Frequently Asked Questions

Legal Hotline FAQ

A blog of the most frequently asked questions to the Maryland REALTORS Legal Hotline.

Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

In a short sale, after I have a fully executed contract, can I leave it active on the MLS and note that the seller is taking back-up offers?

.No.   MRIS Rules clearly limit use of the “Active” status. MRIS specifies that listing a property as Active “indicates that the property is available for showing with no contingencies, contract or rental application registered against it.“  (MRIS Rules and Regulations, Article XII, Section 3; March 2016).  
The preferred method for dealing with a short sale transaction is to treat the third-party approval as any other contingency.  In other words, you would change the status on MRIS to either “Contingent With Kick Out (CNTG/KO)” or “Contingent With No Kick Out (CNTG/NO KO)”, depending upon the terms of the contract.  Legally this is no different than any other contingency, such as a financing or home inspection contingency. Performance on part of the buyer and seller is conditioned upon receiving approval from the lender. Other offers should not be accepted once the buyer and seller have entered into a contract, unless they are accepted as backup contracts, through the use of your company’s approved addendum.  Sellers interested in creating backup contracts should be directed to consult an attorney because the contract provision or addendum that creates the backup contract must be carefully drafted to protect the seller from becoming obligated to sell one property to two different buyers.
For our purposes, we define a “backup contract” to be a transaction that doesn’t take place unless another transaction, usually called the “primary contract,” falls through. Generally, this would occur when a “backup buyer” makes an offer on a property that is already under contract with another buyer. The backup buyer’s contract must be a “backup contract.” The backup buyer is obligated to proceed with the purchase if the seller notifies the backup buyer that his or her contract has become the primary. The seller is also obligated, but only if the primary contract fails (or in the context of a short sale, if the primary contract is not approved by the seller’s lender). Whether a buyer can back out of a backup contract depends on the terms of the contract itself.  However, if the backup buyer has simply submitted an offer for consideration, the backup buyer can withdraw the offer any time before it is accepted. 
If the seller has accepted a contract, any negotiated changes to the contract should be forwarded to the lender for review and approval. 

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