Ethics Dialogue Workgroup Dulles Area Association of REALTORS® Fredericksburg Area Association of REALTORS® Greater Piedmont Area Association of REALTORS® Northern Virginia Association of REALTORS® Prince William Association of REALTORS®
tor
Dulles Area Association of
REALTORS® Fredericksburg Area Association of REALTORS® Greater Piedmont Area Association of REALTORS® Prince Williams Association of REALTORS® Northern Virginia Association of REALTORS®
Regional Short Sale Reference Guide
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Presented by: Ethics Dialogue Workgroup
Version 1: 11/2009
Created and Maintained by the “Ethics Dialogue Work Group”
Release Date: November 1st, 2009
Author: Matthew Rathbun Fredericksburg Area Association or REALTORS®
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Contents I.
Introduction
II.
Dissection of a Short Sale
III.
Confidentiality Issues
IV.
When is Ratification?
V.
Escrow Handling
VI.
Commission Handling
VII.
MRIS Policy
VIII.
Short Sale Credit Issues
IX.
Forms
X.
Appendixes a. Guidebook Sources b. Lem Marshall’s Commonwealth Short Sale Article c. NAR Short Sale Workflow d. VAR Short Sale Tip Postcard e. MRIS Short Sale Do’s and Dont’s f. Short Sale Ethics Reference
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I.
Introduction
As a result of the evolving real estate market and challenges presented by an unstable economy, leaders from five REALTOR® Associations decided to take on the task of creating tools to increase the professionalism of REALTORS®, and in this application, during the Short Sale process. In the earliest discussions, the Workgroup found that one of the most pressing needs was a guideline of common assumptions to facilitate the process. The ubiquitous nature of this form of transaction means there is risk to Practitioners as well as Consumers. The risks escalate for Practitioners because of the layering on by MLS policies, the VREB and the REALTOR® Code of Ethics. This Reference Guide is one part of the ongoing effort of the Ethics Dialogue Workgroup to provide better education and tools for REALTOR® members. This Guide will be updated with the best and latest recommended practices dealing with distressed properties. It’s important to stress that these are only guidelines and do not take the place of the Broker’s application of established office practices. They are designed to be a reference mirroring the market place at the time of creation. Practitioners are always encouraged to seek the advice of their Brokers and if necessary legal counsel. The Associations of the Ethics Dialogue proudly offer the Reference Guide as a tool for its members to use to serve clients with utmost professionalism. The Associations are committed to ongoing monitoring of the marketplace and offering education and useful tools to their members.
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II.
Dissection of a Short Sale
The economic world is in turmoil. A policy paper released by the Mortgage Bankers Association on May 28, 2008 stated that an industry average for taking a home into REO would be about $50,000; or as much as 30% to 60% of the outstanding loan balance. The name of the report is “A Report on Lenders’ Cost of Foreclosure from the Mortgage Bankers Association” and can be found at www.NGA.org. The Agent needs to understand why a lender generates such cost and how a Short Sale may be in the Lenders interest. A summary of some of the categories of Lender Loss in a Foreclosure is as follows:
Lost principal and interest payments
Tax and insurance payments
Maintaining the property
Lost servicing fee income
Costs of collection efforts / servicing
Legal costs for handling the foreclosure
Administrative fees
Costs of restoring the property to saleable condition
Real estate commission for REO agents
This issue is compounded by the knowledge that the market isn’t going to turn around suddenly and practitioner, home owners and lenders will need to weather the problems associated with Short Sales for years to come. The Short Sale transaction is wrought with issues and potential liabilities, but so is the practice of real estate in general. Now is the time for Practitioners to step up to serve clients in their true time of need. Experience and education is a powerful combination in the quest to provide exceptional service and reduce litigation exposure in today’s marketplace. Chapter IX, Listing and Selling the Short Sale, addresses the application of confidentiality principles to a Short Sale transaction. Both Virginia law and the 5|Page
