Would love to know what you think

This will be interesting to come back and see what you learn. Likely this varies from state to state.

You are right ,I know it will be different from state to state, it is a question of law but isn't it also and maybe formost a question of ethics ?

Like I said, eager to find out what other people think

Anne

 

Interesting!  I'm not sure it 'has' to be disclosed but a good buyer's agent (like you apparently are) will discover this and relay the info to the prospective buyer.

Mary, let's say I had not done my homework and had not found out that it was a short sale next door, do you think I would be liable down the road for not doing my homework?

Anne

This issue open a whole new box of . . .

In the simplest form the definition of a Material Fact is "Any fact tht is relevant to a person making a decision." Of course everyone I think is going to have a different take on this. If I were the listing agent and knew I would disclose. It is always best to disclose. When ever you have to ask the question "hmmm should I disclose" then yes you should :)

I don't think the agent was obligated to disclose the short sale.  The agents responsability is to do the best for their client.  The short sale has not been approved and the short sale and foreclosure are not material deffects that affect property value.

Anne- I don't think that you would have to disclose. The loan amount may be $900,000 and the short sale could be for $899,999. A short sale isn't always below market value, it's below Loan value. What if it doesn't sell? And the lender takes it back? Then it goes as an REO and sells for market value? There are way too many unknowns for a disclosure. Until the property actually sells, nothing is certain. Also sellers disclosures do not have to be updated in some states. It would be known facts at the time of listing, not after.

Sorry Ann I wasn't logged in but wanted to get this response out. Now that I had to log back in, I wanted to let you know why only my name was associated with the comment.

 

It doesn't have to be disclosed.  The house hasn't closed escrow yet.  What would you be disclosing, that it might sell for $650,000? 

Anne,

As a former auditor and soon to be CPA I think that we should seriously consider the idea of 'arm's length transactions'.  The short sale next door shouldn't be considered as an arm's length transaction as the reason leading the home to foreclosure have nothing to do with the area, the ajacent homes, or the true value (I am assuming these facts as you didn't mention it.).  (t isn't a true indicator of the home you are trying to secure's value.  Unfortunately the other agent and seller's are being unreasonable and the best tactic is to be willing to walk away from the deal.  It does NOT have to be disclosed as it doesn't have anything really to do with the home that you are trying to secure.  Does this make sense?  Look deeper into the home that you are trying to purchase find truly comparable homes that have sold recently then use the average square feet method.  I wish you and your buyer good luck...keep me posted.

Anne, I agree that this potential short sale would not be a disclosure issue. Forget about it and move on to your best negotiating skill.. How long has the home been on the market and where are the sellers going. are they serious sellers?  I'll be parked to see what  happens next

 Good Luck, Ginger

Property disclosure is just that - PROPERTY disclosure.  Not next door disclosure. 

Anne -

I don't believe that the listing agent would need to disclose the neighbors house is a short sale, I believe in our market that it is not required, however verbiage is allowed in Realtor remarks. If that was the case and I took a listing in some neighborhoods, where would I stop to list all the homes in the neighborhood that are short sales or REO's? In some areas of our market here it's pretty rampant and some streets are taking a huge hit on short sales. I think you have done the right thing by representing your buyer and letting him know, that to me is given him all material latent facts to help him make an informed decision. Here is how our MLS sees it at this time:

Question: Must the MLS listing state "Short Sale" (or other synonymous language) in the Public and/or REALTOR® Remarks of the listing if it indeed is a Short Sale?

Answer: It is not a current requirement that you designate that the listing is a Short Sale in either of the Remarks fields. You may include the information if you wish.

I am guessing that this would definitely mean that a neighbors short sale is out of the question.  We do however; are required to 'select' in the MLS pull-down choices that there is "Lender Approval" if that is the case. I imagine this will change soon since we are experiencing a large volume of short sales in our market here in Maricopa County, Arizona.

I agree with William and Nancy.  It is very frustrating when sellers and their agents are unrealistic.  Went on a listing appointment the other day for a home where the offer they turned down 8 months ago, would be a GREAT offer today and they didn't take it.  Ugh. 

It is a possible short sale?  Nothing has happenend and may not? What are you disclosing.  Dont believe there is an obligation to disclose.

