following is a excerpt from the washington realtors weekly friday facts realtor legal q & a - october 23, 2009 addressing a short sale related question.

 

 

Agent has a listing that is now subject to a purchase agreement. The listing wasn't originally a short sale but through a series of events, and after mutual acceptance, it now will be. The buyer had a septic inspection performed and paid for an inspection and now, rightly, is concerned whether the seller can perform. Understanding that the ability of a party to perform their obligation in a transaction is a material fact; what is the best way to proceed regarding disclosure? If the seller is unable to close; what are the potential consequences?

 

Answer:

The disclosure that seller will have to gain short sale approval must be made to buyer as soon as reasonably possible after discovery of that information. 

 

While it is true, in a normal situation, that listing agent must disclose the fact that seller requires short sale approval during the listing of the property, that is based on a presumption that seller and listing agent know that short sale approval will be necessary at the time the property is listed, prior to sale.

 

Under the facts presented, listing agent and seller justifiably did not know that the sale would be a short sale at the time of the listing and thus, the information could not have been disclosed at that time. Accordingly, it should be disclosed, in writing, as soon as reasonably possible after it is known.  The written disclosure need not take a particular form. It must simply be written and delivered to selling agent.

 

If the seller cannot close because seller cannot clear the financial encumbrances from title and seller does not have the protection of form 22ss, then seller will breach the purchase agreement. The purchase agreement provides that seller is not required to close if seller cannot clear title with respect to non-monetary encumbrances. However, seller is required, pursuant to the terms of the agreement, to pay all monetary encumbrances at closing.

 

The parties should be advised to seek legal counsel as to their rights and remedies in this situation.

 

Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.

 

The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.