With short sales it is necessary to think even deeper into your contract stipulations for both your listings and all Purchase Agreements to protect ALL parties involved.
I know that in some states in some brokerages you are provided stipulations or addendums to use. However, we process short sales in all states and find that the majority of agents that end-up with short sale listings do not know how to proceed.
In our Atlanta Short Sale office we require the following: [Keep in mind that I am not a Broker and should you choose to use any of the following suggested stips, please first have them approved by your Broker and/or attorney]
For your Listing Agreement:
The proper procedure for pricing a short sale property is debated regularly. We see agents all over the map on this one. Some come in too high and hope they'll get an offer. Others list too low from the start and end up having to raise the list price to meet the bank's requirements while shooting themselves in the 'marketing foot.' Pricing should be based upon true current and 90 day projected FMV [FAIR MARKET VALUE.] In this market, that could mean listing below what is owed by the Seller. So inlcude.....
1. All parties acknowledge that the listed sales price may be an amount insufficient to pay total amount owed by Seller to all Seller's lender(s) and /or lien holder(s) and that all offers will be contingent upon acceptance by the Seller's lien holder(s) of a discounted pay-off at no cost to the seller.
To keep the Seller from coming after you when a bank won't accept a short sale, a lien holder who wants money or a promissory note at the closing table, or junior liens that won't budge...include the following:
2. All parties acknowledge that the Listing Broker and their assigns have not warranted that the property can be sold for the price listed and that the lien holder(s) will agree to a short-sale at no cost to the Seller. The Seller has given the Listing Agent the authority to contact and negotiate with all mortgage lien holder(s) the details of the sale and the Seller's situation. All necessary efforts will be made by the Listing Agent to complete the requirements of the short-sale process.
We insert this one to keep Seller's vested and "in breach" of contract if they don't help us help them...
3. Seller shall make all efforts to assist the Listing Agent with the short-sale process. This includes, but is not limited to: providing requested documents or information necessary for obtaining approval of the short-sale from their lien holder(s), providing copy of any notices or information from lien holder(s) and /or attorneys hired by lien holder(s), and staying in open communication.
Just a reminder of the process - so there is no "told you so" later...
4. Seller acknowledges that they will not receive any net sales proceeds at closing and that if their lien holder(s) refuses to honor the discount, the property could go to foreclosure. Seller is aware that their lien holder(s) may require that the difference owed be paid as a deficiency judgment and if there is no deficiency judgment, the discount received may become a taxable event to the Seller. Seller is aware that they have many options and that they should consult with the appropriate legal, tax, and financial professionals.
There are many more variations of the theme and other stips that may be deal specific - but the ones listed above should be included as a minimum for your short sale listings.
Look for Parts 2 & 3 coming soon - I'll cover suggestions for Purchase and Sale Agreements plus a few bonus suggestions for Negotiation agreements and even FEE structures you could implement as a short sale agent.