Good comments and I agree with most of you. As a college instructor in real estate I can tell you that what happens to the home next door financially is not a material fact to this transaction. If the seller hires you as their agent, and you accept, then you are paid to get the best price for that seller. Disclosure of the short sale next door is harmful to your client and not to be disclosed. If you list a home at a certain price, and take that listing, then defend that price! If you can't defend it, don't take it.

The buyer's agent does have a duty to point out that short sale to the buyer, and also the terms under which it was sold. It is then up to the buyer to take the information and come up with an informed decision and use that injfo to bargain with. This is why we negotiate.

Don't short sales make it just so much more fun for all of us?

Great question, Anne, and like most great questions, I am not sure of the answer.

But if I were to make the argument for disclosure I wouldn't emphasize the short sale which is hypothetical and has not been completed.  But it is a fact that the house next door is bank owned.  That means it is not owner occupied (or occupied at all) and future maintenance and care is in the hands of a corporate third party with no presence in the neighborhood.  

The short sale offer is a good negotiating point and your doing your homework has been a benefit to your clients.  You may have just become my preferred agent for the St Pete area.  

Anne,

I agree with most comments before me.  You did your homework and fulfilled your fiduciary duty to your buyer.  The buyer made his/her choice to make an offer on the property.  It is the buyer's prerogative to offer what they feel is right, and seller's - to accept what they feel works for them.

Good luck! 

Ugh, short sales.  I try to steer away from them.... but I don't think the listing agent has a duty to disclose the short sale next door.  Good luck!  Hope you get this sale worked out!

I am sure this is different from state to state but one would think the listing agent would have disclosed this if for no other reason then to keep himself out of court and yet from your contract is would seem like he should have

This is a state issue. In Virginia we are a Caveat Emptor = "let the buyer beware." (Latin)

your friend in Charlottesville

 I think it will be interesting to see how the foreclosures and short sale effect property values overall, if they do. There are many of them in our area and when appraisals are done for contracts, the appraiser must note if some of the comps are foreclosures, short sales, etc for the value will be lower many times but it does not directly affect the subject property. In our area, almost all of the foreclosures are listed in our MLS and any consumer can know about them. I would however have to agree with the comment above that proeprty disclosures are exactly that, disclosures on the said property. It is upto the buyers to do their own research on the community and for us to help them with that.

Simply put the Potential Short Sale next door ( not yet concluded ) Does not need to be disclosed by the listing agent, even when completed.

The Buyer's agent however should disclose this fact particularly if they know that it will have an effect on their Buyer. Example : You are sure that the lesser value will reduce the value of your clients property. Or if your Buyer has been skeptical of property values in this area and has asked to be kept abreast of relevant comps.

Anne, I would be very surprised if this is something that would need to be disclosed. The main reason is that if it is indeed a preforeclosure then it will be public information and is easily found in the public records if buying next to a foreclosire is a concern for the buyer. I would certainly think you, as the buyers agent, would be required to disclose this info but the seller and their agent would not. Just my opinion

Hi Guys thank you so much for your responses

It is really interesting

I am leaning towards disclosure, like Jo said, when ever you have to ask yourself the question - disclose.

but than again everybody that said the listing agent has to do the best job for the seller, so do not disclose, has a strong point too. and yes, it will be different from state to state.

I just realize, that when I am on the listing site and someone brings me a home inspection and want the roof replaced because it is "old" but not leaking, I get upset

Yes, it is old, but it is not BROKEN

so maybe this is kind of the same situation it will be a short sale or foreclosure - but it is not closed yet.

You all have great argument, and in some ways you are all right, maybe it comes down to

Are you an agent for the seller or the buyer?

As an agent for the buyer I want the other party to disclose

.

As the listing agent I could make all kinds of arguments why it does not need to be disclosed.

By the way, we let this one go and made an offer on the short sale - let's see what happens

I see no reason why the agent should have to disclose this fact.  It is not a material defect to the offered property.  In my opinion, in today's market, all offers should be submitted with an appraisal clause if not in the contract.  This hopefully, would protect one *if* the value of the home is effected by the short sales. 

