NWMLS: Mark Any Accepted Offer on a Short Sale as “Pending”

Kevin Lisota of Findwell sent me a heads up about a rule clarification sent out today by the NWMLS to all their members:

Short Sales: Status Change Required after Mutual Acceptance

Rule 120 (b) requires the listing office to timely report the mutual acceptance of a purchase and sale agreement for a short sale as Pending (e.g. Pending, Pending Inspection, Pending Back-Up). A Short Sale property shall not remain in the Active status if the buyer and seller have reached mutual acceptance and are waiting for the lender’s consent to the transaction. The only Short Sale properties that should remain in the Active status are those properties where the buyer and seller have not reached mutual acceptance.

In other words, properties that have any offer approved by the seller and awaiting bank approval must be marked as “pending,” regardless of the known fact that many banks are taking 2-3 months just to respond to such offers, many of which are then rejected by the bank.

This rule is not new, but according to Kevin, there is “zero consistency for this practice right now.” One would assume that many agents are already doing this, causing some of the growing discrepancy between “pending” and closed sales. Of course, if there are a non-trivial number of agents out there not doing this already that begin to do so now, this will definitely artificially inflate the pending sales data even further.

Kevin points out two problems with this rule (and the NWMLS’ newly-found fondness for enforcing it):

  1. Your pending numbers are going to be even more messed up. Often the distressed home seller will sign anything they receive, no matter how crazy, and then submit it to the bank. (Many banks won’t even look at it without a signed contract.) If typical wait times are a 2-3 months for a response, you’ll see all of those properties marked as pending, yet they are not pending until the bank approves the transaction. To give you an example, we have a short sale buyer that is in contract with the seller. They signed an agreement for a sales price close to $300k off the list price and more than $300k being owed to the mortgagor. I believe that this price has zero chance of success, yet the seller signed it just to move things along at the bank.
  2. This policy is not in the best interests of short sellers. Since there is limited success getting buyer’s offers approved, particularly lowball offers, it is in the seller’s best interests to continue marketing the property to try to attract better buyer offers while they wait for bank approval. The moment you change it to pending, it disappears from websites and no one will seriously look at the property any more.

At this point, I’ll continue to report “pending” sales in our monthly summaries, but will be converting our regularly scheduled graphs to closed sales, since that is a statistic that has had a consistent definition since 2000 (as far back as my data goes).

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    DrShort says:

    A short sale pending bank approval seems a lot more like the ‘”contingent” status rather than a true pending. Contingent status reflects mutual acceptance also, it’s just that there’s some other material event that must occur for the transaction to go forward. Just like a short sale.

    Contingent is still counted as active, right?

  2. 2
    Kevin Lisota says:

    While I applaud a consistent NWMLS policy here, it would actually be better to have a separate category called “Pending Lender Approval” or something similar. That would allow you to weed out those numbers from pending sales, giving a true picture of the market. Once the lender approves a transaction, the status could then change to Pending.

    It will be interesting to see if the pending number spike up as a result of this. I predict that they will. If the numbers do jump, you’ll have to take any positive reports of “pending sales improvements” with a grain of salt. Though I will say anecdotally that market activitiy is moving in a somewhat positive direction from what we are seeing in the last couple months, despite any artificial inflation that short sales are causing in our pending statistics.

  3. 3
    The Tim says:

    For the record, I predicted back in January that actual closed sales would “eventually flatten out and maybe even show YOY gains” in 2009. I still think that will be the case. Lower prices attract more buyers. It’s not rocket science. I just don’t get why the NWMLS insists on monkeying with the pending stats. It’s annoying.

  4. 4
    Kary L. Krismer says:

    I just looked at rule 120, and it’s not as ambiguous as I recalled, but perhaps it’s been amended. It says that it will be listed as Pending-BU (backup) where the P&S agreement indicates other offers will be accepted, and Pending otherwise. I thought it was more ambiguous as to timing.

  5. 5
    Kevin Lisota says:

    Indeed, the rule does state that you should change the status to Pending-BU (backup) if the agreement indicates that other offers will be accepted while waiting for bank approval. The problem is that the Pending-BU status is also used when you have a non-short sale when you’d like to solicit backup offers. The non-short sale version has a good chance of converting to a closed sale, while the short sale version obviously can stay in that status for 2-3 months and in many cases returns to active.

    If the short sale is not soliciting other offers while waiting for bank approval, then you are supposed to change the status to Pending. Once again, that lumps it in with properties that have a great chance of closing.

    IMHO, the sale is not pending until bank approval of the short sale is received.

  6. 6
    mukoh says:

    This has been around forever, any signed around offer is either STI or Pending. Now it is Pending. This is nothing new.

  7. 7
    Kevin Lisota says:

    RE: mukoh @ 6 – Is the offer signed around without lienholder approval? I would contend that it is not.

  8. 8

    By mukoh @ 6:

    This has been around forever, any signed around offer is either STI or Pending. Now it is Pending. This is nothing new.

    No, but what is new is the huge number of short sales, so this alters the equation of how many pendings will eventually close. Before there were a lot of short sales, you could reasonably predict that most of the pendings would eventually close. Now it’s much more of a wild card. I like Kevin’s idea of a whole new category called “pending lender approval.”

  9. 9
    Ray Pepper says:

    I’m knee deep in short sale activity (9) that are in one stage or another of short sale. Its a complete joke. Let it take 30 days++++…Just keep looking Buyers. Always keep looking.

    Give the bank their days and get that LISTING AGENT to mark it STI/Pending so the bank will get limited other offers to protect your client. It will save us Agents more work and the “deck” will remain in the hands of the Buyers not the Banks.

    On form 22SS Short Sale Addendum #3 strike the box that states Seller MAY NOT accept offers from other Buyers. 70% of my offers the listing agent lets this slide through and as far as I know the Listing Agent is NOT accepting other offers. DEMAND that STI status or PENDING status if they are waiving their inspection……………………or waive the inspection (to make it more appealing to the banks) but check the neighborhood review option…oh I could go on and on with this on how to protect your Buyers interests…………..

    BTW earnest money on short sale offers? Are you kidding me? I hope you Agents are writing up the offers and not having your clients tie up their cash in earnest. On form 22D check #11 then add. Earnest money to be deposited after Mutual Acceptance of terms from Buyer, Seller, and Lender………….etc. I have an entire format I follow, provided by our counsel, that keeps the $$ in the pockets of our Buyers, inhibits other offers when ours is accepted from seller, and is supposed to have a much higher success rate with these short sales.

    Again, agents………don’t tie up your Buyers earnest money deposits until the short sale market gets cleaned up. However, with my PREDICTION of unrelenting shorts sales over this decade I suspect the madness to continue.

    BTW, totally unscientific but WOW…Agents with their Buyers touring homes everywhere this weekend. I was showing properties in Clyde Hill, Redmond, and Issaquah today and all I can say is the Sun is bringing them out. I know its not the 8k for this set of Buyers I scheduled today.

    Kevin, a whole new category IS coming. Bank on it!…………………………

  10. 10
    Kary L. Krismer says:

    My post in the open thread was focusing on price, but you will now be able to start excluding short sales from your pending searches. That won’t affect the published data, however. Until we get a few months out with the rule requiring listings to be specified, however, the searches we do won’t necessarily exclude all the short sales.

  11. 11
    David Losh says:

    In my opinion the short sale is dead.

    Why would an agent put a buyer through that while in the mean time prices are coming down across the board?

  12. 12
    Ray Pepper says:

    Believe this?


    1 giant headfake ..They shall pick up again………BANK on it! SRS target 7.77

  13. 13
    Ray Pepper says:

    RE: David Losh @ 11

    Why would an Agent put a seller through that? Well, hmmmmmmmmmmmmmm…Can 3% have something to do with it? With a possibility of 6%.

