seems to be around when the offer is truly accepted. Is it when the seller accepts or the bank approves the terms of the sale?
The answer is fairly simple. The term 'subject to lien holder approval' is a contingency only. It is no different than a building inspection contingency, for example; just one of the terms of the contract should the Seller and the Buyer come to agreement. The seller is the owner of the property and the only one required to sign the contract, the bank does not yet own the property but only holds the power of agreeing to accept less than the full amount owed. In some cases, the seller may even bring money to the closing to satisfy the lenders interest in order to get clean title. In the cases where the seller doesn't have the money to satisfy the lien they, (or their agent or a third-party mitigation company), must get the lender to accept less than the full amount owed, resulting in a short sale. This issue is no different than getting the buyers lender to agree to lend money to purchase. The property is under contract and may be marked pending while the lender does their review. So in the case of the short sale at the current time it must be marked pending but can be flagged ‘current; continue to show' and back-up offers can be accepted and the Seller chooses whether or not to submit those to his or her bank.
Our MLS recently made the change to include a new status that will continue to allow the Seller to market their property. The status is called CSS - Current Short Sale Continue to Show. Provided the Seller has not accepted language in a contract that says they will cease marketing and taking offers, a short sale that goes under contract may have this status. The new status better reflects the short sale situation as many times a Buyer will not have the patience to wait and this new status will hopefully encourage more back-up offers. This also allows the listing to continue to feed to all the websites and therefore keep it as an option to the general public out looking for a home.
In addition, the Code of Ethics Standard of Practice 3-6 requires that accepted offers be disclosed: "REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation." This new field and policy with MLS will also allow the full disclosure necessary by our Code of Ethics.
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