All listing agents should have that conversation with their seller clients. Remember Tim and the lawsuit from the man who was surprised by that fact AFTER closing? After closing is not the first time a seller should hear about that. Many if not most agents think the seller shouldn’t care what the price is on a short sale, leading the seller to believe it is of no concern to them. That’s just wrong.

Personally I’d say the seller should assume that the bank will require the note (or not expressly release). And if they aren’t willing to take that risk, they probably shouldn’t try to sell. But whether a listing agent would put those issues before a seller is another matter, which is why the buyer should do as you suggest, and ask. (I’m not sure it needs to be part of the contract–I can see where that does create problems–good issue–I wonder if Craig would give an opinion on how to deal with that.)

Getting back to the 80/20 thing, the seller probably has a bit more leverage if the situation is not an 80/20, or if the 20 is getting a high percentage of what they’re owed.

As to your point about disclosing if it’s close, I’m not quite sure I understand the point that was made in your class. If it’s not a short sale, you don’t need to disclose that. If it’s “close” I’d hope the agent would cut there commission if the seller comes up a bit short and doesn’t have the funds. And finally, if you get an offer that would make it a short sale, when the list price isn’t a short sale, then that actually gives the seller some negotiating position. They might be willing to pay slightly more to avoid the time it would take to do a short sale (or to have the selling agent contribute to making it not a short sale).

As Jillayne teaches in her classes (I think) and has said here, it is very important for the buyer to know in advance whether or not the seller is willing to take the shortfall as a personal note. Often that is the only way it will close. So both the buyer and the seller should be talking about that on day one in the best interest of all parties.

Problem is, if the seller puts that in the contract, the bank likely won’t consider forgiveness. So getting the seller to say that in writing vs. verbally is not necessarily a good answer either.

My problem is always anything forcing agents to do things a certain way, regardless of the wishes and impact on their client. Who needs an agent if the agent isn’t free to look out for their best interest? There is no one right answer for all people, so laws should give some leeway as to how we can represent our clients.

I was in a class the other day that said if there is any possibility that it might be short, better to disclose. Well, you had to ask yourself better for who, since disclosure is like guaranteeing it will be short.

Say the property is listed so that if the buyer offers 98% or more of asking price it is not short, but at 97% or less of asking price it is short. What is the correct answer to “is this a short sale”? Depends on your offer? That could be true of most homes if the offer is substantially less than asking price.

As we move further into the last quarter, more and more buyers will be looking for bargains…as is usual for this time of year. I’m wondering what will happen when all of an agent’s clients want a bargain, and there aren’t enough bargains to go around. Who do they tell about the bargain? It will be interesting

It really is a problem. I’ll give you that. And I’ve been trying to think of decent solutions, but haven’t been able to. I was a bit disappointed with Form 22 SS because I viewed that as a step backwards.

About the best solution that I can think of would be if all the MLS joined together and required a written agreement between the bank and the seller prior to a property being listed. If the banks risked being cut out of the MLS system, that might get them to act, but it also might backfire on the MLS systems. Absent that, I’d think you’d need federal legislation because many of the lenders are national banks, and the chance of getting decent legislation out of Congress that affects banks is about as close to zero as you can get. (Somehow, banks are very well capitalized when it comes to campaign contributions.)

So I really don’t see a solution.

1) I’ve aleays been impressed with Greenspan. Bernanke has yet to give me reason to listen to him, and I’ve felt that way since Greenspan left, likely because Bernanke was so critical of Greenspan.

2) I’m sending the info on the property privately as the detail is not likely meant for public consumption, in case the addres is later disclosed in comments.

3) The whole short term profit vs. long term concerns reminds of me of almost every HOA Meeting I’ve ever attended and the reason we see so many huge special assessments. When I would advise the HOA to increase dues so as to put X per year in reserves for eventual roof and siding replacement, very often MANY would say “but I don’t plan to live here that long”.

Personally I like more regulation as to less in many things for this reason. I don’t think you can trust a free market economy to look past their noses most times.