I know of one foreclosure in a higher end neighborhood that is affecting the neighboring property because of it's dismal condition.  The one neighbor is trying to buy it so that he can clean it up, sell it and maintain his property value. Different condition.

William

your are right, WE did not make an offer, the buyer did.

sometimes as a single agent for the buyer or seller  I get a little carried away and probably to passionate

so, sorry

The buyer made the offer.

Ray

Thank you for your comment, the one thing I do not agree with is the True value of the home.

I think it is affected if the property next door sells for less than comparable properties.

In our area I have seen it often that the appraisers used to stay away from the highest and the lowest sale in the neighborhood and go with the "medium comps"

this has changed.

The last 3 appraisals that I have seen take the lowest comp in the area and the medium comps

so, if this is true than the market value of the home would go down

I do not think it needs to be disclosed.

Comps are done using homes sold at fair market value. Most if not all short sales and foreclosures are sold "as is" which in this market means below market value. An appraiser would most like call the listing agent after the sale to verify that this was a short sale thus removing it from the comps.

Dear Gilbert

Thank you for your comment.

Our MLS drop-down gives us the option of 

bank owned or foreclosure

or pre - foreclosure

I was at a short sale seminar the other day and I asked the question if the word was a legal term and what the exact definition

I was told, it is not a legal term, just a "word"

I guess we will see a lot of "short sales" questions soon

Hi Dennis

yes, "short sales" are so much fun. . .

I think we will have big problems and a lot of confusion about short sales in the very near future.

Nobody really knows what to do and nobody was prepared what this

Dear Bryant

Thank you

Good point,  public records

In my mindset they were trying to hide something - but you are right

If it  is in public records than no disclosure is needed

I can go for this

I don't know how much the short sale would take down the values.  If you think about it, if there is only one home that goes short, and the other homes aren't in danger, it isn't much of an issue.  Someone gets a deal.  If there are a bunch of properties that are at risk, then it is a different beast. 

Should the seller's agent disclose... no.  Would they have to disclose an unaccepted low-ball offer? 

Should you tell your buyers about it?  Absolutely.   

Hi Ted

Thank you

This is a great argument

Will keep it in mind for the next time

Anne

 

I am in a buyer beware state. No seller disclosures.

Anne, it seems I have nothing more to add since it has been stated already. Can't speculate and the burden is on you to disclose since you have knowledge of the foreclosure as well as the offering price.

Hello to All:

Here is sunny San Diego, we have a ton of disclosures that provide us with protection. We must state in the MLS, short sale, also if the home is heading for foreclosure. Plus the paper work that we are responsible for, ask that if any condition or terms that you as a agent know about while you are dealing with the property has change you must make the clients aware of it (Seller/Buyer). On the other side of the coin, Anne if I am not mistaken you have the ABR designation after you name does it not say that any relative fact that you are in possession of while you are representing the buyer as a Accredit Buyers Respresentative be disclosed to your buyer, and I am assuming that you are using a buyers brokers agreement which definitely covers your responsibility to the buyer.

The elephant that is in the room that we need to speak about is will the home appraise. An appraisor will factor into the equation that this home  has a pending short-sale or foreclosure right next door to it.

Anne - The listing agent is under no obligation to reveal anything to you about any house other than the one listed. In your comment you mention that the house next door was in the middle of the short sale procedure, so you do not for a fact know that the short sale will be completed or if the bank will reject the short sale and repossess the property and sell it for $800,000.

What ever happens next door is not the listing agents duty or responsibility to share. As a buyers agent, you must do all you can to get information for your buyer. Your duty to uncover a non-publicized short sale is questionable. In the state of Maryland, you are not required to advise about anything but the house and your best estimate of it's value. If they want more information, the buyer is required to visit the planning office, have a home inspection, have a radon inspection, have a chimney inspection, have a tax person answer tax questions, etc. We are real estate agents.

I will share that Ted is incorrect in his assumption or the way he phrased his answer. Let us clarify. Every home is bank owned until it is paid off. The fact that a short sale is occurring indicates that the property may be occupied and the current occupant or owner is attempting to sell for less than they owe. Some short sales are not occupied, but they all have a listing agent. The bank can not sell the property until they go through the foreclosure process. The short sale exists so that the bank can allow the transfer of the property without receiving the full amount due them.

