Q: I am a New York State licensed real estate broker and I am taking an exclusive listing where the property is subject to a foreclosure action. When I advertise the property, am I required to indicate in the advertisement that the property is in foreclosure?
A: No, unless the seller instructs the real estate broker otherwise, there is no legal obligation for a real estate broker to indicate in an advertisement that a property is subject to a foreclosure. However, because a seller’s real estate broker has certain obligations to a buyer in a transaction (specifically, the obligations to deal honestly, fairly, in good faith and to disclose all facts known to the agent materially affecting the value or desirability of the property), it is advisable that the real estate broker disclose the fact that the property is in foreclosure at some point prior to the buyer entering into a contract of sale for the property. The disclosure of the foreclosure before the contract stage gives the buyer the ability to insert certain protectionary provisions into the contract of sale (for example, a buyer may request (i) the right to cancel the contract if the seller is unable to close within a certain period of time and (ii) that the seller make certain representations regarding the outstanding mortgage, including the balance of the mortgage and the foreclosure process, as well as a representation by the seller that there are no other liens affecting the property).
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP