: A Short Sale Contract is STILL a Contract!

A Short Sale Contract is STILL a Contract!

Florida As Is  real estate contractHi folks. Allison Stewart wrote a very good post this week titled WALK THIS WAY... CAN BUYERS JUST WALK AWAY FROM A CONTRACT?. Allison’s post is talking about Buyers who feel they can just walk away from a Short Sale transaction and get their deposit back because they are just tired of waiting. They feel the contract is not binding.

Here is my opinion on why Buyers feel this way. They are misinformed.

A Short Sale contract is no different than a regular contract with the exception of the 3rd party approval contingency. This contingency is related to the Lender approving the “Short” NOT approving the contract. The lender has no authority to approve the contract since they are not a party to the contract.

They do however have the authority to approve or disapprove the Seller’s request for a “Short” payoff.

A contract is binding and legally enforceable when:

  1. It has a legal purpose
  2. The parties are legally competent
  3. The offer has been made and accepted
  4. There is consideration
  5. The parties have willingly consented to the terms


There may also be contingencies in the contract. Contingencies are: Conditions which must be met if a contract is to be performed.

Some contingencies may be to protect one of the parties:

  1. Survey
  2. Inspections


Some contingencies may need to be removed in order for the purchase to be completed:

  1. Title
  2. Short sale approval
  3. Financing


The Short Sale approval is just one more contingency in the purchase contract. And just like any other contingency it should have a time period to be removed.  

If it can’t be removed in the time allowed then the parties can either extend the time period or cancel the contract and return the escrow deposit.

If it can’t be removed at all because the Short Sale was denied then the contract becomes  “null and void”. The Seller is now unable to perform. This is no different than when the Buyer’s financing is denied. He too is now unable to perform.

Folks....this stuff is NOT complicated. It’s Real Estate 101. Stop trying to complicate matters by treating the Short Sale as anything other than what it is…..a contract contingency.

If your Short Sale listings are not closing. Get training. You’re doing something wrong.

If your Buyers are getting frustrated then you are not setting the right expectations.

These are my thoughts. What are yours?

***I am NOT an Attorney and this is not legal advice. I am however a Licensed Florida Real Estate Broker and this IS my opinion.

Bryant Tutas
Broker/Owner
Tutas Towne Realty, Inc
Licensed Florida Real Estate Broker
http://CentralFloridaShortSales.com

http://ShortSaleSuperStars.com

***The content of this blog is solely my opinion***

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174 commentsBryant Tutas • August 15 2009 04:10PM

Comments

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Hun...

Are you sure it's not complicated? And why do Agents tell Buyers they can get their money back when they walk away from a contractual agreement? Why oh Why? :)

TLW...ROAR!

Posted by "The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW. (President-Tutas Towne Realty, Inc.) almost 5 years ago

I wouldnt know why a buyer would think that way and if they assumed wrong, it is their agent's duty to tell them that they are getting into a legal binding contract.

Posted by Loreena Yeo, Realtor® | Frisco TX Community Ambassador (3:16 team REALTY ~ Locally-owned Frisco TX Real Estate Co.) almost 5 years ago

Hi BB - In California we have a form called "Short Sale Addendum" which is a contingency to the contract, but it says right in the form that if Seller fails to notify the Buyer of lender's aproval within the contingency period, the Buyer may cancel the contract for failure of the contingency.

So as a practical matter, the contract is unenforceable against the buyer unless the lender has approved the contract within the time period specified by the buyer in the offer.

Posted by Susan Neal, Fair Oaks CA & Sacramento Area Real Estate Broker (RE/MAX Gold, Fair Oaks) almost 5 years ago

Very well put. I believe that a lot of confusion can be eliminated up front if we take the time to fully explain the process (or lack of process) with the short sales. If the parties to the contract do not understand it, the judge will be happy to explain.

Personally, I have been trying to avoid them as I do not feel that I am qualified enough to properly `handle the intricate dealings.