Code of Ethics address this issue. All financial information is confidential and thus can only be disclosed upon approval by the client. In a Short Sale situation, the disclosure that it is a Short Sale is the disclosure of confidential information and thus can only be done with the approval of the Seller. This leads to the second type of Short Sale. The second type of Short Sale is where the Borrower, in an attempt to sell their home, asks the lender to forgive their deficiency in funds and release the deed. This becomes a significant issue for Sellers, Buyers and their REALTORS速. This type of Short Sale is a long process for many and represents over 50% of all transactions for many markets across Virginia. There are several types of certifications and designation programs to prepare the REALTOR速 for who wishes to represent Short Sale Clients. Here is a brief summary: Acronym SFR CDPE CSP LMC
Program Short Sale Foreclosure Rep Certified Distressed Property Expert Certified Short Sale Professional Loss Mitigation Consultant
Sponsor NAR REBAC CPDE RealtyU Massachusetts AR
Website www.rebac.net www.cdpe.com www.realtyuonline.com www.marealtor.com
There are a number of individuals and entities involved in the approval of a Short Sale and the Practitioner must coordinate them all. This is a long term transaction, that could take between 30 and 100 days longer than a normal transaction. Clients should be properly prepared for these delays. This may be a huge deterrent to many Buyers. There are a number of disclosures and special documents that have been created for the REALTOR速 to use. The forms are available in Chapter XII and include disclosures to potential Short Sale Buyers and Sellers, and specific addendums for Offers to Purchase and Listing Agreements. Lastly, Brokers are encouraged to have specific company policies to guide Agents and ensure that proper care is given, this is covered in Chapter XI.
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III.
Confidentiality Issues
A Short Sale transaction presents different confidentiality issues from a regular transaction. The most important one is whether the Seller discloses the fact that the transaction could be a Short Sale. It’s important to note that in accordance with the REALTOR® Code of Ethics and Virginia law, a Seller pursuing a Short Sale is considered confidential financial information. The Listing Agent MUST have the Seller’s permission to disclose such information and the permission should be obtained in writing. A Short Sales situation may present an appealing financial opportunity to the Buyer, but there are some concerns. Consider the following: - Military or executive relocations buyers usually have a limited time to find a home and go through the negotiation process. A Short Sale may not be realistic for that type of buyer. Very few practitioners and even fewer Sellers are proficient enough in the process to have everything in order for a quick decision by the Lender. In the case where a Lender withdraws the approval, precious time is lost for both the Seller and the Buyer. - Short Sale Buyers should be diligent in uncovering liens. Sellers who can not make the mortgage payment may not be paying other debt obligations. - Remember that in most cases, contracts are ratified when there is a meeting of the minds. The “Third Party Approval” of a Lender is a contingency. It typically takes awhile for Lenders to approve such a sale. Buyer Agents would be wise to put language in the contract that ensures the Buyer’s contingencies (such as home inspections) do not begin until approval from the Lender to proceed at the current price. Otherwise they may be liable for settlement services, home inspector fees, etc… Buyer Agents must be more diligent. Whether a property is a Short Sale is a fact that is material to the transaction. Regardless of the Listing Agent’s ability to disclose the status of the property, the diligent Buyer Agent should always ask the Listing Agent about the status of a given property. Virginia Law protects Sellers in a real estate transaction by forbidding the disclosure of confidential financial information by their Agent. As already stated, whether the sale of a property will result in a Short Sale is information that is 7|Page
protected by the confidentiality provisions of the statute. Therefore, unless a Seller has provided written authorization to disclose such information, the Listing Agent cannot disclose whether a sale will result in a short sale to anyone by any means.