    Far from dead David. We haven’t even started yet on a mass scale. Short sale “lingo” will be as popular as MSTR,FFIV, CSCO,EXDS, and INSP was back in 2000.

  14. 14
    Kary L. Krismer says:

    RE: David Losh @ 11 – The answer is price. But once REO the price might be even lower. So the only question for buyers is: Do you want to deal with the uncertainty and delay of a short sale, or with the one-sided poorly drafted contracts of a bank?

    I think the fact remains, however, that until the banks get their act in gear, most buyers will have little interest in either.

  15. 15
    Kary L. Krismer says:

    RE: Ray Pepper @ 13 – What’s 3% of nothing?

  16. 16
    Ray Pepper says:

    RE: David Losh @ 11

    Far from Dead David. Only on 1st base in/re to short sale activity this decade. It will become as “fashionable” as granite counter tops was. It will be the topic of discussion much like EXDS, INSP,MSFT,FFIV,RNWK, and CMTN was here in the 2000 Seattle tech boom.

    People are not stupid and they do not and WILL NOT have the cash to bring to close this decade. The process will be stream lined and it will be much more efficient in 2010.

  17. 17
    Greg Perry says:

    By Kevin Lisota @ 7:

    RE: mukoh @ 6 – Is the offer signed around without lienholder approval? I would contend that it is not.

    Sure it is, Kevin. In my mind it could be no other way. Only the principal can sign the contract to sell the property. You have mutually accepted contracted, but subject to a lien holder’s approval.

    The only flaw in the system is that we could not see the distressed properties, which is why they added the new fields.

    I don’t think we’ll see a rise in pendings because agents don’t understand the rules and didn’t do their job correctly. The fines for not reporting correctly (updating the pending sale) are stiff, and agents who end up showing properties that show active and are in reality pending have no sense of humor and generally report infractions to the NWMLS.

  18. 18
    patient says:

    “At this point, I’ll continue to report “pending” sales in our monthly summaries, but will be converting our regularly scheduled graphs to closed sales, since that is a statistic that has had a consistent definition since 2000 (as far back as my data goes).”

    Thanks The Tim, that is consistent with my impression of this site, I.e that it aims to filter through the noise and focus mostly on relevant and reliable data to better guide the consumers than any other local real estate blog. Good move.

  19. 19
    Ray Pepper says:

    RE: Kary L. Krismer @ 15

    Please explain Kary 3% of “nothing”?

  20. 20
    Ray Pepper says:

    I think I repeated myself twice. I need a day off in the Jeep.

  21. 21
    Kary L. Krismer says:

    RE: Ray Pepper @ 19 – If the sale doesn’t close, there’s no commission.

  22. 22

    By Kary L. Krismer @ 15:

    RE: Ray Pepper @ 13 – What’s 3% of nothing?

    How often are we going to see Kary Krismer and Redfin agree on anything?
    Redfin doesn’t handle short sales, because, to paraphrase them ” Ain’t nothin in it for us.”


  23. 23
    Kary L. Krismer says:

    I’m probably the most supportive of Redfin of just about any full service agent. I question their viability, but I like the fact that there is the choice available to people.

    And in the recent poll on where the market was headed, my answer was actually pretty close to Sniglet’s, but just not as detailed, and I wasn’t making a prediction. But the reasons for a possible downturn were relatively similar.

    Getting back to the topic, if I were to make a prediction I’d predict there will be a number of offices, if not entire brand names, that refuse to take short sale listings in the future. Too much potential liability, even without the distressed property law.

  24. 24
    Ray Pepper says:

    RE: Ira sacharoff @ 22

    Well, its all about servicing the customers needs and it always will be. If a Buyer wants a short sale, and they have been educated about the process, I say its ridiculous if an Agent doesn’t write it up. 3% for less then 15 minutes of paper work. I mean come on.