Posted by Jim Palmer, Washington County, Florida (Chipola Realty - Chipley Office (850) 638-2777) almost 5 years ago

A key point about the short sale contingency is that it have a time frame.  In some cases, the short sale approval does not happen in a timely manner.  If time is important to the Buyer, which it most likely is, then the Buyer should set a time limit in the contract for this short sale approval to occur just as they would for any other contingency.  If it does not occur by that date, then, yes, they can ask for an extension or they can stop the contract right there and should get their deposit back.

Posted by Ron Trzcinski (Zenith Realty) almost 5 years ago

Bryant - One of my sellers just retained the earnest money when the buyer *defaulted* before short sale lender approval....  The buyer admitted they were in default, they just decided to buy another house.  That is the way contracts are supposed to work. 

Posted by Wendy Rulnick, Destin FL Real Estate (Rulnick Realty, Inc.) almost 5 years ago

Bryant - Your explanation is great, Black and White, which it should be.  It turns grey when listing agents and/or buyer's agents are uneducated.

 

Posted by Michelle Gibson, REALTOR (Hansen Real Estate Group Inc. ) almost 5 years ago

Susan, The contract is still completely enforceable. It only becomes unenforceable once the contingency period expires. Just like any other contingency. This is my point. It is STILL a contract just like any other contract. Hopefully listing agents in your area are putting realistic time frames on this contingency. The buyer can not just walk form the contract. They have to abided by the terms of the contract.

Ron, EVERY contingency in a contract should have a time frame on it. The short sale approval contingency is no different.

 

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

TLW the reason that buyer's agents tell clients that is because, on our coast, that is how we do it.  Out here the buyer has the right of revocation of the offer up until the time they are notified of acceptance of the short sale by the lender.  Once that happens, that right of revocation goes away. I'm pretty sure CA, OR, and WA are uniform in this.

It's not the the contract isn't binding, but legally we give buyers the right to walk. 

Now having said that I do talk with my clients about the impact that walking has on the seller and I have only had one buyer want to make an offer on a short sale.  Since our market has so few of them, they can afford to keep on looking at other things.

 

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) almost 5 years ago

BB...

(I'm not a lawyer and I am not offering legal advice here but I am only offering topics for conversation) but typically in a contingency situation the non-contingent party (in this case the buyer) can serve notice that they are terminating the contract without penalty. This is especially true if time period is not clearly defined in the contract.

Earnest money ALWAYS belongs to the buyer. It is up to the seller to demonstrate breach or default.

No court is ever going to rule in favor of a seller that cannot perform.

(Disclaimer: Talking points only and not offered as legal advice. Always seek the advice of an attorney.)

Posted by Richard Weisser, Richard Weisser Coweta Newnan Homes for Sale (Better Homes and Gardens Real Estate Metro Brokers) almost 5 years ago

A contract is a contract and I don't see how one could think a short sale was any differnt.

Posted by Gary L. Waters, Broker Owner Waters Realty of Brevard, LLC, Personal Service, always. (Waters Realty of Brevard, LLC) almost 5 years ago

Richard, So are you saying the seller can cancel anytime they want if the contract is contingent on the buyer getting financing? Or contingent on inspections? Why bother even having contracts. This makes no sense at all. Earnest money goes into escrow it does NOT belong to the buyer. That's the entire purpose of escrow. If there is a 3rd party short sale contigency in the contract and the seller has 90 days to clear it and the buyer decides to walk before this time frame is up then the buyer is in breach of contract and will forfeit their deposit.

Melina, That sounds like another one of those foolish board short sale addendums. Contracts are between the buyer and the seller. Why would a seller ever give the buyer carte blanc to walk on a contract.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

BB...

Georgia is not an escrow state ... so there's a difference there perhaps. But following the wave of consumerism, it is very hard for a seller to prevail in court in just about any case, let alone a third party lender dragging their feet because they can.

A condition is just that, a condition. It's not an issue of performance or disposition of the earnest money.