Virginia Regulations 54.1-2131 A 3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the seller consents in writing to the release of such information; It’s important for the Buyer Agent to also be prudent. One possible solution is to write language into the Offer to Purchase that compels the Seller to disclose their pursuance of the Short Sale, as a term of ratification. Since it is possible for Listing agents to present more than one offer to the lender. The Buyer and their agent may wish to make the ratification contingent on only that offer being presented to the Lender. The above paragraph is purely a recommendation and needs to be approved by the Practitioner’s Broker and legal counsel. However, this paragraph could be very useful in the Offer to Purchase. The first section makes it a requirement for the Seller to disclose if they wish to ratify. If the Seller declines to agree to this term it may indicate that it is an undisclosed Short Sale and the Buyer should act accordingly. The second section is a protection for the Buyer, should the Seller find out in the course of the transaction that they cannot pay off all indebtedness and need to revert to a Short Sale transaction.
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IV.
Who are the Players and what is Ratification?
Frequently the question arises: “Can we leave it as active in MLS, if the transaction is contingent on Third Party Approval?” The governing entities dictate the answer- MRIS policy, the REALTOR® Code of Ethics, the Virginia law and the contractual agreement. The contractual agreement has little to do with leaving the listing “Active” it simply dictates which policy is triggered. At the heart of the matter is the answer to the question, is there a ratified contract? The Virginia Statute of Frauds requires that residential sales contracts be reduced to writing, in order to be enforceable. Just as a reminder: the elements of a ratified contract are (1) offer & acceptance, (2) consideration, (3) legally competent parties, (4) consent and legal purpose. An offer is not considered ratified until the other party has been notified. The parties need to agree first, then sign the contract and finally deliver the signed contract to the other side of the transaction. The Regional Contract defines “ratification” as “Date of Ratification means the date of final acceptance in writing of all terms of the Contract (not the date of expiration or removal of contingencies).” <source: NVAR K1321 Paragraph 29.C> Also reference paragraph 1 and 2 of the Virginia Jurisdictional Addendum. The contract makes it clear, that signatures and delivery convey a meeting of the minds and therefore a ratified contract. Acceptance by the Lender in a Short Sale is simply a contingency and does not affect ratification. Remember that some companies are using “subject to” clauses which delay ratification until lender approval. Since these contracts are not truly ratified; the buyer may keep looking for better deals at better prices and the Seller may still keep looking for better Buyers. Both Buyers and Sellers should be very clear, when deciding not to ratify, that either party may bump them from the “deal”.
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V.
Escrow Handling
An often asked question regarding the deposit of escrow is “when”. Fortunately, the Virginia laws regarding escrow do not change if it is a Short Sale. Virginia law requires earnest money deposits (“deposits”) to be deposited into Broker’s escrow accounts within 5 days which the bank is open. (This means if the bank is opened from 9-12 on a Saturday, it counts as a day) It’s important to remember: The law does not change because the Seller is pursuing a Short Sale. Virginia 18VAC65-30-120. Escrow account. Within five banking days after the day of receipt of any money from the contract buyer and until the time the money is invested in a trust, life insurance, or annuity policy, the contract seller or the contract provider shall deposit the money into an escrow account in a bank or savings institution approved to do business in the Commonwealth. Deposits are not required for a contract to be considered ratified, but many Short Sale lenders will not seriously consider a contract if there is no reasonable deposit. Some agents have considered using Promissory Notes that mature upon written notice of the Lender that the Short Sale has been approved. Remember that Promissory Notes need to have a definite end date. In addition, if the Note is released it should be done in the same manner as an escrow mutual release agreement. Deposits can only be released in one of three manners; 1) mutual consent of the principals 2) order from a court of competent jurisdiction and 3) if it is clear by the terms of the contract then the Broker may send a letter to all parties giving them 30 days to stop the disbursement. (spefic steps must be followed for option 3 so please read the statute prior to using that method of disbursement). The issue of the release of the deposit is complicated in a Short Sale transaction if the Seller’s Lender declines to agree to the contract terms. If the Seller wishes to continue to try and get an answer or is desperate for keeping the Buyer in the contract, he or she may decline to reimburse the escrow back to the buyer. The Broker may not disburse the funds without the requisite 30-day letter, mutual agreement executed by all parties, or a court order. It’s important for the Buyer Agent to explain all of this to the Buyer at the time they are making an offer to avoid incorrect presumptions. The rate of failure for 10 | P a g e
a Short Sale is very high and often Buyers are expecting an immediate release of the deposit. The Agent will serve themselves and their clients well by setting reasonable expectations early on. As an added reminder, Brokers are compelled by the 2008 change to the Virginia law to report any mishandling of escrow in a timely manner. This includes agents in one’s own office. 18VAC135-20-180. Maintenance and management of escrow accounts. C. Actions including improper maintenance of escrow funds include: 5. Failing, as principal broker, to report to the board within three business days instances where the principal broker reasonably believes the improper conduct of a licensee has caused noncompliance with this section. REALTORS® are highly encouraged to handle escrow deposits as a serious matter and ensure that these funds are turned into the lender as soon as the contract if ratified. Remember that ratification occurs when the Buyer and Seller, as Principals execute and deliver the contract to each party. The Lender as the “Third Party Approver” is not a Principal and therefore irrelevant to the issue of escrow deposit.
