Tampa, FL · Member since 2009 · 76 posts · 21 votes
Someone was telling me you can not list properties on the MLS that you do not own in Florida.
If you have an option contract on a property, have paid the seller consideration and recorded the notice of option in the public records, don't you have the right to list the property on MLS (in Florida) even though you don't own the property?
My understanding is the option gives you an equitable interest in the property and allows you to list the property on MLS to flip to a retail buyer.
Is this correct? If not how are short sale flippers advertising their properties to retail buyers besides craigs list?
Where can I find the marketable/equitable interest laws for Ohio?
Justin: I'm an Ohio attorney and I just had occasion to research this matter twice in 2 different contexts in the last month. In Ohio - you acquire equitable rights to real estate ONLY if there is a purchase agreement in full force and effect. If you have an option contract and you have not yet exercised the option to purchase - there is no purchase agreement in full force and effect. I have no information about marketable interest. Here is the authority for equitable interest not existing if the option has not yet been exercised:
“A written optional contract for a nominal consideration given by the owner to sell his real estate is not a sale thereof, but only a standing offer to sell to the person, and at the price named therein, if accepted within the time stated in the optional contract. The option confers no right to the holder of the option in the real estate, but it is only a sale of a right to him to become the purchaser upon the acceptance thereof within the time stated. Until the acceptance of the offer according to the terms thereof, it does not ripen into a sale of the real estate or become a completed contract between the parties for the sale thereof. It is only after the holder of the option has accepted the option that he becomes the equitable owner of the property, and can compel specific performance of the contract in a court of equity.â€
Sause v. Ward (1917, 11th Appellate District), 7 Ohio App. 446, 450-451.
An option contract does not give you equitable interest, it gives you marketable interest. Unfortunately, in some states, you need to have equitable interest in order to list the property for sale.
Yes, Florida is one of these states. Trusts are used to accomplish retail MLS short sale flips in Florida. Although they create a whole other set of problems.
Some Realtor associations in Florida don't have a problem placing Option Holders on the MLS.
MLS rules change from associations to associations. Mine has a problem with Option Holders. One way to get around it is to Join with the seller on the listing agreement.
The other way is to use a TRUST and the trustee will sign the listing agreement.
But equitable interest doesn't matter if the Realtor Association has an issue with it.
You might have to talk to a few Realtors until you find one that understands your intentions. Make sure when you interview a Realtor, you fully explain what you plan to do.
I am a Realtor and obviously don't have a problem with listing options, I just don't want to get into trouble. I guess I need to check my local associations MLS rules as it pertains to option holders. Thanks for the feedback guys!
If you record the contract then it becomes "equitable interest"
I rarely disagree with Will, but equitable interest is usually determined by each state.
I was not very clear in my earlier posting. In Florida, it is not clear that an option holder has equitable interest regardless of recording the Notice or not.
In many states, recording the option does give you equitable interest. In other states it is ambiguous. When it is unclear, the local MLS association will counsel its brokers and decide who has rights market the property in THEIR MLS.
So, I argue, that equitable interest or not, when recording the option, the buyer as marketability. Most Notices of Option's should have a clause which clearly states the seller is granting the optionee the right to market the property on the MLS.
Provided the state, Broker, agent or association, does not have laws, rules, or personal feelings to the contrary, then you should be able to market the property since the equitable interest holder is granting you the rights to do so.
Remember, your not marketing the property directly your marketing your option to sell the property.
As several have already stated on this thread, you need to check with your broker and then check with you local association. You should have a local ethics officer in your association that can help you clarify this point.
There are constant changes being brought on by new legislation and an ever changing array of lender rules and attitudes, so what works today, could very well change tomorrow. Just 4 months ago, you could use an option contract and market your option in California. Now you need an RE License. I suspect other states may adopt this too, since many scam artists are ripping people off and the state governments are scrambling to stay ahead of them.
Jonathan has shared some ideas as well. Trusts very popular in Florida for this reason and we need to utilize what tools we can.
And you will not have to disagree with me here either. It was my poor typing error, as a "?" was suppose to be at the end to raise the question of equitable interest as defined per state. You ansered the question properly.
Sorry for the confusion.
My typing sucks. :cry:
Where can I find the marketable/equitable interest laws for Ohio?
Justin: I'm an Ohio attorney and I just had occasion to research this matter twice in 2 different contexts in the last month. In Ohio - you acquire equitable rights to real estate ONLY if there is a purchase agreement in full force and effect. If you have an option contract and you have not yet exercised the option to purchase - there is no purchase agreement in full force and effect. I have no information about marketable interest. Here is the authority for equitable interest not existing if the option has not yet been exercised:
“A written optional contract for a nominal consideration given by the owner to sell his real estate is not a sale thereof, but only a standing offer to sell to the person, and at the price named therein, if accepted within the time stated in the optional contract. The option confers no right to the holder of the option in the real estate, but it is only a sale of a right to him to become the purchaser upon the acceptance thereof within the time stated. Until the acceptance of the offer according to the terms thereof, it does not ripen into a sale of the real estate or become a completed contract between the parties for the sale thereof. It is only after the holder of the option has accepted the option that he becomes the equitable owner of the property, and can compel specific performance of the contract in a court of equity.â€
Sause v. Ward (1917, 11th Appellate District), 7 Ohio App. 446, 450-451.
I recently listed a short sale flip. In my state you have to have equitable interest as well. After talking to two agents/investors we decided we could have the homeowners (A) fill out the listing agreement and list my trust (B) as "owner of record" on the listing. I don't know if it's going to work yet. I'm more concerned about (C) financing without seasoning.
I'm in Florida and instead of listing with my company and Realtor, I simply list with homeowner and my Realtor and attach a Listing Agreement Addendum.
Thanks Keith, and welcome, a very warm welcome to BP. Please hang around! You saved me a ton of typing.
You probably won't find "marketable interest" because it is not a legal term at law, in fact, this is the first I have heard of it. I guess what was meant was the right to market the option, not the property. A good "flipable" option should provide access to the property so that anyone buying the option contract can see the property the option is relates to.
To list a property on MLS any wherein the country it needs to be signed by the owner in title, since all listing must comply with ALTA requirements. If you are listing options, better make it clear. It's not the property you are selling, it's the option contract. Good luck....
Thanks Financexaminer. I'll have to look into the ALTA requirements. Short Sales is a new area for me, but I've done much work on it lately because I have a client working on ramping this up. I am working to develop a system with regards to the legal process because I haven't liked what legal materials I've seen on this matter with respect to Ohio law.
I have a solution for Ohio as far as the law is concerned, but I just need the local area board of realtors to sign off on what I want to do to make sure they have no problems with it. If they have no problems with it, then I hope to be able to convince Brokers that this is the way to go.
My legal process avoids all of the potential pitfalls I've been hearing about. My process also avoids the potentially "less than ideal" work arounds I've seen people mentioning. I just need to work with my client to make sure the rest of the non-legal process goes smoothly....
Here's a whole other issue for you to consider. I'm an REO broker and I get a lot of BPO requests from banks that are processing short sale transactions. Often these BPO's are done right before the short sale is approved and closed. I've never had it happen, but I can almost guarantee you that if the seller discovered that the property was being marketed by the person who was trying to buy the home on short sale, it would affect the outcome of the deal. I don't handle any short sales, way too much work, but I have seen quite a few fall apart at the last minute. Just wondering if the folks with short sale experience out there think that having the property re-listed in the MLS prior to closing the purchase of that property might impair the short sale?