Since theoretically, a bank can withdraw their "third party approval" at any time up to cancellation of the security deed (once again specific to GA) the seller is never in the position of unilaterally removing the condition and performing and therefore probably cannot enforce the contract.

The key is giving everyone a "reasonable" amount of time to perform.

What's the definition of reasonable?

Whatever the judge says it is.

(Disclaimer: Talking points in this comment are the opinion of the author only and not offered as legal advice. Always seek the advice of an attorney.)

Posted by Richard Weisser, Richard Weisser Coweta Newnan Homes for Sale (Better Homes and Gardens Real Estate Metro Brokers) almost 5 years ago

Richard, Wouldn't a reasonable amount of time be what the buyer and seller negotiate and put in the contract? Point taken on the escrow.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

BB...

I'm just saying that it would be a different case in court than what is on paper ... a buyer MIGHT feel comfortable about terminating the contract, and may wish to test the waters in court.

Once again, I'm not a lawyer and I am not offering legal advice but in my very humble opinion the bank approval contingency would be EXTREMELY hard to enforce because it is "circular."

That is to say that nothing can happen unless they agree to allow it and they can't allow it unless something happens! LOL

Folks ... always consult an attorney, we're just throwing out ideas here!

Posted by Richard Weisser, Richard Weisser Coweta Newnan Homes for Sale (Better Homes and Gardens Real Estate Metro Brokers) almost 5 years ago

TLW and BB - buyers here can get their money back, short sale or not, provided they leave a contractual agreement within the stipulations in the contract, e.g., the contigency period, but not just at any time. Even so the the seller can still protest returning the funds, just as the buyer can if they feel they did not voilate the contract and the seller is refusing to return the deposit. Then it is off to court unless they can mediate and resolve.

Our short sale addendum allows us to include a date by which the seller shall receive written consent of the short sale, allowing the buyer to cancel the contract and receive their deposit back if written consent is not received by that date OR the seller fails to give the buyer a copy of the consent by that date. Obviously not putting in a date puts the buyer at risk in  short sale situation. Like the rest here, I am not an attorney nor offering legal advice, but buyers need to read, and understand, the form before signing.

Jeff

Posted by Jeff Dowler CRS, Carlsbad CA Homes for Sale (760) 840-1360 (Solutions Real Estate ) almost 5 years ago

BB I think we do it that way because short sales take so long.  Our listings stay on the market as active and it is in the short sale addendum that the seller will continue to accept offers and present them to the bank.

I'd say it's 50/50 out here with agents that accept just one and present it and those that follow the addendum and continue to get more offers on a property.  It seems to be, out here, that those that accept multiple offers seem to close them better. I'm guessing it's because of the walk factor.

I think because they are such a small part of our market, there wouldn't be a lot of incentive for buyers to make offers on them if they weren't able to walk easily.  I think if they didn't allow that, most sellers would head into foreclosure because their isn't enough of an incentive for buyers to look at those homes.  Short sales are NOT good deals out here.  They just aren't.  

 

 

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) almost 5 years ago

Hi BB... Very Well Stated!  I have never understood why some agents choose to over complicate short sales.  They are a contingency purchase like any other.

Posted by Steve Shatsky, Dallas Real Estate & Short Sale Specialist (214)213-0340 (Prudential Texas Properties) almost 5 years ago

BB - I'm with Melina.  Short sales do not work well in North Idaho and banks are VERY reluctant to participate.  I believe banks across the nation will be attempting to own the property free and clear of Realtors® by gaining a deed in lieu of foreclosure.  

Posted by Kent Anderson, from Schweitzer to the Lake (Coldwell Banker Realty-Schweitzer Mountain, Sandpoint, Idaho) almost 5 years ago

Bryant, this just drives me crazy how some Buyers think that purchasing a home is just something to do one afternoon and if they change their mind, oh well, no problem, give 'em their monies back. Especially after the Seller has all of their eggs in one basket; the Buyer's basket, in that they're not dealing with multiple offers.

Posted by Lynn Pineda, Coral Springs REALTOR- Promises Delivered (Imagine Your House) almost 5 years ago

BB - I had one short sale where the bank did the negotiating.  Went great!

I had another one where the seller did the negotiating.  Couldn't put it together.  Grrr.

I liked the first one because the bank said where to set the price and what they would take.  The second one was totallly up to the seller.  And they were clueless.  They wanted full asking price!

Posted by Bob Haywood, www.BobHaywood.com (McGraw Realtors) almost 5 years ago

What's even more frustrating to me as a Realtor is AGENTS that don't believe its really a contract and leave the listing Active on MLS.  I now write into my offers on short sales "Listing to be put PENDING on MLS and if offer is accepted by Seller, the Seller agrees to only submit this executed contract to the lender for 3rd party approval".  Many Realtors say "Oh we send all the offers to the bank".  Every bank I've done a short sale with only wants 1 offer - highest and best - otherwise they get overwhelmed by paperwork.  If Realtors would take the highest offer, put the short sale listing pending, and close it - the rest of us could be closing OTHER homes, maybe even some non-short sales, and we wouldn't have 5 and 6 buyers all thinking they are getting the same house.  No wonder buyers think they can just walk away when Realtors are taking multiple offers ALL signed by the seller to the bank.  How can the Seller contract to sell his home to 5 different buyers?  Part of this is Realtors not knowing what they are doing.

Posted by Liane Jamason, Top 1% Real Estate Agent - St. Petersburg, FL (Smith & Associates Real Estate) almost 5 years ago

It is my experience that you are incorrect. You can not hold a buyer's earnest money hostage or his/her willingness to purchase the property hostage while the agent/attorney/negotiator takes their sweet time to decide if they can consumate the deal. All of my short sale offers BEGIN the 5 days of attorney approval and inspection AFTER bank approval of the short. Therefore, it NOT a consumated deal until the bank approval. If you are not purchasing property this way, you are wasting time, money, emotion and energy. Unless, you represent the seller, then you are looking at the deal only from your standpoint.

Posted by brycefuller almost 5 years ago

In Arizona the standard Arizona Association of Realtors Short Sale Addendum to the Purchase Contract specifically provides:

 

"Buyer may unilaterally cancel this Contract by notice to Seller at any time before receipt of a short sale Agreement Notice from Seller."

 

We use a Counter Offer that makes the earnest money non-refundable for 90 days.

Posted by Tony Marriott, Associate Broker, REALTOR (Haven Express @ Keller Williams Arizona Realty) almost 5 years ago

HI BB

Thank you so much for elaborating on my post-( I feel truly honored)  We are of the same opinion-

now here is the rest of the story...

Buyer's Brother is a Broker. (Who by his own admission has not been active in Real Estate for many years but has kept his license current (along with his hyper inflated ego) it was his officiousness combined with his lack of current knowledge and invective interpretation of the contract and short sale addenda which lead to the deal dying.  Despite the fact, that they were given CURRENT accurate information repeatedly.

There are times when what they they or a relative "know " is an obstacle so massively overwhelming, that it undermines the best of us- it cannot be overcome with reason or common sense or production of facts. 

In which case- if the deposit is forfeited through their own actions, the agents need all be held harmless.  We wait...as they decide if they will sign the Release and Cancellation Agreement or if in his words "it goes before the board for an EDO."... Okay folks when was the last time one of those happened?   Here is a clue... back in the days when Real Estate firms held their own Escrow Accounts  ahhh but that is entirely different post.

 

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) almost 5 years ago

Actually, in Utah, a short sale is NOT a contract.  You can walk away for any reason, or no reason.  In fact, you can put multiple offers on short sale properties (a practice which typically you can NOT do).  Ironically, we encourage the exact opposite of your post - we educate our buyers to put in an offer with no risk.  They will not even have to put up earnest money until if/when the bank approves it.  Even when the bank approves, then the buyer has to then accept the banks terms before it's an official contract.  Even if the buyer is not sure about the property, both listing agent and selling agent welcome an offer - often banks will not begin the process until there is an offer.  So, even if the buyer walks, the listing agent is happy since now they can advertise "bank approved price of $XXX quick close possible".  My words will probably make you cringe, since I often say "make an offer, you have nothing to lose, and you can keep looking".  Here is a line from our short sale addendum:  Buyer may cancel the REPC for any reason, or for no reason, by providing written notice to Seller whereupon any Earnest Money Deposit shall be released to Buyer.

Posted by Paula Smith, Paula Smith Red Rock Real Estate (Red Rock Real Estate St. George) almost 5 years ago

Very well put Bryant. We are constantly debating with our members that this is simply another contingency and that all short sale listings that have a contract in negotiations should be listed as "Contingent". They just don't seem to get it.

Posted by Cindy Kelley almost 5 years ago

Brycefuller, this is not about holding the buyers deposit hostage. It's about abiding by the terms of the purchase contract. The time to protect the buyers deposit is during contract negotiations. If they agree to give 90 days to remove the 3rd party contingency then that time frame is what dictates the contract. If the walk on day 89 they will forfeit their deposit.

Tony, That clause is ridiculous. My seller would not agree to that. It just shows how clueless our boards are when it comes to short sales. If you put a clause like that in a contract then why even bother having a contract. It's a waste of time.

Liane, your thoughts are exactly right. The reason short sales don;t close is inexperienced agents. It has nothing to do with the lenders. The lender are slow but they approve short sales.

Kent, I have yet to have a bank want a deed in lieu of foreclosure. They also don't want to foreclose. The lenders are all about the bottom line and neither one of these options make financial sense. Lenders would much prefer to do a short sale.

Richard, "That is to say that nothing can happen unless they agree to allow it and they can't allow it unless something happens!" Sounds exactly like a buyers financing contingency.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Bryant-THANK YOU!  This is stated perfectly

We've had the same problems in our area because the buyers are not being educated before going into the contract.  You have to understand the process yourself so you can adequately prepare your buyer for the wait.  I tell them upfront that they are going to get frustrated, tired of waiting, and ready to walk away...but they need to be prepared to stick it out if they are going to go into it.  Then when this happens (which it always does) I remind them that we talked about it before going into this and they said they could handle it.

We still have quite a few listing agents in our area who are insisting on NOT sending in contracts...they send in offer after offer to the bank, not binding any buyer to the purchase.  (by the time they get an answer, if the bank gives them one without an actual contract, there are no buyers remaining) We've even had one tell us that they couldn't have their seller sign the offer and make it a contract because months before they had had a contract but it fell through and there couldn't be two contracts on the property. (????!)  Half the time they don't even know what bank is involved or if there are multiple banks.  Many still do not know what a hardship package is so they definitely have not had their sellers complete one or even prequalified the seller.  Our favorite is when we are told that the title company will be handling the whole transaction and all of the negotiations!

Education is the key!  When you work a short sale correctly your chances of success go way up.

(BTW-Bryant and Wendy's training on this is fabulous!)

Posted by Stephanie Lim (Lim Team with Keller Williams Realty Jacksonville) almost 5 years ago

I couldn't agree more BT!  We have actually started to ask for MORE earnest money down.  No more of this $500.00 down crap.  These buyers and investors need to understand that short sales TAKE TIME.  My rider clearly states that they understand this deal may take 10 weeks or longer. And for those agents and buyers that can't read that parapraph,  my agents are also taught to EDUCATE the buyers agent.    "So Mr. Buyers Agent, you do understand that this house might not be available for 3 to 4 months and possibly longer, don't you?  Does your client really need to be in their new house in 90 days?  If so this is NOT the house for them. Please note on our SS addendum that is clearly documented so we don't want to hear in 5 weeks that your buyer is getting tired of waiting and is going to back out of this deal."   I know it's rough but sometimes you need to be aggressive with these agents. 