    Although I support Red Fin I do NOT support their recent decisons in their price adjustments, office minimums, only offering 15% less then asking process maximum, and non-representing clients in short sales. They will revisit these again in the future. Bank on it!.

    Financially speaking, I know why they do it, but their financial constraints have shifted their focus on “survival” more then the consumer.

  25. 25
    patient says:

    ” the NWMLS’ newly-found fondness for enforcing it”

    No wonder, the way the sales increase and absorbing inventory has been paraded this year. Now, if you look at The Tim’s invenotry tracker you can see that today is the first and only month this year where the inventory has stayed above $10k after the first of the month purge of expired listings etc. Coincidence? Who knows but a re-enforcement of this rule could definately lend “artificial?” support to the idea of absorbing inventory and increasing sales.

    Going forward the only measure of interest for pendings to me is what the percentage of short sales are, unfortunately that number is secret to the public…right?

  26. 26
    Kevin Lisota says:

    RE: Greg Perry @ 17 – Greg, I have a couple of clients that have been looking at tons of short sales, not because they want a short sale, but because of the location and price point that they want. I can say with great certainty that some agents update the pending status and some do not when the seller has signed an offer, despite whatever the NWMLS guidelines say.

    I’m not sure that the legalities of whether it is “mutually accepted” or not are really the question here. The problem is that there is a wave of properties now marked as pending that have limited chance of actually closing because they are a short sale. I think it does a disservice to agents and the market to pump up how great the “pending sales” are if the statistics are distorted by the short sale mess we are in.

    Also, if short sales have a limited chance of being approved, wouldn’t it be prudent for the seller’s sake to continue to market the properties in hopes of a better offer? By marking it pending, you’ve seriously comprimised the ability to attract more buyers.

  27. 27
    Kary L. Krismer says:

    RE: Ray Pepper @ 24 – Does Redfin refuse to write offers on short sales, or merely refuse to take short sale listings? I thought it was the latter.

  28. 28
  29. 29
    Greg Perry says:

    RE: Kevin Lisota @ 26

    I understand. Short sales are cumbersome. The bottom line here is that if we were to introduce more offers to the banks from “potential” buyers, it would screw the system up more than it is now. Heck, we can hardly get a response for the one offer on the table.

    The banks don’t want it, the principal has little to gain, and the listing agent for sure doesn’t want to handle several offers with a bank on a short sale.

    When a principal agrees to terms, it’s mutually accepted, and subject to (lien holder approval). Just like subject to — a suitable inspection.

    This is why short sales are considered “distressed properties” and sell for less than an arms length transaction.

    If an agent doesn’t update the status to pending after mutual acceptance, he/she does so at their peril. I know I get really cranky when I waste my good buyer’s time and my time showing properties that are not available because an agent is playing games. I don’t think I’m alone on this.

  30. 30
    Kary L. Krismer says:

    RE: The Tim @ 28 – Thanks. That’s pretty amazing to me. I wonder if it’s just a holdover from the days of the Distressed Property Law. Their policy would make sense in light of that, but I don’t see the reason for it today.

  31. 31
    Kary L. Krismer says:

    RE: Greg Perry @ 29 – I don’t see that the bank wouldn’t want to know about better offers. It’s not like they do a detailed analysis of an offer or the buyer.

    The problem is that submitting a new offer would probably slow them down, so the agent doesn’t want to do it. So again this is another area where the banks being incompetent handling short sales harms their own interests.

  32. 32
    Greg Perry says:

    RE: Kary L. Krismer @ 31

    Kary, I’ve had banks instruct me to submit only one offer. Your second paragraph being why.

  33. 33
    patient says:

    By Greg Perry @ 32:

    RE: Kary L. Krismer @ 31

    Kary, I’ve had banks instruct me to submit only one offer. Your second paragraph being why.

