Follow Up To “New Catch-22 In Short Sale Negotiation”

We have received tremendous feedback to our recent blog concerning lender(s) who are now forcing sellers to use auction companies to further market their property as a precondition to short sale approval.  Our previous suggestions to attempt to address the situation were (a) encourage the seller to incorporate language in their contracts to permit the continued marketing of the property, and (b) encourage the buyer(s) to come forward with their strongest offer immediately.  As with any new directive by a short sale lender, there are a myriad of additional challenges that a change in policy can cause.

To that end, an additional consideration is the issue of the relationship between the seller and original listing agent. While it is generally not within our purview to address the contractual relationship between the listing agent and their client, it is important for agents and seller’s alike to also consider the terms of the listing agreement as it relates to the short sale lender’s requirement that a third party be allowed to market the property. 

For example, the agreement that we have seen from a lender requiring the use of also requires the listing agent to sign the agreement to make the property available for showings to buyers and to cooperate with the auction process. In such event, the listing agent will be entitled to a commission from a sale to any buyer, but the commission is limited to 3 percent. However, the typical listing agreement does not address this somewhat unusual circumstance, and as such, it is worthwhile for the seller and the original listing agent to simply agree that in the event procures the buyer, then the listing agent will look to recover its commission as a result of the agreement between the parties and, and not as a result of the original listing agreement. Otherwise, it is conceivable that seller, being parties to two separate agreements, could have legal exposure under two separate agreements pertaining to the sale of their property. 

As always, should you have any questions in regards to the foregoing, please consult with your local real estate attorney.


Berlin-Patten, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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