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VI. Commission Handling From time to time the issue of commission comes up in the process of selling a Short Sale. Many lenders have tried to encourage the REALTOR® to “give up” part of their commission to make a transaction close. However, Fannie Mae and Freddie Mac have agreed that they will not require a reduction in a commission set for less than 6% for any of their loans. The Lender is not a principal to the transaction, and can only say yea or nay to the total proceeds. Occasionally a Listing Agent agrees to reduce his or her commission in order to “make the deal work”. That decision does not affect the Buyer’s brokerage commission, unless the Buyer’s broker has agreed to such changes. MRIS sets the subscriber policy for how commissions are shared. In December of 2008, MRIS released a policy clarification on how REALTOR® express commission in MLS. The Policy set forth in Article X – Section 2 of the MRIS Policy Manual stipulates that compensation is delivered in one of three ways: a.) By showing a percentage of gross selling price; b.) By showing a definite dollar amount; or c.) Commission may be paid on net sales price (sales price minus seller concessions) or on base price in new construction if specified in the system. Section 6, had this change: References to special compensation in any other field, other than the compensation fields are not intended to, or shall be construed to, permit any conflict with the unconditional offer of cooperation and compensation made in the compensation field(s). If there is any conflict between the unconditional offer made in the compensation field(s) and any other field. MRSI policy is that the information I the compensation field will control. This clarification addresses the practice by Listing Brokerages of including comments like “50% split with commission received from Lender”, or other similar comment. There are two issues with these types of statements. First it reveals the Seller is pursuing a Short Sale and therefore requires prior permission from the Seller. The second issue is that the Buyer Agent is slave to the Listing 12 | P a g e
Agents ability to negotiate with the lender. Therefore the policy says that the compensation offered in the compensation field controls the amount paid the Buyer Agent, regardless of what the Listing Agent agrees to negotiate away with the lender. Another tactic used by some Brokerage companies is to counter the receipt of an offer on the Short Sale property with an agreement between the Brokerages to share any commission received in an equitable split. The question then becomes, what happens to the offer to purchase should the Buyer’s Brokerage refuse to agree to the new commission agreement? . Chapter X this issue is addressed more thoroughly, but the short answer is that it’s against the REALTOR® Code of Ethics and Virginia law to withhold an offer to purchase from the Seller unless specifically agreed to by the Seller. Likewise, a Buyer Agent who does not like the offer of compensation in the MLS, may not attempt to negotiate a higher compensation in the terms of the offer to purchase, as this would be a potential violation of Article 16 (SOP 16-16) of the REALTOR® Code of Ethics.