In the first place, until it closes, it isn't a comp, so as a listing agent I wouldn't entertain your argument either.  Secondly, it's not a material fact and, therefore, requires no disclosure from the listing agent.  You did your job -- as a buyer's agent -- and discovered it. 

I'm with those who state it's not a material fact.

In VA the Listing Agent is only responsible for the 4-corners of the property they are listing.  The Buyer's Agent is responsible for everything else.  Not to mention, it isn't a comp.  I take Foreclosures and write in big red letters FORECLOSURE on it when I do a CMA.  This is a distress sale and my clients aren't necessarily in the same situation the bank or pervious owner's of the next door property.  As a Buyer's Agent I would make my clients aware of the Foreclosure and the possible effects of that on them if the decided to purchase the home next door. 

My thoughts: I don't think that the listing agent should disclosure the information.

Lenders/appraisors in manyt locations are starting to use " Shorts " as part of the valuation process.  It is due to the sheer numbers of problems out there.

It would not be required disclosure in Texas. The house next door might be in poor condition as are most foreclosed and short sale homes.  Are you really comparing apples to apples? Also, if just one house in a neighbor short sales or forecloses, agent tend to throw that comp out as its not fair comparison to the rest of the homeowners.

I agree...

Anne, I agree that this potential short sale would not be a disclosure issue. Forget about it and move on to your best negotiating skill.. How long has the home been on the market and where are the sellers going. are they serious sellers?  I'll be parked to see what  happens next

 Good Luck, Ginger

We have no obligation to expose it, but it might be good business if we do.

cheers 

I don't think they had a duty to disclose the short sale. This came up in your initial research of the neighborhood. You did your job.

Nothing is certain until it closes. There were so many different scenarios here that could/would affect that home next door but until it closes it's still on the table. I dont believe a seller, in this market would turn down a deal with a quick closing and no inspections.

If the house next door is in foreclosure, it may not be in as good condition as the subject listing.  It may have a lot of deferred maintainance.  If the owners weren't in financial difficulty, it may not have been for sale at all, and certainly not for sale under distress conditions.  I  don't think it's the sellers' responsibility to disclose conditions having nothing to do with their own house; rather, it's a situation relating to someone else's financial troubles.

If the sellers are wrong about their asking price of $797,000, then it will remain unsold. 

The property next door has nothing to do with the "material" of the listing. They are not required to disclose that information.

Anne - In Idaho there is no requirement to disclose the home next door is in foreclosure. At any time that foreclosure could be purchased and resold.  The new owners could have it looking as good as ever.  This in no way would hurt your clients.  I hope all is well.

I'll go along with the no disclosure necessary by sellers crowd, and good luck with your new offer

Wow - the response it great

I want to thank you all so much for your comments.

There were some very good arguments for both sites and it made me see things i would have not seen without you guys.

Also a big thank you to ActiveRain for making this possible

I will let you know if I have any news

thanks again

Anne

 

 

But it's not the same "dress."  It is too different "dresses."  A blue dress may be on sale, but not the red one that you baught.  It will depend on your state law, but in most states, the LA does not have to but the Buyer's Agent should. 

Not to mention, retail stores, most, have a 2 week price adjustment policy that would cover the same dress going on sale within a given time frame.  Real estate does not have the same clause.  Just b/c I thought about dropping the price or my client sends me a price adjustment amendment to take affect in Saturday and I get a contract on Friday, doesn't mean I give the house to the Friday contract at the Saturday price.  Who would I be working for? 

Wow. I would have told the buyers so they could make an offer on the other home. But I am not sure that is something that the seller's agent has to disclose. I think I am going to take a peak and see. 

I do not think that what a house might sell for is a material fact concerning the property next door. Once that transaction closes it will bring everyone else in the neighborhood down along with it. The listing agent needs to educate their buyer on where their local market is headed. If it is headed down then the seller needs to realize by trying to stick to their guns on the price it will end up costing them alot more in the end. It happens all too often sellers dont realize they are shooting themselves in the foot by not negotiating and accepting offers 6 months later they will be begging for. Great post

I don't think there was any obligation to mention the short sale next door.