Home Buying in 22553>Question Details

Diane, Both Buyer and Seller in Virginia

If a home is going towards a potential short sale should the listing state this information?

Asked by Diane, Virginia Fri Jul 27, 2012

I put an offer on a home, and they countered with a higher offer stating that if they didn't get their price the home would go to a short sale. So I got pushed into settling for the higher counter offer. Now I have found out (after I did the home inspection) the home needs lots of repairs. Isn't this "deceptive advertising" and that the listing should have said "potential short sale"?
Diane

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Hi Diane,

In Virginia the pursuit of a short sale is considered a confidential financial fact. The Seller is not obligated to disclose the issue in advertising. However, if they needed the contract to be contingent on their mortgage company's approval to sell without paying off the debt, they would have to disclose it prior to ratification.

In this case it doesn't sound as if it would be a short sale so long as they received a certain price point. Therefore it sounds as if they did the right thing by trying to negotiate terms where the net was sufficient to pay off the pending debt on the home.

Additionally Sellers in Virgina are not required to make disclosures about the physical condition of the home. Virginia is a buyer beware state which is why it's wise to get a home inspection.
1 vote Thank Flag Link Fri Jul 27, 2012
Additional information you should know involves the disclosure of potential short sales in future listings. The changes coming to listings through the Metropolitan Regional Listing Service (MRIS) includes the status of distressed sales. The information provided below was a recent message sent to agents from MRIS. This should help with future home searches.

We are working on providing a consistent, more accurate method for entering and searching for distressed properties. Starting next week, a new Transaction Type field will be added to Matrix and Keystone. All listings must be categorized as one of the following:
Standard sale refers to a property which is available for sale without third party involvement or approval.
Potential Short Sale refers to any property that is underwater and the sale is subject to bank approval.
Foreclosure refers to a property that is subject to foreclosure proceedings. Until the foreclosure proceedings are finalized, the seller still owns the property.
REO (Real Estate Owned) properties are bank or lender owned.
Other/Undisclosed should be selected when you do not have your seller’s permission to disclose the property as a distressed sale.

It will be the sellers decision to disclose if a home is a potential short sale.

Dwayne Moyers, Realtor
Long and Foster Realtors (Woodbridge Office)
Maryanne Moyers, Associate Broker
Long and Foster Realtors (Fredericksburg Office)
Top 2% of Realtors Nationwide
0 votes Thank Flag Link Fri Jul 27, 2012
Diane,

NO. Legally sellers are NOT obligated to disclose their financial or personal situation in MLS, at least NOT in the state of Virginia. It might be different in other states. Some Sellers do disclose short sale in MLS, but it is each Seller's personal decision and listing agents should have the decision to disclose in writing.

However, by LAW, sellers MUST disclose the short sale to buyers upon receipt of an Offer, so buyers can make an informed decision - your seller satisfied this condition by informing you about it and you agreed to a higher price, which tells me you thought the property was worth the higher price as compared to other homes in the area.

In addition to the above, the new 2012 real estate contract in Virginia makes every sale "as is" transaction. It means, buyers must do their due diligence more than ever before.

In your situation, if the seller is wise and wants to keep their credit rating good by avoiding short sale, they should make every effort to do the repairs. My suggestion to you is that IF you like the house and it meets you criteria, you may be wise to overlook small items, unless the repairs are costly and deduct from the value of the house. This is a decision that only YOU can make.

Good Luck
0 votes Thank Flag Link Fri Jul 27, 2012
I don't think it's deceptive advertising. When you made your offer you were told verbally that the homeowner either needed to get a higher price or they would be in a short sale situation. That IS a disclosure of sorts. There should have been a seller's disclosure document, however, and the condition of the home should have been fully and honestly set forth in that document. In addition, if the repairs were easily discovered by a simple walk through of the home, that too is a sort of disclosure.

I guess we could call this a cautionary tale. Never allow yourself to be pushed into making an offer that is higher than what you really, really feel the home is worth, particularly if there is no 'wiggle room' to account for any issues uncovered during the home inspection. Second, read the seller's diisclosure carefully and do a careful visual inspection yourself before making your offer or accepting the seller's counter offer. And, third, if you feel there is no room to negotiate home inspection issues, then base your offer and counter-offers on the worst case scenario.

If you still like the home, and are willing to wait, then insist on a credit toward repairs and if it throws them into a short sale situation, so be it. I have a feeling they will end up in that situation anyway. Otherwise, walk away and chalk it up to experience.
0 votes Thank Flag Link Fri Jul 27, 2012
There's really no such thing as a potential short sale, It's a short sale or it's not. The Sellers told you that if you didn't agree to the price they countered with that they might have to go to a short sale. You agreed to their price, no one forced you to do this. You did your inspections and found out the home needed work. (This makes me question your agent's ability as an experienced agent should have noted many of the required repairs to begin with and pointed them out to you. While agents aren't home inspectors, any agent who's been actively selling real estate for a while should have developed an awareness and be able to pick up on the signs of needed repairs.)

Regardless, it's not deceptive advertising in my opinion and unless Virginia uses a real estate contract unlike any other I've seen or used, you have the right to terminate your contract now and get out or , try to negotiate with the Sellers to address the needed repairs.

Do yourself a huge favor, don't waste your time on short sales, most go now where and take months for the buyer to realize their wasting their time. Fifty percent of the time or more, the Sellers aren't approved for a short sale and the property ends up in foreclosure.
0 votes Thank Flag Link Fri Jul 27, 2012
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