Marketing a short sale is just like marketing any property with one serious exception. That exception is that at some point the seller is going to have to disclose the short sale requirement to the buyer. When and how that disclosure is made is a big part of marketing a short sale property.

When to make the “short sale” disclosure depends largely on the numbers you developed with your seller. If the asking price minus the seller’s closing costs is more than the loan payoff, a full price offer will not result in a short sale. In such a situation, the disclosure would not be necessary, or usually made, until the seller was considering an offer less than the asking price that would result in a short sale. When a full price offer will not result in short sale, the property can be marketed just like any other property. No short sale notice would be needed until the seller countered an offer that did not generate sufficient revenue to clear the title.

The general rule here is that a short sale disclosure is required prior to entering into any contract under which the seller will not be able to deliver clear title. If the seller is going to counter with a short sale contingency, the counter itself will disclose the short sale. When, however, the asking price itself is less than the loan payoff, and the seller will not or cannot make up the difference, every offer will trigger a short sale situation. That raises serious disclosure timing issues.

Disclosing a short sale situation signals seller distress. Seller distress can reduce offers to below market value. In addition, the uncertainty of the short sale process may discourage potential buyers and their agents before they even see the property. A short sale disclosure can also attract the attention of market predators, “low ball” offers and real estate scams of every stripe.

Your seller must be prepared for the marketing down-side of short sales before agreeing to market the property as a “short sale.” The bottom line with a short sale is that the seller cannot accept an offer without a lender approval contingency. That means either inviting an offer with such a contingency or countering with the contingency. Either is a form of short sale disclosure.

Unless you use a short sale form, or your company has a standard short sale addendum, someone will have to draft the short sale contingency. Drafting such contingencies is well beyond the expertise of a real estate licensee. Nevertheless, knowing how such a contingency works is a big part of writing a short sale deal.