Things a Listing Agent Should Never tell a Short Sale Lender...

I know that this sounds like a question from the $25,000 Pyramid show, but....There is a disturbing trend in short sales....an investor puts a property under contract and begins to market the property for future sale. Listing agent discovers that there may be a higher offer. They then tell the short sale lender!

This is a mistake for valid legal reasons. The listing agent's duty is to the home owner. In telling the short sale lender that there "may" be a higher offer, you are breaching that duty to your client! If the short sale that you submitted is rejected, you are now liable to yoru client because you had no duty to disclose the higher offer and in doing so, the bank rejected the offer because they believed that a higher offer is coming in. Of course the higher offer does not come in because the contract with the investor is now terminated!!

There is some misguided notion that you have a duty to the bank. The only time that you do is when the property is a REO. In that situation, of course, you must advise them of the higher offer, BECAUSE THEY ARE YOUR CLIENT!

There is no duty to advise the bank of the higher offer. There IS liability to YOUR client if you DO! So, please do not do this. You will lose investor buyers, and subject your self to liability...and by the way, in all likelihood, your E&O policy will not cover this loss because you were not acting within the scope of your duty and license and your action caused the liability!!

Investors are around 30% of the buyers right now so it makes no business sense to alienate them!!! This is also a good reason for the listing agent to NOT negotiate the short sale....you are putting yourself in harm's way when you negotiate the short sale