If you’re going to understand short sales, start with this basic premise – there is no rule book, there is no standard, there is rarely a consistent practice and we’re making up the rules as we go along. Something I learned last month is likely to be different last month. The best defense/preparation is an experienced professional who is both knowledgeable and confident enough to say, “I don’t know … but I’ll find out.”
How anybody does real estate as a part-time profession is beyond me. I live and breathe this stuff every day and it’s all I can do to keep up. The Charlottesville real estate market is, shall we say, fluid. It’s always changing, and new wrinkles, opportunities and challenges arise every day. Even on normal transactions.
So what’s a good Buyer’s Agent in Charlottesville to do when trying to determine whether a property for sale is, or is likely to be, a short sale?
A short sale is an arrangement with your lender whereby they will allow you to sell the property for less than the amount of the current mortgage.
First – ask the listing agent.
Second – check to see what the seller paid – and when (did they own it long enough to do a cash-out refinance and buy a boat and a TV and a horse?)
Third – Understand that in the Charlottesville MLS we are supposed to disclose whether a property is in a short sale position. But … what about the ones that are thisclose to being a short sale?
Fourth – Prepare our buyer clients for what they may run into. This includes explaining timelines, perils, pitfalls, opportunities and so much more. (more to come on this)
What’s a Charlottesville buyer to do in this market with more and more short sales?
– Be patient.
– Be aware that there are some things that neither you nor your agent can control.
– Be informed.
– Be qualified.
Buyer Agents must be more diligent. Whether a property is a Short Sale is a fact that is material to the transaction. Regardless of the Listing Agent’s ability to disclose the status of the property, the diligent Buyer Agent should always ask the Listing Agent about the status of a given property.
Virginia Law protects Sellers in a real estate transaction by forbidding the disclosure of confidential financial information by their Agent. As already stated, whether the sale of a property will result in a Short Sale is information that is protected by the confidentiality provisions of the statute. Therefore, unless a Seller has provided written authorization to disclose such information, the Listing Agent cannot disclose whether a sale will result in a short sale to anyone by any means.
Virginia Regulations 54.1-2131 A
3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the seller consents in writing to the release of such information;
It’s important for the Buyer Agent to also be prudent. One possible solution is to write language into the Offer to Purchase that compels the Seller to disclose their pursuance of the Short Sale, as a term of ratification. Since it is possible for Listing agents to present more than one offer to the lender. The Buyer and their agent may wish to make the ratification contingent on only that offer being presented to the Lender. The above paragraph is purely a recommendation and needs to be approved by the Practitioner’s Broker and legal counsel. However, this paragraph could be very useful in the Offer to Purchase. The first section makes it a requirement for the Seller to disclose if they wish to ratify. If the Seller declines to agree to this term it may indicate that it is an undisclosed Short Sale and the Buyer should act accordingly. The second section is a protection for the Buyer, should the Seller find out in the course of the transaction that they cannot pay off all indebtedness and need to revert to a Short Sale transaction.
Much like how good Charlottesville Buyers’ Agents should be researching a property’s true continuous days on market (quote from a client regarding Days on Market, “The MLS lies” 🙂 ) [ Realtors gaming the MLS ] – Buyers’ Agents should be doing extreme due diligence.
Part 1 of 2 – Charlottesville Short Sales and Listing Agents’ Responsibilities