Yesterday our RAM board of directors announced a change in how we are supposed to handle short sales in the MLS system. This will really impact the short sale process and everyone should be aware of the changes. I don’t agree with the changes but after discussing with my broker, I’ll let him fight that battle.
Currently, when you have a potential short sale listing, you complete the short sale addendum. This is a standard addendum that the Hawaii Board of Realtors released. This addendum gives 2 options to define “Acceptance Date”.
- On acceptance of the Purchase Contract. This option is like any other “non-short sale” contract.
- Upon delivery of written approval of the short sale to Buyer by all lien holders. This is the option most will select.
This addendum gives the buyer the opportunity to walk, without cause and without any loss of deposit at any time. It gives the seller the right to continue to market the property and to present all offers to the lien holder until written approval is received by the lien holder.
The new Maui MLS rules say that when an offer has been accepted by the seller, the listing must be changed to PENDING status. In the past we left it ACTIVE until the bank accepted the offer. Most agents, when calling to inquire about a short sale would ask “Do you have any offers to the bank and where are they in the process”. Now, most just won’t call.
Ok, let me “talk story” to simplify this. I have a client, Sally who is selling her home as a short sale. We price it aggressively to get traffic and the best offer. We have 14 showings in the first 10 days but no offers. We get a low-ball offer. Sally just got a foreclosure notice on her door so she is worried. She wants to accept the offer and submit it to the bank. We do that and per MLS rules, I mark the listing to pending. Suddenly we have no more showings and only an occasional inquiry. Despite checking in with the bank regularly, we have no indication if they will accept it or not. Remember, that most the banks do one of 2 things with a short sale offer, 1)accept it 2) sit on it. Rejections are rare; counters are rarer. So it sits…and sits. The auction continues to be delayed so Sally is very frustrated. Per the short sale addendum, Sally can’t back out. As long as the buyer still wants the property, even if the time frames have expired, the seller is stuck. A year or so down the line, Sally is foreclosed on. She consults with an attorney who challenges whether I acted in her best interests. Wait – the contract states that the seller can continue to market the property. If the property isn’t ACTIVE on the MLS, how could I be actively marketing it?
I’m not a lawyer, but I would think that any court would rule with the contract and the REALTOR Rules of Ethics and say that the MLS rules are not legally binding. The listing agent has an obligation to do what is best for the client as long as it is legal. If I were serving as a juror on this case, I would find myself guilty.
I can hear myself trying to explain this to my next short sale client. “So once you have accepted a contract, I can continue to market it but it won’t show up in the MLS as available. Forget that statement I made earlier about the MLS being the best marketing tool available!” If I wanted to be legal and follow the MLS rules and uphold my commitment to my seller, I would need to change the contract. Hopefully, we could put something in it that would allow the seller to deem the contract pau on a specified date if the bank has not taken action. I would strongly advise my client to NOT accept offers that are not “reasonable and justifiable” to the bank.
Hopefully, our RAM Board of Directors will see this is far more than a simple status change before they see some well intended agent in court!