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VII. MRIS Policy Once a contract is ratified, the listing status must be changed in MRIS to reflect the actual status. Some agents are using the CNTG/KO. That’s fine, so long as the kick-out clause addendum is used and it is very clear that the property does have a kick-out and all parties understand what that means and how it will be enforced. A listing cannot be “Active” in MRIS, if the contract is ratified. Here is what MRIS has to say: "Short Sales" have become the subject of great discussion and debate among practitioners, regulators, and policymakers alike. With input and guidance from the MRIS Board of Directors, the MRIS Compliance Committee, the REALTOR® Shareholder Associations and the MRIS subscribers, and taking into consideration the new policy changes approved by NAR at this year’s mid-year conference, MRIS is updating its policies related to Short Sales. The goal is to provide a balanced approach that addresses issues on both the seller and buyer sides of transaction. There are several points that MRIS subscribers will need to consider: Definition of Short Sale. MRIS is adopting the definition of "short sale" established by NAR: "As used in MLS rules, short sales are defined as a transaction where title transfers; where the sale price is insufficient to pay the total of all liens and costs of sale; and where the seller does not bring sufficient liquid assets to the closing to cure all deficiencies." Definition of Potential Short Sale. A potential short sale describes a property that may reasonably be expected to become subject to a short sale. Going forward, MRIS’s new policy is that all Potential Short Sale listings must be disclosed unless local laws require otherwise. The potential for a short sale is considered a material fact. Lender Approval. Seeking lender approval is part and parcel of the typical short sale transaction. The bottom line: If lender approval is to be sought in a transaction, then this fact must be disclosed to the potential buyer and buyer’s agent unless local laws require otherwise. It is your responsibility to properly determine what your legal obligations are, and to act in accordance with these obligations. Compensation Data Field. Since only listings with unconditional offers of compensation may be entered in MRIS, the compensation entered in the 14 | P a g e
compensation field is the compensation that any cooperating broker should expect to be paid as result of the sale. MRIS will continue to treat commission related issues and disputes as the purview of the arbitration panel of the appropriate local RealtorÂŽ Association. MRIS is not a party to any short sale transaction or compensation agreement, and will not adjudicate compensation related disputes among subscribers. Appropriate status. The status for any listing where a ratified contract is subject to a lender approval must be changed to CNTG/KO or CNTG/NO KO, indicating a third-party approval contingency. MRISâ&#x20AC;&#x2122;s perspective is that a listing broker, in such an instance, may continue to market the property and continue to accept back-up offers. The MRIS Rules and Regulations require that the listingâ&#x20AC;&#x2122;s status be changed within 48 hours excluding weekends and holidays. Please refer to the Short Sale FAQ at http://www.mris.com/compliance/faq.cfm for more information. Note: Virginia considers the pursuance of a short sale as a confidential financial fact and thus cannot be disclosed in MLS or anywhere else without the written permission of the Sellers. The Virginia Administrative Code also addresses this issue 3. All online listings advertised must be kept current and consistent as follows: a. Online listing information must be consistent with the property description and actual status of the listing. The licensee shall update in a timely manner material changes to the listing status authorized by the seller or property description when the licensee controls the online site. b. The licensee shall make timely written requests for updates reflecting material changes to the listing status or property descriptions when a third party online listing service controls the website displaying the listing information. c. All listing information shall indicate in a readily visible manner the date that the listing information shown was last updated.
