Our sales meeting topic yesterday was short sales. The meeting started something like this, “What is a short sale?” “It means that someone is taking it in the shorts.” Actually a very accurate response but there is more to it. RMLS and OREF, which produces the forms that are standardized for Oregon real estate, have acknowledge the increase of this type of sale in our market by modifying the rules and creating new forms.
For our purposes here, the RMLS rule change doesn’t really matter, it is just about how an agent handles the switch from Active to Pending while waiting for third party approval. OREF new Short Sales- A Brief Summary is great disclosure describing short sales. The is also a new addendum that goes along with short sale transactions.
From the Summary:
1. DEFINITION. The term “Short Sale” is used to refer to those real estate transactions in which the agreed-upon purchase price is insufficient to pay off all of the secured debt on the property (such as mortgages, trust deeds, state/federal income taxes, liens, property taxes or other local assessments) including the costs of closing, such as escrow and recording fees, title insurance premiums, real estate commissions, etc. If the seller is in bankruptcy, a trustee for the seller’s creditors will take control of the sale. In most Short Sales, the seller must secure an agreement from one or more third-party creditors to accept from the closing proceeds something less than the remaining amount of the debt due them. In other words, the debt is “shorted” or reduced. The one thing common to all Short Sales is that the final decision on price and terms of the transaction, as well as the identity of the ultimate buyer, will be in the control of third parties, usually creditors, whose consent to the transaction is required in order for the seller to convey clear title to a buyer.