26 April I am in discussions with a prospective client on a listing for a property that will be a “short sale.” April 26, 2017By Cindy Sellers Distressed Properties 0 You must disclose in the MLS listing that a property is a short sale. In our opinion, this is a material fact, because the contract of sale will require the approval of the lender, and a buyer would likely consider this an important factor when deciding whether or on what terms to make an offer. In most cases, it takes a significant period of time to obtain the lender’s approval of a short sale, and that time frame is an important factor for many, if not most, buyers as well. Since a sale of a property is not technically "short" until settlement, the term "Potential Short Sale" is used to describe a property that may be subject to a short sale. You should include a Short Sale Addendum in the contract, and MAR publishes one. This is an absolute necessity for ensuring that the parties understand the contract is contingent on the agreement of the seller’s lender to accept the net proceeds of the sale as full payment of the underlying debt. Once an offer has been accepted by the seller, the status on MRIS must be changed to CNTG/KO or CNTG/NO KO, indicating a third-party approval contingency. You should choose the kickout (KO) status only if the parties have also executed a Kickout Addendum. MRIS's perspective is that a listing broker, in such an instance, may continue to market the property and continue to accept offers. The MRIS Rules and Regulations require that the listing's status be changed within 48 hours, excluding weekends and holidays. The offer of compensation indicated in MRIS in the compensation field is unconditional. MRIS's policy is that language in the Remarks field or any other field does not alter what is indicated in the Compensation field. Compensation may only be displayed as a percentage of the gross sales price or a specific dollar amount. When the number of short sales began to increase several years ago, the listing broker would often be asked to reduce the amount of the commission being paid by the seller. This issue has largely been resolved because Fannie Mae and Freddie Mac both issued guidance stating that a commission of 6% was presumed reasonable, and servicers should not ask for a reduction. If, for whatever reason, the listing broker does have to reduce the commission, the buyer’s broker is not obligated to agree to split the reduction or even to accept any reduction. The buyer’s broker is not precluded from accepting compensation other than as stated in the compensation fields. However, that issue is one to be negotiated directly among the brokers to the prospective sale. Short sales are more complex than traditional real estate transactions. In addition, the seller may be in a very emotional state and facing losing their home. Some sellers may be in denial and may have waited until the last minute. Facing foreclosure, they now turn to you for help. REALTORS® should avoid making misleading statements or promises about the seller’s financial situation. You should not promise that you can stop a foreclosure sale, or that the short sale will be approved. You should not make any representations about how secondary debt will be treated, or what the tax consequences are if the debt is forgiven. You should also be careful not to undertake representation of a client if you are not satisfied that the services you will be rendering are within your field of competence. Finally, if your client has any specialized tax or legal needs, you should advise him or her to immediately seek competent, professional assistance. Related Posts My broker has informed me that under no circumstances may I contact the owners of property following my departure from the company and that any listing I have will remain with my current broker. My broker has informed me that under no circumstances may I contact the owners of property following my departure from the company and that any listing I have will remain with my current broker. Is my broker right? I have a buyer-client who wants to purchase a property that is “for sale by the owner” (FSBO). I have a buyer-client who wants to purchase a property that is “for sale by the owner” (FSBO). What do I have to do to comply with PHiFA? When a contract will not settle, how do I get the property back on the market? When a contract will not settle, how do I get the property back on the market? Is it illegal and/or unethical for an agent to refuse to show another company’s listing to a buyer client based on the compensation being offered to the agent by the listing company? Is it illegal and/or unethical for an agent to refuse to show another company’s listing to a buyer client based on the compensation being offered to the agent by the listing company? Once the seller/lessor signs the listing agreement, must I give seller/lessor the Understanding Whom Real Estate Agents Represent form so that the seller/lessor can acknowledge that I represent the seller/lessor? Once the seller/lessor signs the listing agreement, must I give seller/lessor the Understanding Whom Real Estate Agents Represent form so that the seller/lessor can acknowledge that I represent the seller/lessor? I am a listing agent involved in a short sale transaction. The lender has requested that I reduce my commission. The selling broker will not agree to accept less than what was advertised in MRIS. I included a comment in the remarks section that the commission was subject to lender approval. What happens if the selling broker refuses to take a commission that is less than what the listing broker offered in MRIS? Also, is it true that Fannie Mae servicers cannot condition the approval and closing of short sales on the willingness of the listing firm to alter its fee arrangement with the borrower as long as the total commission does not exceed 6%? Does this mean the mortgage company has to pay the fee if it’s less then 6%? Comments are closed.