Short sales are popping up more and more across the Seattle area. Buyers need to be aware of whether not a potential property is a short sale because the offer process is quite different.
Here is the NWMLS definition of a short sale:
“A “Short Sale” is a sale that does not produce sufficient funds to cover the existing monetary encumbrances against the Property, closing costs, real estate commissions, and other financial requirements of closing. Seller’s creditor(s) are those third parties who have an interest in the Property in the form of a deed of trust, some other security, or a lien (e.g. tax lien).”
See my problem with a short sale listing is that buyers go into the process without the full knowledge of how different it is from a “normal” transaction. The NWMLS has come up with a form to help, but making sure to use a short sale agent in the process is the best plan of attack. Short sales can be great deals, but knowing what is involved is key.
Knowing that a listing is a short sale is also key since there are no guarantees as to price or commission in a short sale. The offer is (or should be) always signed subject to lien holder approval. The lien holder almost always inevitably comes back with a higher price even if you offer the list price and they also usually come back with a lower commission amount for the two agents involved. False advertising all around in my opinion. The MLS is now stating that a short sale listing must be disclosed. This is a step in the right direction in my opinion.
Another really needed change: Short sale properties typically stay marked as “active” in the MLS while the approval from the lien holder is being obtained. This is frustrating for buyers out there and also bad for the MLS stats. I think the short sale numbers are actually seriously dragging down the area stats overall and the new rule is a helpful one in that. The properties with offers which are waiting for approval will be marked “pending – BU” until they go to “pending” and then “sold”. I am extremely pleased with this development which will be good for everybody. Other sellers in the neighborhood who may be waiting for a distressed property to come off the market before they put theirs on can now have an easier time without false lower priced competition.
Introducing Form 22SS:
The MLS’s short sale addendum for Washington state (Hallelujah!). It isn’t perfect, but it is going to help clarify a lot of the process and steps that have been unclear in the past. First of all the from states that the property is a short sale and that the lien holder has to approve the offer. The form then gives the seller so many days (default is 30 days) to get that approval. Mutual acceptance is explained as when the lien holder approval is delivered. 22SS Gives the buyer the option of checking a box to either say that the seller can accept other offers for lien holder approval while they wait for their answer or not. My advise on that to buyers is check the box that allows your deal to be the only deal in town. Of course, my advise for a seller is usually the opposite depending on the situation. Lastly, the new from gives the buyer the right to back out of the deal at any time prior to lien holder approval.
I am in the middle of a short sale purchase. Purchase and sale agreement excecuted 2/29/08. No other offer since mine. Property has remained active with no status change. Have been getting the run around from both agent and listing agent. New answer yesterday, the listing office has decided to be non-compliant with the NWMLS on changing the status of short sales and that it would take too much money to fight it. I think they are referring to this new addendum. It seems to me that rule 120 hasn’t been changed that much in the revision. I would have checked the box that disallowed other offers and they would have changed the status from active to ‘pending-BU’. Am I missing something here? Got a referral to an attorney who has some experience in real estate transactions?
Signed; Locked on like a Pitbull!
Hi newly educated –
Sorry this happened to you – I sure hope it does go through for you and that you are going to get a great deal if it does. Short sales are tough and I am not sure if the new addendum is applied to a transaction already in the works. I would think that at least the status should change, but who knows. I like that the MLS is trying to address short sales and their quirks, but the new language is vague. I do have two calls in to them for some clarifications.
Good luck! I hope you get a good deal:)
[...] short sales and foreclosures have increased so much so that the NWMLS has had to come out with new rules for short sales. Buyers who are well qualified are out there looking for the best deal and I am noticing that the [...]