Yesterday, I showed a truly adorable cottage to my client.
The seller is not (yet) underwater on her mortgage, but could be if she receives an offer less than what she owes at which point, it could be a short sale. The property's current market value isn't worth what the seller is asking for. It's already gone through two agents, has had the price adjusted more than once. And it's still over-priced.
I talked with the listing agent to get the full story.
- And she told me the seller is applying for a loan modification, and that she should get an answer by April.
- So...what if her loan is modified? The agent said the seller will keep the house.
- But what if there's an offer and it's accepted before the seller gets an answer to her loan modification aplication? The agent said it will have to be at the listed price for the seller to accept the offer.
- What if the buyer spends the money for the appraisal, after which the modification is approved? The seller will back out of the agreement (and the buyer is out of luck and won't recover the cost of the appraisal unless the seller reimburses the buyer)
- But what if there isn't an offer forthcoming? Will they reduce the price then? If they do, it will become a short sale.
Seems to me they should first try to get an answer to the loan modification. And if it's turned down, then that's the time they should list the property for sale.
I think the fact that the seller is applying for loan modification while listing her house for sale is material fact and must be disclosed up front. It may turn off some buyers and agents, but this is critically important information that will determine whether a buyer would want to write an offer.
The only thing agent shares in the confidential remarks is that it's not an REO, not a short sale, and to call the agent for more info.