    Is that any different from any other type of sale? I would hope that as a buyer’s agent you are only submit one offer per property, how would you otherwise not violate the interrests of one of the buyers? If you already have submitted for one buyer you can impossibly not be influenced by that offer if you guide another buyer to write an offer. Seems at least like an ethical violation?

  34. 34
    Kary L. Krismer says:

    RE: patient @ 33 – The difference is the bank isn’t under contract to accept anything. And the bank should have fiduciary duties to it’s shareholders (e.g. the US Government) to maximize the recovery they get on properties. IMHO it should be criminal for the banks to issue such instructions.

    Edit: I wonder whether this would be a good shareholder derivative action suit?

    In the bankruptcy world, where sales are subject to court approval, new offers get submitted to the trustee and the trustee brings them to the attention of the court.

    Finally, as to the ethical duties of an agent, they are required to submit new offers to the seller even after acceptance. The problem is that the seller can’t accept them without breaching the contract, which is hardly ever a viable option.

  35. 35
    patient says:

    RE: Kary L. Krismer @ 34
    Ok, now I see why this is weird, you are talking about the role as a seller agent for the bank not a buyer’s agent. I agree that it seems contra productive as border line criminal for the banks to not seek the best possible deal until the papers are signed.

  36. 36
    Greg Perry says:

    RE: patient @ 33

    I was writing in the context of the representative of the seller in #32.

    The listing agent owes no duty or allegiance to the bank, whatsoever. The listing agent must represent the sellers best interest.

    To me, this means first making sure the seller confers with an attorney skilled in foreclosures and bankruptcy. I am not skilled enough in the law and personal financial matters to determine my client’s best interest around the short sale issue.

    Perhaps bankruptcy is a better option for the seller.

  37. 37
    patient says:

    RE: Greg Perry @ 36 – Understood and I agree.

  38. 38
    Kary L. Krismer says:

    And I’d agree too, but if the bank would not have a delay because a new offer was submitted, that would be in the interest of the seller. First, the sale would be more likely to be accepted at a higher price. Second, if there is a deficiency after the sale, it would be less. But with the current state of affairs, it’s not clear it is in the seller’s interest to submit a new offer.

  39. 39
    Greg Perry says:

    RE: Kary L. Krismer @ 38

    Heck, it could be in the seller’s interest to drag it out as long as possible to live rent free and payment free in the dwelling if you think about it.

  40. 40
    Kary L. Krismer says:

    That’s true. I’ve heard of people living in their place rent free for a year.

  41. 41
    what goes up must come down says:

    RE: Ray Pepper @ 9 – Ray thanks for the info I have to say that was one of the most informative posts I have read. Thanks again.

  42. 42
    what goes up must come down says:

    RE: Kary L. Krismer @ 23 – I guess the “customer” is not always right, Kary I think it depends on the number of short sales — or the offices you mention just might not be in business.

  43. 43
    David Losh says:

    Short sales are the banks problem. The banks want the problem to be everybody else’s. They made bad loans.

    So all the SS boiler plate language that the NWMLS wants to throw at banks will do nothing to cover the aspects of agents who should know better at this point.

    What’s the sales pitch on short sales? It’s cheap.

    They are anything but cheap. They are only cheap by yesterdays standards. The future will make these short sales another load of over priced carp.

  44. 44
    Kary L. Krismer says:

    RE: what goes up must come down @ 42 – I’ve heard one office that did a lot of short sales closed up shop, but I’d never heard of them before and don’t remember who they are. But I was actually thinking more of liability concerns, not lack of closings driving the decision.

  45. 45
    mukoh says:

    RE: Kevin Lisota @ 7 – Kevin, an offer is signed around and accepted by the SELLER/BUYER. Bank is not signing on the offer unless they own the property. At that point it is a mutually accepted transaction with contingencies such as inspection, financing, form 17, title, short sale and etc…

    What I was referring to is that this is nothing new and contracts accepted pending a short sale approval have always been PENDING at the least ACTIVE-STI upon mutual acceptance. Any real estate agent can attest to that.

