Listing presentation

The broker is planning a listing presentation, and the seller thinks they may have to proceed with a short sale. How can the broker better prepare to work with the seller? 

Knowing the seller may have a short sale, the broker can take steps in advance of the listing. First, the broker may contact the title company and obtain a search-and-hold or title report for the property. The information provided will help the broker and seller itemize current liens on the property, thereby developing an accurate idea of what the seller will need to do financially to provide clear title. Having an accurate picture of the seller’s financial position is beneficial before entering into the listing so the listing broker may ask the seller to have financial information readily available. 

The listing broker can include additional documents in the listing folder: a WRA Short Sale Checklist, a WRA Listing Questionnaire Regarding Title Issues, a copy of the Addendum SSL to the Listing Contract- \Short Sales, and a sample net sheet. The broker and seller can use these documents to identify potential issues with the transaction in advance of marketing the property for sale. The broker can also complete a current CMA to assist in determining a viable list price for the property. If the property does not sell quickly, it is valuable for the broker to go back and ask the seller similar questions to assure that the seller’s financial position remains similar throughout the listing period. 

The WRA-SSC Short Sale -Checklist was created for the broker and property owner to work together to gather information and assess the seller’s situation to decide if a short sale is a good solution. The checklist includes background information, potential alternatives to short sale, and a roadmap and requirements to move ahead when a short sale is the right decision. The Addendum SSL–Short Sale Listing is educational in nature and allows the broker to obtain consent to work with the seller’s lender. This addendum includes cautions about the potential consequences of a short sale and recommends the seller consult with attorneys and tax advisors with specific questions. 

Lender involvement

The broker has a property that has been listed for almost a year. The seller was current on payments at first, but not in recent months, and has now received a foreclosure notice. The seller wants to move forward with a short sale. Must the broker get bank pre-approval for the short sale? 

Whether a seller will qualify for a short sale is a case-by-case determination to be made by the seller’s lender. Given the change in the seller’s financial position, the broker and seller may review Addendums SSL and SSO to educate the seller about the short sale process. The listing may be amended to incorporate the Addendum SSL, and the Addendum SSO may be used with any offer to purchase. The seller may approach the lender to determine under what terms and conditions the lender would approve a short sale.

However, lenders do not in general agree up front to approve a short sale. Whether the lender will offer any information would be dependent on the lender. 

The Home Affordable Modification Program (HAMP) is a program to assist homeowners to avoid foreclosure by modifying loans. The Home Affordable Foreclosure Alternatives Program (HAFA) sets forth a uniform process, uniform forms, and perhaps most importantly, firm deadlines for short sales. If the seller qualifies for HAFA, the seller can obtain pre-approved short sale terms before listing the property. If a borrower/seller expresses interest in a short sale to his or her loan servicer and is eligible, per the basic HAMP criteria at www.makinghomeaffordable.gov, the seller will receive a standardized Short Sale Agreement (SSA) that will give the list price or the net sales proceeds amount acceptable to the servicer and set a maximum limit on closing costs. To find out if the seller qualifies, the seller may contact the Homeowner’s Hotline at 1-888-995-HOPE or visit www.realtor.org/government_affairs/short_sales_hafa. Fannie Mae, Freddie Mac, and some other lenders have similar programs and may be willing to set some sale parameters in advance — the seller will need to ask the lender.

Seller repairs 

An offer was presented to the seller on the listing broker’s short sale listing. The offer used the WRA Addendum SSO and included an agreement in Additional Provisions that the seller would make specific repairs prior to closing. Is the seller bound by the offer terms regardless of the short sale status? And would the seller or lender be required to perform the repairs in the offer if they sign and are accepted?

If the optional “as-is” provision in the Addendum SSO is marked, the “as-is” clause states, in part, that the seller will not make any repairs or cure any defects in the property. Consequently, if accepted, there would be contrary terms in the Addendum SSO and the Additional Provisions. The seller should counter the offer to assure there is not an inconstancy relating to repairs of the property included in the Additional Provisions. In a short sale, the seller — not the lender — is the one transferring title to the property and agreeing to the terms of the contract including repairs. Given the seller’s financial difficulty, there is no assurance that the lender will approve the short sale including enough remaining funds for the seller to complete the repairs. Since the lender is not a party to the contract, the lender would not be required to make the requested repairs. 

Sheriff’s sale

The broker’s short sale listing is in foreclosure. There is an accepted offer subject to lender approval, but the sheriff’s sale was last week and the lender has the successful bid. What does the listing broker do after the sheriff’s sale? 

Technically, the seller still owns the property. Title of the property does not transfer to the successful bidder until court confirmation of the sheriff’s sale. Before confirmation, the listing broker will continue to provide brokerage services, and if possible, although not probable, the broker can assist the seller to convey the property per the pending offer. Without successful negotiation of the short sale or obtaining funds to pay off lien holders, the seller may not be successful. Although ownership of the property is conveyed by sheriff’s deed, the seller’s obligations to the buyer and the listing broker must still be resolved. It will be necessary to address each contract, the original listing, offer, and possible second listing on its own merits. 

• The first listing: The listing broker — not listing agent — must determine what action to take regarding the listing. Although the seller did not sell the property, ownership changed; therefore, per the listing, the broker could technically pursue the seller for commission when there is an effective change of ownership or control of the property during the listing. Considering that the seller no longer owns the property, functionally the broker no longer has the property to market, effectively terminating the listing. If the broker does not wish to pursue commission or damages for breach, the broker and sellers may use a CAMR to release all rights and interest in the listing. If the broker wishes to pursue legal rights, a notice or other correspondence from legal counsel may be appropriate. 
• The original offer: After the confirmation of the sheriff’s sale, the broker may give written notice to the parties that title to the property has been conveyed by sheriff’s deed. One definition of material adverse fact is “information that indicates that a party to a transaction is not able to or does not intend to meet his or her obligations under a contract or agreement made concerning the transaction.” If the parties agree to release all rights and interest in the offer and to disburse earnest money, they may sign a CAMR. However, if either party wishes to bring legal action against the other, they may be referred to private legal counsel for legal advice. If no CAMR is agreed on, the broker holds the earnest money until proper disbursement authorization is given. 
• The second listing: The lender may elect to list, with a new listing contract, with the same broker or may engage a new broker to market the property for sale. Generally, the lender will have the new listing broker target any formerly interested buyers to purchase the property. If the lender does not list the property, a broker may enter into a buyer agency agreement to represent the previous buyer to acquire the property from the FSBO lender. 

Tracy Rucka is Director of Professional Standards and Practices for the WRA.