Short Sales Should Be Disclosed to Consumers Upfront

 

I received a call today from a house shopper who was looking at homes online. When I informed her that the house she was calling me about (not my listing) was a short sale she got upset and asked me: “Don’t Albuquerque Realtors have to disclose when a house is a short sale?” My answer was “no, not really.”

Read What is a short sale?

Well, I’m not sure my answer was exactly correct.  In fact, NM real estate licensing law dictates that brokers are required to make “disclosure of any adverse material facts…about the property or the transaction” to consumers. In my opinion if a house is offered for sale as a short sale it is clearly an adverse material fact. The problem is that Southwest MLS rules do not require that brokers identify short sale listings to consumers in the public remarks section of the MLS, but only in the LO/SO (Listing Office/Selling Office) section that consumers don’t have access to. Only the public remarks section, not the LO/SO remarks, are sent out to consumers through the data feed that websites like Realtor.com, Trulia, Zillow, and individual agent websites use to display Southwest MLS data. Consumers don’t get any indication the house they’re looking at is a short sale.

If licensed brokers are required to disclose “adverse material facts about a transaction,” why don’t they have to disclose it to consumers online?  It sounds like a violation of license law and a large gap in Southwest MLS policy to me.

OK REALTORS®, still think that you don’t have to disclose if the transaction is a possible short sale? Well how about Article Two of the Realtor Code of Ethics that we are all supposed to adhere to? Article Two says: “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.” There are at least two pertinent facts about short sales that I think need to be disclosed. First, that short sales typically take considerably longer to sell because of the tedious and time-consuming bank approval process, and second, that banks are under no obligation to accept even full price offers. Frequently they don’t. Those sure sound like pertinent facts to me.

I can already hear some agents saying that short sales are starting to close with more and more regularity. However there is no statistical evidence of this that I’ve seen yet, and no one watches Albuquerque Real Estate Stats more closely than I do; there is only anecdotal evidence and it is what I consider to be nothing more than wishful thinking on the part of brokers.

Judging by the number of Albuquerque real estate brokers that do not disclose that their short sale listings are exactly what they are, many of my fellow brokers do not agree with me on this issue. OK, perhaps I should give them the benefit of the doubt, they probably haven’t given it that much thought. They are just trying to sell houses and don’t worry about esoteric things like honesty and integrity and ethics. It’s these same brokers that are thankful that there is no MLS policy that forces them to reveal their listing, which at first glance looks like a great deal, but in reality is a short sale and a longshot to successfully close. Why? Because as several agents who I believe to be a little short in the honesty and integrity department have actually told me, listing a short sale is a great way to find buyers for other properties that you can actually sell (betcha they don’t tell their seller clients that).

Brokers, please don’t mislead the public. If your listing is a possible short sale just say so in the public remarks section of the MLS. It may not be required by Southwest MLS policy, but the way I read NM licensing rules and the NAR code of ethics it’s the right thing to do. Tell consumers up front. When you don’t it diminishes our credibility and our reputations as Realtors.

—–

Just the cold hard truth as I see it. The opinion expressed in this post is mine and mine alone and is not the opinion of my qualifying broker or of RE/MAX.

***Please comment, I want to hear your opinions. Tell me why you think I’m wrong.*** 

 

If you enjoyed this article, Get email updates (It’s Free)

Comments

  1. Great article. Not controversial at all unless you aren’t disclosing that your listing is a possible short sale and even then its a guilty conscience and their problem not yours. Even if it is not required it should be a brokers priority to tell the whole truth and save their potential customers some heartache instead of duping them into a deal with smoke and mirrors.

  2. Rich, this was decided in SWMLS Policy committee a number of years ago; from the discussions I recall that it was decided that if it was disclosed in public remarks then it was a privacy issue; it’s not an adverse material fact, per se, regarding the property – but more the sellers.

