San Jose Short Sales Listing Agent Duty to Disclose Property is Substantially Upside Down

By
Real Estate Agent with The Papas Group (DRE #01766524)

San Jose Short Sales Listing Agent Duty to Disclose Property is Substantially Upside Down

In Holmes v. Summer, G041906 (Cal. App. 4th, filed Oct. 6, 2010) the State of California Appeals Court ruled that if a listed property is substantially upside down and a sale can’t be completed unless it is done via a short sale, this material fact must be disclosed by the Listing Agent to the Buyer who is not their client.

A Listing Agent’s job when doing a short sale is challenging enough. Now one more disclosure needs to be added to the mix.

It appears that the Listing Agent involved in the law suit did not disclose in the MLS, advertising materials, or any other documents that the property would require a short sale. The Listing Agent knew the house would sell for about $749K but the seller owed over $1.14M. The Buyers sold their house on the assumption that their purchase was on track to close when the seller’s bank refused to sell at a $392K loss. The sale fell through, the buyers had no place to live and sued.

As a consumer, how will this court decision affect how you choose a Listing Agent?

As an Agent, how will this ruling affect how you do you due diligence with sellers prior to taking a listing?

I know I will have a new disclosure document in my package of papers to help ensure compliance with this requirement.

Comments (2)

Nick T Pappas
Assoc. Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Broker/Providence Property Mgmnt, LLC Huntsville AL - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Paul, we disclose if there is a possibility or indeed a short sale.  There are liability issues and you sure don't want to be on the other end of a law suit.  A couple of years ago a client of mine put in an offer on a home and the listing agent never mentioned that it was subject to third party approval.  As you can imagine there was talk of a law suit, but that probably would have been more trouble than it was worth as my client needed to get into a home and not involved in a law suit.

Mar 13, 2011 03:41 PM
Paul Caloca
The Papas Group (DRE #01766524) - Scotts Valley, CA

Nick, we have disclosure requirements here too. It appears a listing agent did not do so and now here were with more forms to fill out.

Mar 14, 2011 08:20 PM