Florida Short Sale Contracts Are "Contracts"

When I wrote “When is a Contract NOT a Contract?” it stirred up over 40 comments and some controversy.  The crux of the matter is that many Destin Florida listing agents are accepting more than one “primary” contract on a Short Sale listing.  There is a prevalent belief in the Emerald Coast real estate market and others, that a contract is “not” a contract despite being signed by both buyer and seller, until the bank approves the price and short sale. Thus, the thinking goes, the Short Sale seller is not truly obligated to the buyer who wrote the offer, and can simply sign multiple contracts with parity.  Because of this misconception, many buyer’s agents also think release and cancellations are not needed when buyers “walk” prior to bank approval.  Also, the practice of accepting more than one “primary” offer is likely a disservice to sincere buyers who are subjected to auction-type handling of their offers.  There may be legal ramifications, as well.

I have since tracked down a definitive answer from the Florida Association of Realtors staff attorneys, as written in Florida Realtor Magazine, September 2008.  The following is from the Legal Q&A that appeared on page 9 of the magazine.  It clearly reinforces the fact that a Short Sale contract is a “contract” and that the seller should only sign another contract with a “Back-Up” clause attached.

Legal Hotline

Contracts
Q I have a fully executed FAR9 Residential Sale and Purchase Contract along with the FAR SSA-2 Short Sale Addendum to Purchase and Sale Contract. We are still within the time period in which the seller may obtain the lender’s approval of the short sale, and now another buyer has made what is arguably a better offer. May the seller sign the second contract?A The seller may sign a second contract but should do so only as a backup contract with the appropriate backup contract addendum attached. If using a FAR contract, use addendum P(1) from the FARA-9 Comprehensive Addendum. Of course, the FAR SSA-2 Short Sale Addendum should also be used.

Here is the link http://www.floridarealtors.org/FLRealtorMagazine/2008/September/0908LegalHotline.cfm