As the dynamics of the real estate marketplace continue to change rapidly, new issues seem to keep arising. The current one is when selling a property short is not a “short sale”. As property values have fallen more and more, sellers are satisfying their loan obligations without going to the bank to forgive the difference.
Why Disclose When There is Nothing to Disclose?
It seems to be a challenge convincing buyers and their agents that just because the sellers owe more than the current market value, the listing is not a distressed sale. If the seller will be paying off the loans in full prior to the transfer of the property to the buyer, and the cooperating broker will be receiving the compensation represented in the MLS, there is nothing to disclose.
The only time a listing must be disclosed as a “short sale” is when the contract negotiated for the sale, as well as the listing agreement, and therefore the commission, is subject to lien holder or court approval.
According to section 1.9 of the rules and regulations of the Midwest Real Estate Data LLC dated January 26, 2010:
“Listing brokers must communicate to potential cooperating brokers by selecting “C”(Court Approval) or “S”(Short Sale) in the SCI field that gross commissions established in the Exclusive Brokerage Agreements are subject to court approval “C” or short sale “S” and that compensation payable to cooperating brokers may be reduced if the gross commission established in the Exclusive Brokerage Agreement is reduced by a court or pursuant to a short sale. In such instances, the fact that the gross commission is subject to court approval or pursuant to a short sale, and either the potential reduction in compensation payable to cooperating brokers, or the method/amount by which the potential reduction in compensation will be calculated, must be clearly communicated and agreed to by the potential cooperating brokers prior to the closing.”
In a market with many challenges, the sellers ability to close when there is none seems to be an obstacle that agents and their clients are creating when it is not there. Yes, you should ask the question after doing your research on the property. If the answer is the seller will be responsible for paying off their obligations and will be meeting the terms of the contract by the close of the transaction, then why argue? It does not matter how the seller is meeting those obligations, the only thing that counts at the closing table is that they are.