NAR considers new short-sale disclosure rules

WASHINGTON – April 25, 2008 – When the National Association of Realtors®’ Multiple Listing Issues & Policies Committee meets in May, members will discuss a standard definition of “short sale.” The discussion stems from disagreements within the industry with regard to when properties can be labeled as short sales, and how to disclose them in the Multiple Listing Service.

Committee Chair Colleen Badagliacco says that most MLSs allow Realtors to disclose real estate-owned properties, and whether sales are “subject to lender approval” or “subject to court confirmation.” However, banks often discourage disclosure of potential short sales because more potential buyers submit low-ball offers.

Badagliacco says that listing agents have a fiduciary duty to sellers, including REO properties, and suggests that encouraging a short sale might not be in the seller’s best interest. On the other hand, as potential buyers focus on the properties currently available for sale, they want to know which ones have the potential to be a short sale. Disclosing “potential,” however, can be difficult. “Are you potentially pregnant?” asks Badagliacco when describing the problems Realtors face if selling possible short sale properties.

“The (issue) that we’ve really been trying to focus on and pin down for discussion at the May meeting is: ‘How do you define a short sale?’” says Badagliacco. “Because technically you don’t have a short sale until it comes to closing, and there is not enough money to pay off the lender.”

Source: Inman News (04/24/08) Roberts, Jr., Glenn

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