Quote:
Originally Posted by Eric Coffey
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.  |
All the above is correct. I've done 80+ shorts. The seller can only sell the house to one buyer so they really can't sign more than one offer. Even if later offers are for more, the house is already under contract. The banks often feel differently and will ask for multiple offers but they don't have to follow the same laws that Realtors do.
Not much about shorts make sense. The seller's lender is often servicing a loan for another investor. If the loan is not fannie mae backed, the investor will not always follow the governments short sale guidelines. It's sort of a free for all at times. Shorts are often unpredictable and a real gamble. They are sometimes good for the investor looking for a deal but not always the buyer looking to find a home for their family.
Never put a large good faith deposit on a short sale offer. If the seller goes AWOL (they often do) you will need to go to court to get the deposit back. The broker is forced to keep it in escrow until the seller releases or the court gives permission.
Oh, trust me, the banks are not doing any favors for the Realtors. Inside deals, I wish. They act like Realtors are the enemies instead of the ones helping sell off excess, distressed inventory. It's a fight every step of the way and a lot of wasted time working shorts.
Have fun :>)