Does a Short Sale Need to be Listed on the MLS

Question

I have an off market deal that my agent found. To make the numbers work, it would need to be a short sale. My agent is saying before the bank will consider a short sale offer, they want to see it listed on the MLS. Seller has no money to add to the deal, so they were hoping to walk away with what they owe, but that is unlikely because the house needs work.

First question is, does it need to be listed on the MLS or is that just because an agent is involved?

Second question is, if you list a property on the MLS, do you need to list it at a price that will net the seller more than their loan pay off? For example if you owe $150K on a property, can you list it for $150K knowing that with realtors fees, you would not have enough money to close? Or is it necessary to list it at a price that will satisfy what is owed?

Assuming you do not need to list this on the MLS is there a way I can structure the deal so the bank approves it and my agent gets paid?

It is my first short sale, so any suggestions or help is appreciated. I should add that cutting my agent out is not an option, but he is willing to take very little on the deal to make it happen.

Joe Splitrock · Answer

In my case the agent was doing a favor for someone he knows. I am guessing due to time and complexity that short sales are not ideal for realtors, but I am not an agent.

Maybe if you brought the deal to the agent they may give you a finders fee. The risk is once it goes on the MLS, anyone could end up buying it. That is the whole point of the bank wanting it on the "open" market.

Jennifer Kinzle · Answer

@Eric Pinter Eric is correct, as is your Realtor.  All short sales are required to be listed on the MLS, often for a minimum of 7 days' time.  The short sale listing agent will not charge the home seller any fees or commissions.  All the seller attorney fees, closing costs, title fees, etc, are covered by the bank.  The homeowner will also not need to worry about fixing anything on the property to sell as-is.  The bank will want the list price of the property to reflect current closed comps in your area,  in a 1 mile radius, if you have others that are closed foreclosures in the past 6 months, add them in too.

Short sales are a lot of work for a listing agent, not so much for a buyer's agent.  They fall apart fast if they are not pushed through the banks' systems and all deadlines must be met promptly.  So if you're already thinking about cutting out your agent, perhaps this deal is not for you.

Brett Goldsmith · Answer

@Joe Splitrock 6% commission is standard with most big banks and I see it paid out daily. Depending on the investor and servicer, if the agent is double ending it, and purchase price, commissions could be reduced. Some programs guarantee commission won't be cut.

Eric Pinter · Answer

Bank is going to look primarily at the net price (after all concessions, fees, commissions, etc).  Also, the bank will not pay more than an ordinary amount of RE commission.

Brett Goldsmith · Answer

Yes, almost all investors and services require the property to be on the MLS. FNMA & FHLMC require the property to be on the MLS for 5 business days and a weekend prior to accepting an offer. Most investors have followed suit. FHA has different guidelines depending on different scenarios. Buyers and agents have been blacklisted from servicers and in participation on certain deals due to this in the past.

Eric Pinter · Answer

Many times the short selling lender will REQUIRE that the property be listed in the MLS.

Robert Haney · Answer

In the Houston area, which I assume is like most major areas, there are companies that just handle short sells.  They are usually much more qualified than the typical agent since that's all they do everyday.  Typical fee to the buyer is $3k to $4k.

Benjamin Cowles · Answer

yeah, AFTER its been put on the mls. Gotcha.

Joe Splitrock · Answer

I think short sales have actually gotten easier than they were several years ago. My friend was a realtor back in 2008 and I remember him talking about how a short sale was near impossible. He basically said that it was easier for it to go to foreclosure. I know improvements were made on the process over the last few years including government programs such as HAFA.

Short sale is an option for investors, but probably only after it has been on the MLS.

I had to walk away from the deal I was looking at. Main reason was it needed too much work/money but I was also concerned that it could take months for the bank to approve.

Benjamin Cowles · Answer

Thanks again. Yeah, so I'm left wondering the point for investors to work on short sales. Maybe there was in the past when banks weren't so much on the up and up and now it's just a dying legacy for investors? Anyway, I think I will just forget about them at this point.

Does a Short Sale Need to be Listed on the MLS

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