The National Association of Realtors’ board of directors has approved policies that allow for more disclosure about the potential for short-sale transactions in which lenders consider whether to allow a purchase offer that is less than the amount the seller owes on the mortgage.
Colleen Badagliacco, former president of the California Association of Realtors who serves as the chairwoman for NAR’s Multiple Listing Issues and Policies Committee, said today that the board decision requires that Realtor association-operated multiple listing services must give participants the ability to disclose to other participants the potential for a short sale.
Prior to the rule change, many MLSs did not have the ability to disclose the potential for short sales to other MLS participants, Badagliacco said, so that buyers and cooperating brokers who are presenting purchase offers may not realize until they submit the offers that the sale is subject to lender approval.
It can take weeks and even months in some cases to hear back from lenders on whether a short-sale offer is approved, too, which can be a frustrating process for buyers.
"We’re trying to do everything that we can, from our point of view, to make the retail market function," Badagliacco said.
"You have to give brokers and agents that participate in the (MLS) service the ability to disclose it," as a result of the new policy.
The language approved by the NAR board of directors provides that a "potential short sale" transaction is one in which there is a likelihood for a transaction in which title transfers, the sale price is insufficient to pay the total of all liens and the cost of sale, and the seller does not bring sufficient liquid assets to closing to cure deficiencies.
NAR directors also approved language that MLSs can choose to adopt on whether to require listing agents to disclose the potential for a short sale to other MLS participants. And the voluntary MLS policy provides for disclosure by the listing broker about a potential reduction in the gross listing compensation if the transaction is approved as a short sale.
The policy changes do not require or suggest any public reporting of potential short sales by MLS participants to consumers and other nonmembers of the MLS.
Rising volumes of short-sale and foreclosure-related real estate transactions are hot topics with real estate professionals and multiple listing services. Some MLSs already have specific categories and reporting requirements for properties that may be subject to a short sale.
Real estate auction sales have also been a subject of discussion for NAR officials. Last week, during a meeting of NAR’s MLS Issues and Policies Committee and Multiple Listing Service Forum, a panel of representatives for several MLSs presented varying approaches for handling auction properties in an MLS system.
Ben Anderson, chairman for NAR’s Auction Presidential Advisory Group, said the national subprime mortgage disaster is in some ways reminiscent of the collapse of the savings and loan industry in the 1980s.
The volume of property auctions is rising again in response to rising foreclosures, he noted.
"The oversupply is overwhelming and the result of that is a challenging market," Anderson said. Auctions can help to quickly heal the supply-demand imbalance, he said, and Realtors and Realtor-affiliated MLSs can play a role in the transactions.
MLS Property Information Network Inc., a New England regional MLS, is opening up to non-Realtor auctioneers in order to allow its members more opportunity to participate in auction transactions, said MLSPIN’s Michael Jewell, who spoke during the meeting.
Anderson said that Realtors should not feel threatened by auction transactions.
"The auction will never, never replace what we do as Realtors in a traditional sense. It is a method of selling real estate," he said.
Some audience members questioned whether prices for auction properties are accurate, as they may reflect a starting bid price that is artificially low because it may not meet a reserve price or satisfy the lender if the transaction involves a bank-owned foreclosure, for example.
And the MLS representatives who shared their methods for handling auction properties have different requirements for disclosing the price and compensation involved with these properties.
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