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VIII. Short Sale Credit Impacts By: Michele Freemyers, Attorney for EKKO Title
The impact of a Short Sale on a Seller’s credit score may be an issue for some Sellers. This issue has evolved quickly in the wake of the current market, but one thing has stayed the same. Short Sales negatively impact a Sellers’ credit history. However, REALTORS® are encouraged to not give advice on such matters, unless they have specific training in that area. The client should be given a resource to rely upon and referred to an attorney or CPA. Michele Freemeyers, attorney and instructor gave this advice in a June 18th, 2008 article: The Story I had a client call me the other day… his story was similar to many we have all heard over the last year and a half. He had been trying to sell his investment property for over two years but was very resistant to dropping the price, which he recognized was necessary to get any offer of purchase. His life savings had been depleted trying to keep current on this property and he had reached the end of the line. He was depressed, frustrated and resigned to losing the property and taking a credit “hit”. The bottom line for him was whether he should he “go to the trouble of trying for a short sale” or just “let it go to foreclosure”. He definitely wanted the easier road, which he thought would be a foreclosure. The consequences would be similar between the two . . . . right? What do Lenders Say? I flashed back to about two weeks prior when I was teaching a Short Sale and REO Transaction class for a local lender. The Senior Loan Officer had some material to share with us. First, she showed us actual credit reports of clients who had gone through a Short Sale. There was a “Before” and “After’ credit report for the same borrower. The Short Sale basically dropped this borrower’s credit score by one hundred (100) points. The mortgage also showed as “Paid in full but settled for less than was owed.”…. Okay, this was kind of what we would have anticipated and is certainly consistent with the information we have received from the lending institutions over the last year. Then we see the real show stopper. The Loan Officer hands out the new Fannie Mae underwriting guidelines that go into effect May 31, 2008. Guess what? The rules have changed.
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REALITY BITES The reality for my client on the phone becomes painfully clear. My advice: You better find a good agent who is competent and experienced in handling a Short Sale transaction. Under the new Fannie Mae guidelines the effect of a Foreclosure on a borrowers’ credit worthiness is substantial, devastating and decisive. A Short Sale may reduce your clients’ credit score and will stay with them for about a one year or twelve month period of time. For all our clients who have “let it go to foreclosure”, I have some very, very bad news. Effective May 31, 2008, according to the Fannie Mae guidelines, a client who has filed a foreclosure will be “ineligible” for a period of five years. That is FIVE YEARS (5 years) for a foreclosure compared with a one year “ineligible” for a Short Sale. That difference is significant and will have an immediate effect on our business. Don’t be Surprised It should be no surprise to us that the lending guidelines would adjust. We should have all seen this coming, right? Certainly the prior estimates of a 2 year credit hit for a Short Sale as compared to a 3 year hit for a Foreclosure were astonishing and somewhat unbelievable, leaving many of us to wonder if the effect of either outcome made no significant difference to our Seller, then why did it matter which outcome they pursued? The implementation of these new guidelines solidifies the rules and changes the desired outcome for many of our Sellers. As a result, I think we will all become experts on the Short Sale transaction.
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IX. Presenting Offers An Agent must present all offers to their client. Here is Virginia Statute: 54.1-2131. Licensees engaged by sellers A. A licensee engaged by a seller shall: 2. Promote the interests of the seller by: c. Receiving and presenting in a timely manner written offers and counteroffers to and from the seller and purchasers, even when the property is already subject to a contract of sale; and Here is what the REALTOR® Code of Ethics states: Standard of Practice 1-6 REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. (Adopted 1/93, Amended 1/95) Standard of Practice 1-7 When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/93) These requirements do not state that the offer has to meet the Listing Agent’s approval, nor does it dictate the format of the offer. There is no “required” contract format. All offers have to be presented, even if on a napkin. Whereas the Virginia Code section actually specifies “written” offers, the Code of Ethics compels REALTORS® to present “all” offers, which could include oral offers or even letters of intent. There are some basic elements that make an offer to purchase, but that’s a post for a different time.
