Steps to Take if a Listing is a Potential Short Sale
In 2004, an agent sold a house located on 444 Ramshackle Rd to a buyer for $500,000. In October 2007, the owner contacts the agent and wants him to list the house at 444 Ramshackle Rd. The agent receives an offer of purchase for $450,000. In light of the market conditions, the agent believes this would be a good deal for the owner. However, upon receipt of the offer, owner informs the agent that he is not sure the offer will be sufficient to reimburse the outstanding mortgage balance. What can the agent do?
First and fore most, in this market, before accepting a listing, an agent should always ascertain a few vital pieces of information. Doing this due diligence check before an agent accepts a listing will spare future headaches. Ask a potential client: (1) do you have enough equity in the home to pay off all the liens against the home; (2) have you made all your mortgage payments in a timely fashion; if not (3) how far behind are you on your payments; (4) have you talked to your lender(s) about the situation; and most important (5) are you currently in bankruptcy?
So now the agent knows it is a short sale. What next? Short sales can have potentially devastating tax consequences as well as an impact on the owners credit therefore, the agent must inform the client that he should seek the advice of an attorney and a tax advisor. Informing a client in writing is the best and recommended practice, however an agents verbal recommendation, within the context of the Code of Ethics, is sufficient for a REALTOR® to discharge their ethical duties.
Next, an agent should obtain written permission from the client to talk to the lender(s). This will allow the agent to ascertain the clients true position. The agent should ask the lender if they will consider a short-sale on the property? If the lender(s) agree, then the agent should ask for the information they will need from the client to approve the short sale and what commission they will approve as part of a short sale. It is important to ascertain this information prior to entering into a listing agreement as lenders may not accept the terms of the agents listing agreement.
Then run a title search to make sure the property is free and clear and the deal will be able to go through.