Short sale vs. loan mod showdown

Q: I listed my home for sale as a short sale, and it's been on the market for a few weeks. My agent is great, and I really like her. My bank just sent me a letter offering me a loan modification, and I'd really like to keep the house instead of selling it. I think I might be able to afford it now.

I wish I hadn't listed it now, because I know she's gone to a lot of trouble to put it on the market, hold open houses, etc. Is there any way for me to get out of my listing agreement with her? Do you have any suggestions for having my conversation with her?

A: I have one primary suggestion: Relax. If you say to your agent what you just said to me, she'll probably be happy to continue supporting your path, especially if you let her know how much you appreciate her work and that you plan to refer her to those among your circle of contacts who are ever in the market for a real estate agent.

If your agent is experienced and/or knowledgeable about short sales, then she is certainly aware that a good number of them end up off the market before they close, whether due to foreclosure, loan modification or simply a change of the seller's mind.

I've never seen a listing agreement that mandates that the seller actually sell the home -- and if it did, it would be unenforceable (although it is possible for an agent to earn a commission if they obtain an all-cash, no-contingency offer at the listing price and the seller rejects it).

However, it doesn't sound like you have an offer, much less a contract with a buyer, and most short-sale listing agreements offer more exits than a cross-town freeway! Until you are in contract with a buyer and the deal is approved by your bank, there's no obligation on your part to sell your home.

To sell or not to sell -- it's your prerogative.

I'm certain that if you fully explain the situation and unforeseen circumstances to your agent, she'll understand and release you from the agreement. Your appreciation and the prospect of your lifelong business and referrals are worth more to a good agent than a hard-to-close short sale could ever be.

Before your conversation, though, check out your listing agreement to see whether you agreed to reimburse her for marketing expenses in the event you canceled this agreement. (This would be rare, but is possible). ...CONTINUED

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