  46. 46
    mukoh says:

    My friend is going through a short sale right now as a buyer. Its CW who is the servicer for I think Chase or Citi. He is waiting since March for any word from the bank. So far no response from the bank, the property is Pending. His agent says he has over 8 of these accepted sitting for two months or more waiting for the bank to make a decision.

  47. 47
    Maria Cristina Evans says:

    I agree with the MLS. It is the realtor’s job to help the seller just to accept the offer that he/she is confident the bank will approve. The seller doesn’t know anything about the market and can’t do a CMA. You can always send to the bank the low offer just to get the process going… Hello… you don’t need seller signature.
    It is also important to have the buyers to do inspections before the approval. In my short sales I ask the buyers to do inspections before the approval. Finally, you just need ONE buyer but you need to make sure you have the right market price.

  48. 48
    David Losh says:

    RE: mukoh @ 45


    The house that I looked at today has had an offer with the bank since last November and showed as active. You can submit as many offers as you would like hoping one would get the attention of the bank.

    The offer to the bank is for $750K for a property they have lent over a million on.

    The change makes all signed arounds go pending which is a friviolous action in the market place. As your next comment attests banks are slow to respond.

  49. 49
    Kevin Lisota says:

    RE: mukoh @ 45 – The way that the short sale addendum is worded today is that none of the inspection, financing, title, earnest money, closing or other deadlines begin until the date of bank approval. To quote “mutual acceptance shall be deemed to be on the date of delivery of the Lender Consent to the Buyer”.

    I’m not arguing whether or not legal “mutual acceptance” has occurred. I just think it makes sense to change the status to Pending when the lender consent is delivered to the buyer, since that is when everything else in the contract begins.

  50. 50
    Jillayne says:

    Greg Perry re: comment 36:

    “The listing agent owes no duty or allegiance to the bank, whatsoever. The listing agent must represent the sellers best interest.”

    Listing agent must be honest and deal fairly with all parties including the bank. Listing agent must also not violate any state or federal laws that may favor a bank but may not favor a seller.

  51. 51
    mukoh says:

    RE: David Losh @ 48 – David, thats because the very skiled selling agent didn’t take care of his buyers, and let other people make offers on a home that his buyers want.

  52. 52
    what goes up must come down says:

    RE: mukoh @ 46 – Mukoh, question if by the time the bank got back to your friend the market dropped another 20% — just throwing our a number not saying it will happen — could your friend walk away or renegotiate the deal?

  53. 53
    mukoh says:

    RE: what goes up must come down @ 52 – When the bank comes back I am sure they will come back higher then what the offer was accepted at. So once they come back they will re-evaluate the price vs. market I assume.

  54. 54
    Kary L. Krismer says:

    The NWMLS is also reminding agents that if they are going to submit offers to the bank prior to accepting the offer, that has to be disclosed in the listing.

  55. 55
    David Losh says:

    RE: mukoh @ 53RE: mukoh @ 51

    These comment make no sense. My concern is that you do make comments that have no bearing in the market place or about the market place. In some other comment you say your friends were out bid by $30K.

    You spent a lot of time attacking me which I’m used to, but you should have some working knowledge to go along with that.

    I have no doubt you made millions of dollars as a big time builder developer, but your comments here make no sense.


  56. 56
    hollyrocket says:

    So…. If a property is owned by a bank there can be no mutual acceptance until the seller (the bank) agrees in writing on price and terms. The “financing,” as referenced in the NWMLS rule, is the financing vehicle, not meant to indicate the owner/seller. If an offer is made on a listed foreclosure, it is not considered pending until the owner responds and the negotiations are finalized for the offer, even if the owner happens to be the bank.

  57. 57

    […] Sales for King County are up 16% from a year ago, though there is some debate about whether all of these pending sales will […]

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