Quote:
Originally Posted by tevake
Whats wrong with the bank, willing to take what ever the seller forwards to them, without even looking at other offers? This process seems seriously flawed to me. this is a bank that recieved over FIFTY BILLION DOLLARS in bailout funds from us thru the largess of our government. And cant be bothered to look at all the offers on a property they are selling at a loss? Really WTF? I just don't get it! Any insight here?
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Yeah, it can be a bit confusing!
Remember, it is still an agreement (contract) between buyer and seller, just contingent on (seller's) bank approval. So if the seller has signed/accepted an offer, any subsequent offers automatically become a back-ups, even if the first/accepted offer hasn't officially been submitted to the bank for approval yet. Also, most sellers will jump at the first reasonable offer, as they really have no skin in the game. The only motivation for a seller in a short-sale is to avoid foreclosure. They can't net any money at closing, so the offer price is largely irrelevant to them. That said, the bank will still do their own valuations to ensure the price is at/around current market value.
Regarding the "one offer at a time" thing: It is standard procedure. The approval process for most short sales is a long, involved process. So, a common practice is for the sellers to agree to only submit one offer to the bank for consideration at a time (no back-ups submitted). In return, the buyer agrees to deposit hard (non-refundable) earnest money at the time of seller acceptance (instead of upon lender approval, which can take 3+ months in some cases). Otherwise the buyer could walk away at anytime prior to that lender agreement notice without any penalty, putting the seller back to square-one. That can be a very frustrating proposition for the seller, especially if they are approaching their foreclosure/trustee sale date (with no more extensions).
Yes, the system is far from perfect.
FYI: It is usually the exact opposite with REO (bank-owned) properties, as most banks can/will collect several offers, then issue all parties a "highest & best" request with a deadline to make any changes to your offer. It is basically the equivalent to a silent-bid auction at that point, as you will never be privy to what the other offers are at. Also, cash is still king. So you will frequently see buyers requiring financing being beat out by lower offers from buyers with cash.
Oh, and regarding the bailout funds: You will likely be even more appalled to know that those banks are being FULLY compensated for their losses from the gov't on some of those distressed property sales.
