PROView - May 2008 - (Page 17) Dealing with Short Sales and Multiple Offers Bargain hunters abound in this market, so it is not too surprising that REALTORS® find themselves once again dealing with multiple offers. Randy Schwartz, general counsel for the Florida Association of REALTORS®, advises that once there is a signed contract, even though it is subject to the bank’s approval, other contracts must be taken as back-ups. If a seller insists on signing every contract that comes in and sending them all to the bank, keep in mind that Article 1 of the Code of Ethics states that “REALTORS® pledge themselves to protect and promote the interests of their client.” Standards of Practice 1-7 clarify how REALTORS® are to conduct themselves in this situation: REALTORS® shall continue to submit to the seller all offers and counter-offers until closing…unless the seller has waived this obligation in writing…REALTORS® shall recommend that sellers obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the preexisting purchase contract. Short Sales and the MLS Rules and Regulations According to Kat McCoy, Manager of the Suncoast MLS, there seems to be some confusion as to how agents should treat short sale properties in the MLS. Below are McCoy’s answers to common questions regarding transactional steps that apparently are cause for some confusion among agents and brokers. Q: What language should be used to specify that a property indeed is considered for a short sale? A: Include, in the private remarks section, the following message: “Possible short sale – call agent for details.” Cooperating brokers are thereby put on notice that the listing price may not be sufficient to cover all encumbrances, closing costs, or other seller charges and sale of property at full listing price may be conditioned upon approval by third parties. The information that the sale may be conditioned on the approval by a court, lender, or other third party can also be included in public remarks if the seller has agreed to this disclosure in writing. Q: What should be the status of a listing once an offer has been presented? A: The listing status should be Pending or Active with Contract once a contract has been signed by a seller. If the offer is submitted to a lender before it is signed by the seller, the correct status is Active. Q: What’s the proper way to specify an offer of compensation? A: A percentage or dollar amount should be stated, following the same rules and regulations as any other PINELLAS REALTOR® ORGANIZATION exclusive contract. The MLS Rules and Regulations state: “The MLS requires that the published information clearly inform Participants of the compensation they will receive in cooperative transactions unless the listing Participant advises them otherwise in writing and in advance of the cooperating Participant’s producing an offer to purchase.” Q: Who does the REALTOR® truly work for – the seller or the lender? A: Agents work for the seller, not the lender, throughout the transaction. Unless the lender is a party to the listing agreement, they have no say in how the listing appears in the MLS. Further, no seller or lender can negate MLS rules. MLS rules are between the broker and the MLS. Q: What if the lender reduces the compensation, how should that be handled by the listing broker? A: According to the NAR Code of Ethics and Arbitration Manual: While offers of compensation made by listing brokers to cooperating brokers through MLS are unconditional, a listing broker’s obligation to compensate a cooperating broker who was the procuring cause of sale may be excused if it is determined through arbitration that, through no fault of the listing broker and in the exercise of good faith and reasonable care, it was impossible or financially unfeasible for the listing broker to collect a commission pursuant to the listing agreement. In such instances, entitlement to cooperative compensation offered through MLS would be a question to be determined by an arbitration Hearing Panel based on all relevant facts and circumstances including, but not limited to, why it was impossible or financially unfeasible for the listing broker to collect some or all of the commission established in the listing agreement; at what point in the transaction did the listing broker know (or should have known) that some or all of the commission established in the listing agreement might not be paid; and how promptly had the listing broker communicated to cooperating brokers that the commission established in the listing agreement might not be paid. Some selling brokers suggest preparing a net sheet to accompany offers showing all closing costs on the buyer’s side of the net sheet, and the seller along with the third party bank will counter on the basis of the bottom line price they will accept. If the offer is structured properly, it is possible to avoid making commissions an issue. Q: What is the appropriate way to price a short sale? A: Unless the price is for an auction property, all listings must show the gross list price as stated in the listing contract or by a status change, authorized and signed by the seller. According to the MLS Rules and Regulations, “The listing Participant must state the full May 2008 17
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