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What’s a buyer to do? Almost as daunting as the issue of Listing Agents not presenting the offer to purchase, are Agents declining to write offers. Prior to entering into an agency relationship (either the implied or expressed) the Consumer is a Customer and is not due certain levels of skill. Upon becoming a Client obligations are imposed. These obligations compel Agents to write all offers that are lawful, at the order of client. This is where obedience comes in. 54.1-2132. Licensees engaged by buyers A. A licensee engaged by a buyer shall: 2. Promote the interests of the buyer by: b. Assisting in the drafting and negotiating of offers and counteroffers, amendments, and addenda to the real estate contract pursuant to § 54.12101.1 and in establishing strategies for accomplishing the buyer’s objectives; Note that the emphasis is on the “Buyer’s objectives” not the agent’s objective, therefore trying to obtain a higher commission by offering a higher price, or “saving face” with the opposing Agent are against the Code. The Agent is hired to carry out the Client’s wishes and attempt to obtain the best property at the lowest price possible. Still not convinced? Ok, what does the REALTOR® Code of Ethics say about this? Standard of Practice 1-8 REALTORS® , acting as agents or brokers of buyers/tenants, shall submit to buyers/tenants all offers and counter-offers until acceptance but have no obligation to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing. REALTORS®, acting as agents or brokers of buyers/tenants, shall recommend that buyers/tenants obtain the advice of legal counsel if there is a question as to whether a pre-existing contract has been terminated. (Adopted 1/93, Amended 1/99) If the Seller wishes their Agent to screen offers and only forward those which meet a certain criteria, Agents should get that directive in writing and PROFESSIONALLY explain to the Selling Agent that the Client has rejected this type of offer. Any offer in this market is a good way to start the conversation that may lead to a closed transaction. If for no other reason than to enlighten self 19 | P a g e
interest, present all offers and treat ALL Agents and Clients with respect and professionalism. It’s simply what the client hired the Agent to do. A Selling Agent who doesn’t write “lowball offers” is compelled to explain that policy to the Consumer before he or she enters into the agency agreement, otherwise the Agent is ommitted. The Short Sale process presents some unique issues for some Agents. The chief issue is multiple offers. With the low price of certain Short Sale properties, it’s not a surprise that occasionally more than one offer arrives. The Listing Agent must present all these offers to the Seller. The Seller then dictates which offer they desire to accept. The Seller may accept multiple offers, knowing that the Lender will accept only the highest and best. The recommended way to proceed with multiple offers is to ratify the contract that appears to be the highest and best, and ratify subsequent offers as “Back Up” offers, allowing the Buyer Agents to know what the true status of their offer to purchase. The lender’s approval contingency does not preclude a Listing Agent from submitting additional offers to the lender for them to choose the offer that generates the highest yield.
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X. Forms
There are a number of forms that are available to REALTORS速 to help them best represent their clients. The next several forms are a combination of the MRIS forms, maintained by NVAR and available from Zipforms and AutoContract and VAR forms found at www.VAREALTOR.com.
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Appendix 1: Sources “Who are the Players and what is Ratification” Sources: Real Estate Law, Fourth Edition Dearborn Publishers; Modern Real Estate Practice 17th Edition; Fairfaxlaw.blogspot.com, NAR 2009 Code of Ethics, MRIS.com, LEG1.state.va.us, (Virginia Legislation Online) en.wikipedia.org Desiree Hatcher, “Foreclosure Alternatives: A Case for Preserving Homeownership,” Profitwise News and Views (a publication of the Federal Reserve Bank of Chicago) (February 2006), p. 2 (citing a GMACRFC estimate) (http://www.chicagofed.org/community_ development/files/02_2006_foreclosure_alt.pdf). See also Congressional Budget Office (CBO), “Policy Options for the Housing and Financial Markets,” (April 2008), p. 17. 3 Karen M. Pence, “Foreclosing on Opportunity: State Laws and Mortgage Credit,” Board of Governors of the Federal Reserve System (May 13, 2003), p. 1 (http://www.federalreserve.gov/Pubs/feds/2003/200316/200316pap.pdf).. See also CBO, p. 17; Community Affairs Department, Office of the Comptroller of the Currency (OCC), “Foreclosure Prevention: Improving Contact with Borrowers,” Community Developments (June 2007), p. 3 (http://www.occ.treas.gov/cdd/Foreclosure_Prevention_Insights.pdf). NAR Short Sale Flow Chart: http://www.realtor.org/mempolweb.nsf/pages/shortsales
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