Realtors vote to require disclosure of short sales

Realtors vote to require disclosure of short sales

By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published Nov. 19, 2010

Real estate agents must flag in the Multiple Listing Service database those homes that they expect to be short-sale transactions, local Realtor officials decided today.

The vote by the Charleston Trident Association of Realtors’ Multiple Listing Service board to mandate disclosure brings clarity to an issue that real estate agents have debated recently, as short sales have come to represent a growing and complicated segment of local home sales.

Short sales are transactions for which bank approval is needed because the offer does not cover the seller’s outstanding debt. The bank must agree to forgive some of that debt or work out an alternative payment arrangement with the seller.

Some agents have pushed for the Charleston Realtors group to require full disclosure so that buyers know ahead of time what they’re getting into, as banks’ involvement in a home sale can add time to the process.

Others have said that disclosing a short sale can invite lower offers; and that it can discourage some buyers and therefore isn’t the best way to market a home. Additionally, the question of whether a sale is a short sale depends on the offers submitted.

Some sellers, too, are reluctant to advertise publicly what could be perceived by neighbors and friends as financial troubles, putting the agents who represent them in a difficult spot, agents have said.

Under today’s decision, agents must disclose potential short sales in the section of the Multiple Listing Service database, or MLS, that only agents can access. The mandatory disclosure does not apply to the portion of the information about a home in the database that is available to the public, the Realtors group said.

The searchable public section of the MLS is what populates the listings on some agents’ individual websites.

“This decision puts the choice of public disclosure in the hands of the seller,” David Smythe, president of the MLS board, said in a statement. “Sellers will be required to disclose property as a potential short sale within the MLS; however, disclosure to the public will be determined by the seller and their real estate professional.”

The disclosure requirement applies to home listings that are “reasonably known to be a potential short sale,” according to the MLS board’s decision.

That means that if a sale, to the best of the agent’s knowledge, is going to be a short sale, it must be disclosed as such, said Meghan Weinreich, spokeswoman for the Charleston Trident Association of Realtors.

The definition isn’t black and white, but that’s the nature of short sales, Weinreich said. Sellers and their agents do not always know ahead of time how a deal will turn out.

“You can’t always know,” she said.

Weinreich said the decision is effective immediately, and it will be implemented once the MLS database is altered to include a short sale disclosure box in the agent-only section.

Reach Ashley Fletcher Frampton at 843-849-3129.