Does "Short Sale" belong in Real Estate Advertising?

So "Short Sales" and Foreclosures are all over the news lately.  These terms are also being tossed about an awful lot in Real Estate Advertising and Marketing.

I wonder why Realtors and Real Estate Companies are so willing to advertise the distressed nature of some of the homes for sale?

A number of real estate experts have been quoted on regional blogs and in local media that the sales price for homes that are identified as "Short Sale" or "Foreclosure" properties is in the range of 20% to 43% below the value established in a CMA (Comparative Market Analysis) of similar homes in the same area.

I can understand that a home that has already been foreclosed on, and has been vacant for some time, may very well need to be discounted due to the home falling into disrepair from being vacant for a period of time.

But what about the home where the seller has fallen behind on their mortgage payments and the foreclosure process is just getting underway?  Here in Illinois, it's possible for a home owner to remain in possession of a property for as long as a year before the foreclosure process results in the final eviction of the residents of the home. 

I sold my first pre-foreclosure condominium about 13 years ago here in Chicago - way before the huge wave of foreclosures happening right now.  The owner of a condominium in a desirable high rise in Lincoln Park lost her job and couldn't make her mortgage payments.  As the mortgage company started the foreclosure process the seller listed the condo for sale with an aggressive Re/Max agent who marketed the home through all his company's normal marketing channels.  None of the marketing for this condo mentioned that the home was in foreclosure, and my buyer paid full retail price for the condo affording the seller a small profit after paying off her outstanding mortgage. 

As the condo was in perfect condition and completely salable, the question comes to mind: 

Should my buyer and I have known about the status of the mortgage before making an offer?

If so, why?

My company has a whole company e-mail address for agents to get the word out about open houses, new listings, company announcements and the like.  An informal survey of the bulk of the email received yesterday and today reveals four emails addressed to the company promoting a new listing that is in pre-foreclosure or will be a short sale.

Other blogger's have noticed a marked increase in the advertising and marketing of properties and their pre-foreclosure or short sale status through the Multiple Listing Service and even in their newspaper advertising.  Yikes!  I have not seen the practice being adopted too frequently here in Chicago.  Yet.  But a search of all property types, for the words "foreclosure" or "short sale" reveals 161 listings.

But this begs the question:  If you have a listing where the seller is having trouble making payments on the mortgage but the home is in otherwise perfectly marketable condition, should the Realtor reveal the status of the mortgage in the marketing for the home?  Even though the disclosure of this information will virtually guarantee that the home will sell for a discount of 20%, 30% or even 40% off of its full market value?

I am sure I know the answer to these questions.  It's : No.

Here's one for you, though:  Lots of buyers love to ask why the seller is selling?

What do you say when a buyer asks you why the home is for sale?  Or why the seller is selling?  Or why are the sellers moving?

Or even more direct:  Is the seller in foreclosure?  Is the home in foreclosure?

My favorite answer when the question is asked during a home showing is:

"Why, they've decided it's time to move!" Delivered in the sweetest voice and with a broad smile like it's the most natural answer in the world.

Usually this will stop the line of questioning.  Sometimes a potential buyer will follow up with a serious look and repeat the question.  In those instances I'll meet their icy stare and tell them that I can't answer the question.

About one in 100 will ask me why? 

Of course it's because it's my duty to promote the best interests of my clients.  And revealing anything about their reasons and motivations for moving is a violation of my duty to them.

Which brings us back to the "Short Sale" or foreclosure status.  Doesn't it make sense that announcing to anyone and everyone this info also violates the duty that you have to your sellers?

I'd love to hear from any of you especially if you're in the real estate industry.