If the Agent wrote the offer, submitted it and is the procuring cause
then you have to pay. Sadly, if it is now a Short Sale, the banks are
covering the Short, so it will likely be negotiated down.
Clearly, it seems it is a regular sale now gone short sale.
Believe it or not there is a lot of work on the part of the listing agent to close a short
sale, even though it is not apparent to you.
Please call with any questions.
Short Sale Department. LLC
The commision on a short sale is paid by the bank. If you don't sign an extension you are out of contract. You have a buyer waiting in the wings and all of your paperwork is sitting at the bank with an asset manager reviewing your paperwork. Short Sales take a very, very long time and updates are long in coming we can call the lender every day and still no new status. You say the agent advised you from the beginning it would be a short sale so she probably had a different sales price in mind from yours when you first listed the property. It took you 8 months to agree? There is no law to write off the balance this is part of negotiating the short sale to not pursue you for the deficiency. You may be referring to the Tax Debt Relief Act as the name states TAX is better answered by your CPA who is a professional in this field not your Realtor.
I realize every state is different and rules vary, but I would think that if you don't sign an extension and list with another agency you will have to begin the process all over again and find a new buyer and send the new paperwork to the lender; basically start all over again.
If you have a Sale pending, someone did some work for you to find a Buyer. If you have an issue with your agent, I recommend having a meeting with the Broker and agent, and spell out what your expectations are. Short Sales are very difficult and time-consuming, and full of frustration and just plain hassle. You might ask the Broker to assign an agent with experience and competence in short Sales to help your agent to complete the sale. Also, be sure that you get a letter from the lender which expressly agrees NOT to pursue a default judgment for the balance.
In addition, unless you have power of attorney for your parents, THEY, not you, are the principals in the transaction You may be advising them, but they are the sellers, not you.
May I assume there is also a buyer's agent involved in the sale?
Whatever commission is ultimately paid for this sale, if it takes place, will be paid to the agents listed on the contract. Your displeasure will not remove any agent from being in that position - extending the listing, or not, will not change the contract that is in place.
Now, as far was what you do after the listing expires, and whether you have the right to continue to market the home, is a question I will leave for an attorney to answer.
ps not to defend the agent as I certainly don't have enough information - the fact that she didn't know about the law to write off a balance on a short sale really isn't her area of expertise - in the event of a short sale, having an attorney advise you should always be recommended. Either an attorney or an accountant should be giving you tax advice.