At the same time that the California Association of Realtors® (CAR) released its November, 2010 revision to the Short Sale Addendum (designed for use with a purchase contract) it also released a new form, the Short Sale Information and Advisory (SSIA). Coincident with release of the SSIA, CAR has discontinued a previous document, the Short Sale Listing Addendum. At first glance, then, the new document appears to be a replacement for the discontinued one.

The Short Sale Listing Addendum, as its name implied, was to be provided along with a standard listing form when a broker or agent took a listing whose likely selling price would be less than the existing mortgage balance. Certainly, the SSIA is appropriate to be used in the same circumstance. For the most part, it differs from the Short Sale Listing Addendum in that it provides considerably more detailed coverage of similar topics. The Addendum was a one page document, the SSIA is three pages.

Consider, for example, the treatment of the topic of alternatives to a short sale. The now-discontinued Addendum said this: “Broker has advised Seller that other options, such as, but not limited to, negotiating a modification of existing Loans/Liens, refinancing, bankruptcy, foreclosure or deed in lieu of foreclosure may be more appropriate for Seller.” In the new SSIA, Alternatives to a Short Sale is a separate section 16 lines in length that spells out a definition of each of the alternatives.

Whether it is a good thing that the new form is longer and more detailed is open to debate. Is it better simply to note that a short sale might result in adverse tax consequences and to advise the seller to consult with professional tax counsel? Or is it better to spell out (in a still albeit general way) how those consequences might come into play, and in what sorts of situations there might be exceptions, and that state and federal laws differ, and then give the same advice to seek professional tax counsel?

The SSIA devotes considerable space (approximately .75 inch of a single-spaced page) to the subject of the possibility that the seller might have continuing liability on the debt. The discussion contains a wealth of information about deficiency judgments, California anti-deficiency protection rules, and new state law on the subject. It probably contains more information on the subject than most licensees possess. Again, is this a good thing? I doubt it.

Under the best of circumstances a discussion of deficiency judgments and anti-deficiency protection rules is liable to induce the MEGO (My Eyes Glaze Over) effect. The likelihood that one would be closely read and comprehended by a stressed-out consumer in the context of listing their property is pretty low. Besides, as with discussions of tax or legal issues, it is followed up by the necessary cautionary advice that an appropriate professional should be consulted because the broker cannot and will not give advice on such matters.

Curiously, the SSIA contains a section directed to buyers. It generally advises about the perils and possible pains of getting involved in a short sale transaction. The inclusion of this section makes it apparent that the SSIA is not designed only to be used with a listing, though it would be odd to present a buyer with this document that has so much information specifically directed to a seller.

Finally, we note that the SSIA contains a Broker Authority section that is taken, with only minor modification, from the former Short Sale Listing Addendum. This makes the document an indispensable addendum to the standard listing contract in a short sale situation. It authorizes the Broker to “(1) market the Property for sale, (2) contact lenders concerning lender’s approval of a Short Sale … and Seller agrees to give Broker any necessary information to negotiate with lender, and (3) advertise in the MLS and other advertising medium that the Property transfer, sale price and payment of commissions are subject to Lenders approval.”

While this is a very important section, it is somewhat surprising to find it in a document that is titled to be “information and advisory”. The section provides neither information nor advice. It is contractual, providing the broker with certain rights and the seller with certain obligations.

There is a lot of good information in the SSIA. Certainly, none of it is incorrect or misleading. Nonetheless, some agents may find themselves longing to use the earlier, shorter version.

Published: December 14, 2010

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .