The real trick is determining the comps. For a short sale (if I did one) I wouldn’t go out further than 3 months.

But I agree with your point that there needs to be a safe harbor. But then personally I think the MLSs should get together and slap the banks upside the head and let them know if they don’t approve a price first, no access to the MLS. Someone needs to get the banks in line, and clearly it’s not going to be the government that does it because politicians like the campaign donations made by banks.

Reasonable is subjective. What are the safe harbor quantitative parameters or specifics defining a “reasonable” list price for a short sale that guarantee the list price meets the NWMLS reasonable test? According to the NWMLS “what’s reasonable in regards to our own rules and regs, yes, that is subjective and it’s at our discretion.” It seems to me subjective testing is open to just as much abuse as the problem the NWMLS is attempting to police.

I asked the NWMLS if this scenario is reasonable. The owner is months delinquent. Notice of Trustee has been issued. The auction is four weeks away. Single family home comps support a price of $400k. The outstanding debt encumbrances amount to $450k. The listing agent lists the property for $280k with a 2.5% SOC. For an all cash non contingent buyer who can close in less than one week with four weeks left before the foreclosure auction it is reasonable to expect an investor will want a large discount from the FMV to compensate for the inherent risk and transaction risk and to obtain a higher return on capital or IRR to make the deal worth while. Is this listing reasonable according the NWMLS?

The NWMLS response is “That one, I’m not sure on. You’ll have to call”

The NWMLS isn’t sure……this is exactly my point. The scenario I described is unreasonable if the listing agent has no intent, skill or plan to execute in good faith. Similar transactions are happening on a regular basis. The primary reason sellers are settling for a lower price and a higher loan deficiency which may seem unreasonable is the tax treatment of the loan deficiency on a primary residence under the current tax law. A loan deficiency up to $2M on a primary residence is not taxable. The sale price in some respects is irrelevant. If the primary residence loan deficiency is $50k or $500k the impact to the seller is the same. WA is non deficiency state which means after the short sale transaction is closed the lender cannot come after the seller for the deficiency. The time to close the transaction is very critical. A requirement that the property be listed as close to FMV as possible (assuming this is the “reasonable” requirement) likely means the seller will encounter more months of delinquency as the property sits on the market for a longer period of time.

What is reasonable? I think the short sale homeowner is more interested in time than the price. The NWMLS needs a better way of identifying the bad short sale agents it is attempting to police with the “reasonable” rule.

In fact “being pressured into an offer” should never be a consideration. If anything, being pressured should be a turnoff.

Thanks in advance

“November 24, 2008. NWMLS has received numerous complaints regarding published list prices. The problem seems most pronounced with short sale listings. Some listings contain a list price that is obviously far less than than the fair market value of the property and the amount of existing debt secured by the property and so low that it is readily apparent that there is no possibility that the seller and the seller’s creditor(s), who must approve the short sale, would be willing to accept any amount approximating the list price. In other words, the listing agent knows that such listings cannot be purchased for the list price or for a price even remotely close to the list price. Thus, the list price is not established in good faith as a reasonable sales price, but instead, a marketing gimmick or ploy designed to attract attention by misrepresentation. With such listings, the seller and listing agent have no intention of compensating a selling agent who procures a buyer willing to pay the list price, or anything approximating it. Thus, these list prices are published in bad faith and not as a price that the seller is willing to compensate a selling agent for procuring a buyer.NWMLS Rules require that all listing data be accurate and offered in good faith.”

That there are fewer houses being constructed is contributing to unemployment (in a number of areas–not just pure construction).