I hear this too many times: agents thinking that a sales contract is ratified until the Bank approves the short sale. Well, let me tell you....that's wrong.
When a purchase contract includes a Short Sale Contingency Addendum, which gives the buyer some options on voiding the contract if deadlines are not met, it doesn't create a situation, when it comes to ratification, any different than if there was a Home Inspection Contingency Addendum, or a Radon Inspection Contingency Addendum. The Short Sale contingency is just a contingency. A tool for one party to use to void the contract if needed.
When a purchase contract includes a Short Sale Contingency Addendum, which gives the buyer some options on voiding the contract if deadlines are not met, it doesn't create a situation, when it comes to ratification, any different than if there was a Home Inspection Contingency Addendum, or a Radon Inspection Contingency Addendum. The Short Sale contingency is just a contingency. A tool for one party to use to void the contract if needed.
The contract is ratified when the seller (the people) and the buyer (the people) agree to all the terms of the sales contract AND, because the contract is ratified, the good faith deposit (or Earnest Money Deposit (EMD)) is due.
Want an exception?: you have to include that in the contract. For example, if you do not want the EMD due until the Bank Approves the short sale (otherwise known as Third Party Approval), then you need to write that into the contract and have mutual agreement on this. If you don't want to do the home inspection until the Bank Approves the Short Sale, you have to write that in as well.
Virginia requires Earnest Money to be deposited quickly. My agents are required to turn in their EMD within 24 hours of a contract becoming ratified. Do you have standards like this in your office?
ALSO: MRIS rules require you to update your listing to represent the current status within 48 hours of it changing. I don't care if the bank has not approved the short sale, there is a ratified contract and the status in the MRIS needs to reflect that (CONTRACT, Cntg/No Ko, Cntg/Ko, TEMPOFF, etc). The seller cannot just decide that he wants to leave it "Active" so they get more offers. It's not the seller's decision what the status is in MRIS. Change your listings to reflect their correct status right away.
Here's a Video from Lem Marshall, VAR's Special Counsel, on the subject:
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