Short Sale Agreement Notice

The Arizona Association of REALTORS® recently created a new form that is helpful to any agents who do short sales. Short sales have been rampant in the last few years and they have definitely caused frustration for agents. This form will alleviate one particularly confusing issue. This is the delivery of the "Agreement Notice."

Let's start with a quick review of the process of a short sale transaction. A buyer decides to make an offer on a short sale listing. The seller may accept the offer to avoid a foreclosure, bankruptcy or to get away from a house which the house is not worth as much as they owe the lender. At this point, escrow is usually not opened because the bank (who has an interest in the property) has not accepted the offer. This is where the waiting period begins. I have closed a short sale transaction in as little as 9 days and my longest short sale escrow was 10 and 1/2 months! There are no rules on how long the bank could take to accept the offer or if they will accept it at all. It depends on the bank, the negotiator, the market, the BPO (Broker Price Opinion), the appraisal, the other agent, the Seller and the Buyer.

If the bank does finally agree to accept the offer, they give the Seller an approval letter which defines all the terms of the agreement. These may or may not be the same terms as written on the purchase contract. It is up to the Seller, the Seller's attorneys and tax advisors to review the approval letter to see if it is acceptable to the Seller.

If the Seller and the Seller's creditors enter into a short sale agreement, the Seller then shall immediately deliver notice to the Buyer which is also known as the "Agreement Notice." Per AAR's Short Sale Addendum, the date of the Seller's delivery of the Short Sale Agreement Notice to the Buyer shall be deemed the date of Contract acceptance for purposes of all applicable Contract time periods

The date of Seller's deliver of the Short Sale Agreement Notice to Buyer shall be deemed the date of Contract acceptance for purposes of all applicable Contract time periods. At this time, the buyer shall promptly open Escrow and deposit Earnest money as described in the Contract upon receipt of the Agreement Notice. Close of escrow shall occur 30 days after delivery of the Agreement Notice.

But what constitutes an Agreement Notice? Does it have to be on official company letterhead from the bank? Can it be an email from the other agent? Can it be a verbal message from the Short Sale transaction coordinator? I have seen all these things happen. The verbal "Agreement Notice" is the most frustrating and can be a dangerous practice for the buyer, seller and agents. This is why the AAR's new form released in February 2012, "Agreement Notice pursuant to Short Sale Addendum to the Residential Resale Real Estate Purchase Contract," has agents breathing easier. For ease, we will refer to it as "AAR's Agreement Notice."
AAR's Agreement Notice is signed only by the Seller and gives the Seller 2 options.

The first option indicates that the Seller and the Seller's creditor(s) have entered into a short sale agreement to sell the Premises to the Buyer for less than the loan amount(s) secured by the Premises.

The second option indicates that the Seller and Seller's creditor(s) have entered into a short sale agreement, however, certain terms of the Contract were modified. The Listing Broker will have to write up an AAR Addendum Agreement indicating the modified contract terms. Once the Addendum is signed by the Buyer and delivered to the Listing Broker the Agreement Notice will become effective.

This new form should be utilized by both Listing Agents and Selling Agents. It will clearly define the date and under what conditions the short sale Agreement Notice was received.