Notes from the MAR Legal Hotline
Steve Ryan, MAR General Counsel
Margy Grant, MAR Associate General Counsel
Q. I am a buyer agent for a client who put an offer on a bank-owned property seven days ago and it was verbally accepted. Due to the nature of the ownership we agreed to do a home inspection prior to executing a purchase and sale agreement. At this time the listing broker is not returning my calls timely and cannot pin point a time that the bank will execute the purchase and sale agreement. As a buyer agent what are my options? Can I call the bank directly?
A. Unless the listing broker has given you permission to contact his client directly you technically should not call the bank, even though it is an entity rather than a person it is still exclusively represented by a brokerage firm. Bank-owned property listings are unique in that the “seller” is a company, rather than an individual; therefore it is not as easy to get answers from them. There is not a person sitting in the home hoping that it will sell, there are steps a bank has to take before it can complete a sale, therefore the timelines may not be as normal as other sales. It is probably best to set up a conference call with the listing broker to assess the situation and figure out the status of the agreement and request a written timeline of the process of the purchase. While the lack of communication is probably frustrating it is also important to remember that under the statue of frauds without a signed contract to purchase your buyer does not have anything binding them to this property.
Q: Recently I represented a seller who was behind on their mortgage and asked me to try and sell their property. Upon further investigation it became clear that the value of their home was less than what they owed their mortgage lender. An associate in my office recommended that I contact their lender and try to work something out to try and sell the house anyway, is this legal? If so who do I call? Also, am I required to disclose this to potential buyers?
A. What you are dealing with has become known as a “short sale.” A short sale occurs when the net proceeds from the sale are not enough to cover the sellers’ mortgage obligations and closing costs. There is nothing illegal in participating in a short sale, however you need to be prepared for a possible long process without a guaranteed good outcome, the mortgage lender may not approve the loss on the mortgage and begin foreclosure proceeding and even schedule an auction. If the seller chooses to try and negotiate a sale you will want to speak to your seller to gain permission to speak to their lender(s). You will then want to contact someone in the risk mitigation department as these are the folks who will most likely approve the short sale. Keep in mind this process can be time consuming and needs to be monitored consistently. If your seller plans to accept an offer that will need to be approved by their lender then, yes, you should make this disclosure.