I tell the youngsters that in the old days, if people didn't have 10% down for earnest money, they didn't go out shopping for a home with me or with MOST agents.  Lenders demanded that.

Let's face it, most buyers have to come up with 3.5% down and the lenders are wanting to see that seasoned, so what's wrong with having them come up with most of that as their down payment?  You will separate the tire kickers from the true buyers really fast!  Now watch your short sales close!  :)

The days of seeing 30% to 40% of our SS deals fall apart are over in my offices.

 

Posted by Vicki Watzlawick, Illinois Foreclosure Expert, The Watz Team ( Broker Owner (The Watz Team) ) almost 5 years ago

While experienced with regular residential and foreclosures - I need clarification with short sales. I currently put in an offer in May with my first time homebuyers and have yet to hear back from the bank whether it's approved, rejected or countered. My clients are really interested in this short sale property, but still want to look at homes since it's been 3 months. Considering the listing agent says the bank is just being uncooperative and told me that "it's a waiting game usually - whoever's offer hasn't been withdrawn in the end is the one accepted". As mentioned, the agent has left it Active in the MLS and told me there's a few other offers.

My question is: can I put in an offer on another short sale or foreclosure property while this other one is still pending waiting for the bank's response? If so, should I go back and add a contingency statement to the short sale contracts first to read something about a timeframe for the bank approval contingency clause? Our standard contracts don't have any standard timeframe in there, but we'd like to make another offer... Any advice (especially from Jersey agents) would be appreciated!

Posted by Christine almost 5 years ago

By the way, in the next week so Wendy and I have procured an interview with a Short Sale negotiator who works for one of the big lenders. He has asked to remain anonymous and we had to pay him to get him to do the interview. It's going to give you some insider information from someone who has been doing this for 18 years!!! Look for the announcement this week.

In the meantime check out www.ShortSaleSuperStars.com  its FREE!!!

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

BB, state laws vary greatly on short sales and the laws governing them and the contracts.  In NC, we have a short sale addendum that specifically states that until the "3rd party" gives written approval of short sale, either party can walk and earnest money must be returned to the buyer without penalty.  Furthermore, it states that the property in question MUST be actively listed as "For Sale" until such time that written approval is given and that any other offers must be presented to seller to consider.

In other words, a short sale contract is NOT a contract until the lender approves it.  It is simply an offer, even if both parties have accepted and signed it until the 3rd party approves it.

Posted by Roger Johnson, Realtor - Hickory NC Real Estate (CENTURY 21 American Homes) almost 5 years ago

95% of short sale offers are not accepted by the banks...........

Posted by Cola almost 5 years ago

Christine, You need to check your contract. If it's been signed and accepted then check the time lines. If it hasn't been signed and accepted then there is no contract and you can go house shopping. My guess is that it has not been signed and accepted.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Well here in Colorado Buyers and Sellers can nullify the contract at any point prior to the lender approving the short sale.  That typically takes a long time so buyers get frustrated with the amount of time it takes and walk.  It is provided for in the Colorado Short Sale Addendum.  Oh and nobody needs a reason either other than they dont want to play anymore.

Posted by Bruce Swedal, Denver Real Estate (Re/Max Southeast, Inc.) almost 5 years ago

Bryant,

Just like with so many areas in this industry, the buyer needs someone to educate them and guide them with appropriate expectations.

There have been several times I've had a client who wants to use the inspection as a way out of the contract.  "Be really picky - I need something to help me get out of this contract..."

Posted by Andrew Cox (Cox Property Services) almost 5 years ago

BB - You and I are on the same page!  Of course - I had to get my 4 page counter offer approved by our Designated Broker and the company attorney!

Posted by Tony Marriott, Associate Broker, REALTOR (Haven Express @ Keller Williams Arizona Realty) almost 5 years ago

BB-

Wow...alot of people are misinformed..."brycefuller" yes that is the correct way to word the contract, my offers will only be worded that way. The buyer gets 10 days (home inspection) AFTER the date of approval from the bank. However Attorney review begins immediately upon the initial of attorney review.

