Question Details

Davewalker, Home Buyer in Orange County, CA

When an agent lists a property as a short sale on the MLS, what verbiage do they use to protect themselves?

Asked by Davewalker, Orange County, CA Sun Apr 26, 2009

Mainly what verbiage do the agents use to protect me the seller? For instance if I list my home as a short sale and the bank does not even know it yet, and then they refuse, am I liable? It just doesn't seem right for agents to list properties as short sales when the bank hasn't agreed! It seems that the bank should okay the price and terms first!

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The Multiple Listing Services have different rules regarding how short sales are listed. I do not know how the Orange County Association of REALTORs defines a short sale listing.

In most cases Realtors are required to disclose that the expected proceeds from the sale will be insufficient to cover the closing costs AND that in order to sell the property a third party (the lender(s) needs to approve the shortage).

The next step is lender approval. An "approved short sale" indicates that the lender has approved a price. The problem is that in declining markets what was a "fair price" at one date may not be "market price" when the property finally is up for loan approval. It is not uncommon to have short sales require such a long escrow that the property declines in value and the lender needs to approve a lower price.

At that point many properties actually are foreclosed if the time frame is such.

Also, most lenders will not approve a price until they have an offer.
1 vote Thank Flag Link Sun Apr 26, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
Ask your agent this question. There may be local laws that impact my answer, but I will give you an "in general" response. Agents are not permitted to give away your confidential financial information without your consent. In other words, there is no requirement to even disclose that it is a short sale. It may, however, be in your best interest to do that, and you can discuss the pros and cons with your agent.

Having said that, before ratifying a contract, you will need to put in a contingency that says the offer is contingent on third party approval. That 3rd party is your bank - no approval/no contract. That's how you protect yourself.
1 vote Thank Flag Link Sun Apr 26, 2009
It would not be fair to a potential buyer to not be informed that the house they hope to be in in 45 days may not be available for months because the offer is contingent on a third party accepting they offer. Our particular MLS requires that we input whether or not it is a short sale.
0 votes Thank Flag Link Sun Apr 26, 2009
The listing should indicate that this is a POTENTIAL short sale and that lender approval may be required. The bank has to be presented with a contract before they can approve a short sale. The contract will be accompanied by a short sale packet including the seller's hardship letter. The bank will determine whether there is actually a hardship and whether to accept the offer. There can be no short sale without this and the packet has to be resubmitted with each offer. If the bank does not accept the short sale, it would be treated as a rejected offer.
0 votes Thank Flag Link Sun Apr 26, 2009
Each State may have different requirements as far as verbiage required on MLS. But from what I have been seeing we are required to state in the remarks that the home is subject to Seller's lender approval, that it is a short sale or something to that effect. Most of the lenders that I have worked with on Short Sales will not agree to any price until there is an offer presented. It is helpful though if the agent gets the Seller's financial information, hardship letter, authorization to speak with the Seller's lender and at least makes contact with the lender prior to putting the home on the market.
But- the lender will not even discuss what amount they will accept until there is an offer presented. It is frustrating I know- but until they devise a better system, that's what we are dealing with.

All the Best to you!
Web Reference:
0 votes Thank Flag Link Sun Apr 26, 2009

I answered some questions about SS but I can not find them in my list quickly. You may check my Q&A.

When I answer real estate question, I always focus on legal and ethical aspects.

Remember lender's role in SS transaction. Lender's decision is the contingency not the whole contract. How to deal the contract is still a negotiation between buy and seller. Lender can only say as yes, I approve the price or no, I donot. Maybe, lender can even have no responses. Law doesnot say that lender must answer yes or no in a specific period. You can think about how buyer's lender works in a transaction. That is similar.

Here, I would like to mention two things. First, real estate is a statewide business but loan is a nationwide. Second, most lenders which have a lot trouble borrowers, have no legal department or no strong legal knowledge to understand all the states which their loan business cover. That is not hard to believe that lenders are easy to break or ignore the local real state laws. Especially in CA called legal and real estate pioneer state, outside lenders always do something that they believe they are right but in CA, they are wrong.

Also, since end of 2008, the laws and regulations keep changing. Some lenders may have no time to update their understanding. By the way, otherwise, they would not have today's trouble. When lender tells or yells you to do this or that, do be afraid. The lender may not be right.

0 votes Thank Flag Link Sun Apr 26, 2009
Your agent should make sure that your lender is aware before listing the home. Most MLS' hav ewording that should be in the listing.
0 votes Thank Flag Link Sun Apr 26, 2009
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