BiggerPockets

There seems to be 2 schools of thought when it comes to short sales as it pertains to the MLS Status (Active, Backup, Pending, Closed). Specifically when the listing agent receives an offer on a short sale. However, I haven't been able to find a clear cut answer so I thought I would ask here to see how other Realtors are dealing with this.

1st Some agents are keeping the property in Active Status once they have received an offer and have submitted it to the bank. No bank approval yet so the property is still marketed as Active on the MLS.

2nd Other agents are immediately putting the property in Pending or Backup status and negotiating the first offer they receive.

I can see positives and negatives to both. Thoughts? Is there a legal and correct answer?

I think the closest thing we have to that is a Special Conditions Section that shows the property as either Short Sale/Subject to Approval or Short Sale/Offers Submitted. This isn't technically the status but just clarifies what type of sale it is or if special conditions exist (i.e. Corporate Owned, REO, Short Sale).

I'm definitely calling the board tomorrow. Really the heart of my question is what to do with "backup" offers if and when they come in. If you take every backup offer that comes in and send it to the lender (assuming it's higher and/or better in some way) it could potentially lengthen and complicate the bank approval process.

I agree, honesty is definitely best. I did find out more info today from our local board and the legal hotline provided by California Association of Realtors.

Once an offer is accepted by the seller (homeowner, not the bank) our local MLS rules state the property must be taken from Active status and put into Backup or Pending.

In the Short Sale Addendum in section E it states "Unless otherwise agreed in writing, Seller may continue to market the Property despite acceptance of Buyers offer, and to present to Short Sale Lender(s) any additional offers that are received on the property".

This is a very compelling reason alone to have all buyers include the SSA with their offer.

So it's really up to the seller, whom I clarified is the homeowner, not the bank. The key words are "may continue to market". The seller doesn't have to but it's their right if they want to.

I agree that too many offers could in fact just confuse the bank but if a seller receives a lower than asking price offer and then receives a higher offer it's their call.

Thanks David and Mark for your comments!

To me, any property, not just a short sale should remain active until the offer has been accepted and signed with a copy in my hands

I see your point and I agree. However, our local board was very specific about changing the status from Active to Backup or Pending once an offer is accepted by the seller. It's a bummer because the buyer could go away or find another house to buy leaving you in the lurch if and when their offer gets accepted by the lender.

Yep, definitely agree with that too. I've experienced that as well. I'm trying to weigh out our ethical and ficuciary responsibilities in this short sale market.

The listing agents responsibility is to the seller/homeowner so it's really whatever serves them best. If submitting multiple offers complicates or lengthens the process then as a listing agent I'm not serving my client well.

Just getting out some of my own thoughts and hearing everyones opinions has been very helpful.

Lafi,

That makes sense on surface level, but it really doesn't do the seller any good. The seller really shouldn't be entering into to binding contracts at one time.

It is physically impossible for them to perform on both. The seller can ratify one offer, and sign other offers as back ups, but they really shouldn't sign two offers as primary contracts.

I know that when sellers sign the offer that they are subject to lender approval, but they really shouldn't ratify two deals. What if the lender approved both? Obviously, you couldn't close twice. If the lender approved both, the seller would be likely be subject to damages in a lawsuit. The likelihood of this happening is slim to none, but it is still good to be safe.

I wouldn't put anyone in a situation where a lawsuit can be filed. But I think if you inform all the parties of the situation and how you are handling it, they are usually receptive. Wouldn't you agree?

I would usually agree. Unfortunately, it only takes one bad apple to spoil your day!

I'm sure you are fine as long as you disclose to everyone (and document).