    If you think about it, ANY property for sale is subject to being a short sale unless it is owned free and clear. Remember when “short sale” used to just mean that the seller would come into closing with money?

    What I think it should require is that it can only say it’s a ‘short sale’ if the correct process either through FHA, or that the package has been properly submitted to the lender’s risk mitigation process. Too many broker who are inexperienced in the process just stick a property into the MLS without having taken the proper steps to process the file through the system so that it can really be sold; or pricing it artificially low where it cannot possibly be sold.

    So, to answer your question – this was reviewed by legal, as well as NAR. But, if you really think it should be publicly disclosed, take your case to the Policy Committee with NAR first, and then SWMLS – rules are meant to change!

    • I disagree, the fact that a listing is a short sale is an adverse fact. It’s not a statement about the people, but about the transaction, namely the length of time it can take, and the likelihood of actual short sale approval and worst of all- the fact the the bank is under no obligation to approve the short sale and sell the house at the advertised list price.

      I also disagree that the seller’s right to privacy trumps the buyers right to full disclosure online. If the seller chooses to move, even if it’s a really tough time for them, I think they have waived their right to at least some level of privacy when it comes to selling their home. While it’s unfortunate that, for whatever reason, the seller needs to do a short sale, I think the rights of the consumer to understand the difficulties of a short sale outweigh the rights of the seller. This policy, in my opinion, is another example of how the real estate industry, while giving lip service to the importance of buyer brokerage, still revolves around the “list to live” Realtor model.

      I totally agree that too many brokers just stick the listing in the MLS hoping to “figure it out and deal with it later” if and when they get offers. Kind of like how they list condos for sale without taking the time or the care to have the condo disclosures completed by the homeowners association and then advertise them as FHA eligible when they are not. Short sales are for the most dedicated and educated brokers only, and even those brokers who advertise themselves as ‘short sale experts’ have low success rates, at least from what I’ve seen, and of course, I have looked. That’s not a statement so much about broker competence, because most of the brokers advertising themselves as “short sale experts” have taken additional training and are better equipped than other brokers who have not, but it is a direct reflection of the extremely flawed short sale process. But hey, does anyone really believe that banks are in the business of forgiving debt and feeling compassion for people in financial distress? This is planet earth people, not planet Mars.

  3. It is not that it isn’t disclosed, it’s just that it isn’t public information for everyone to see. The sellers are not hiding the fact that they are subject to a short sale, but they have professional representation, a broker, who is managing their distressed sale. At the time that a prospective buyer contacts the Realtor professional they have the opportunity to access more information about a property. If they do or don’t want to access short sale properties, at that point they then have the opportunity to be afforded information through their relationship with their broker.

    The same as if we started posting seller disclosures on-line for everyone to see; information like this is best conveyed through the professional relationship created through customer/Broker contact.

    Would you want everyone to know everything about your buyers, on-line, i.e. ‘going through a divorce, need my next house’ or ‘I’ve inherited a bunch of money, I’m out there buying’….goes both ways.

  4. Good points Linda, up until your final paragraph. Those comments don’t have any adverse affect on the likelihood that a transaction will actually close, but I get your point.

  5. Allmost every IDX shows which ones are short sales or not. Buyers are smater than you think nowadays….

    • But ours is one of the few, evidently, that does not. Let the buyer beware and if the price looks too good to be true, ask why. Since I wrote this post, short sales seem to be moving better, however, so don’t count them out, just be aware.

Speak Your Mind

*

CommentLuv badge

All content by Albuquerque Real Estate Agent Rich Cederberg, 505.803.5012, unless otherwise noted. eXp Realty, (505) 750-1846.

Some of the information contained herein has been provided by SWMLS, Inc. This information is from sources deemed reliable but not guaranteed by SWMLS, Inc. The information is for consumers' personal, non-commerical use and may not be used for any purpose other than identifying properties which consumers may be interested in purchasing.

Broker-Reciprocity

This IDX solution is (c) Diverse Solutions 2014.