There is NO WAY a listing agent can do their client justice if a buyer can walk away at anytime...it's simple..it is a contract, walk away before the agreed time is over... you lose your earnest money..it's that simple.

Liane- All my short sale listings stay "ACT" or active... in the state of NJ you can only have one contract! Any realtor that puts a short sale house under "PND" is hurting their client. I cannot take ANY more offers if the house is under contract. The house cannot be sold to anyone else other than the potential buyer that is under contract. It is just to get back up interest...thats all. Mis informed buyers are dangerous to a short sale seller, AND IT IS NOT THEIR FAULT, it is their Realtors fault.

In my opinion short sales are the BEST DEALS AROUND... but many Realtors won't show them...pity

Think about it...The people who are selling the short sale house are still living in and caring for that house...remember, a short sale is still owned by the seller, not the bank, that seller is well aware that if they sell the house, it is very beneficial for their credit.

Foreclosures are generally in need of alot of work, I have been inside of foreclosures that I would not let an enemy buy. GRANTED...there are great foreclosure deals out there, but many more great short sale deals are to be had.

BEFORE GOING FORWARD WITH A SHORT SALE, the buyers Realtor should ask the selling Realtor questions, pick their brain to see if they know what they are doing...many Realtors taking on short sales have NO CLUE. This is where the problem begins.

I have had 3 short sale get approved within 30 days. Most under 60 days..The average straight or regular sale closes in 30-60 days...short sale buyers need  to be informed correctly, prepared to wait a little longer than a regular sale, but the benefits are much more rewarding$$$$$$!

That's my opinion.

 

 

 

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) almost 5 years ago

Cola, You're wrong.

Roger, My guess is that that addendum has nothing to do with laws in NY. It's an addendum put together by the Board of Realtors. We can't confuse board "suggested" addenda and MLS "rules" with law. Now if this is a law in NY...show it to me. I bet you can't find it.

Our board also has addenda related to short sales. I don't use them and I'm not required to. My job is to protect my seller. We use an addendum that was reviewed by an attorney that protects my seller and commits the buyer.

Again, why bother having a contract if the parties can walk just because they feel like it?

OK I have to head out to Church. I'll be back later

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Here, Here to Liane Jamason's post - right on!

Understand the rules vary from state to state, but here in VA if you're ratified you're UNDER CONTRACT and it needs to be changed in MLS (back-ups always welcome).  ONLY ONE ratified contract should be submitted to the bank for approval, and for sake of tying this back to the topic at hand - the TERMS and CONDITIONS of that ratified short sale contract should be upheld as with any other sale type.  (Personally I can't comprehend why this is even an issue but am painfully aware it is).

Posted by Lisa Moroniak, SFR - Short Sale & Foreclosure Certified (Keller Williams Realty | Northern Virginia | 703.635.0388) almost 5 years ago

Cola-

95 % of people that post here with no signature or identifying remarks under their post are WRONG.

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) almost 5 years ago

My opinion: Seller signs contract, buyer signs contract..we have a bilateral contract w/the short sale addendum stating the effective date begins when "Sellers Lender gives written approval."  Escrow is not collected until contact is "effective" (FAR BAR AS IS Contract line #19), I typically put in 3 days and escrow dollar amount on this line.  I never tie up my buyers escrow on a short sale.  This was suggested to us by a previous Broker I worked with.  I also agree w/an earlier post on buyers should continue to look and if another property is located and is not a short sale then withdraw your offer(s) and move on. 

Another frustration for short sales and being a buyers agent; the seller signs the contract, then it should be placed "Active (Contingent)" in the MLS.  Some of our Boards here in FLA will fine the Realtor if the Short Sale listing is not put in this status on the MLS if there is a signed offer on the table.  The seller can negotiate the offer (before submitting to the bank) and try to get the buyers offer higher.  If the buyer does not want to negotiate w/the seller then they move on.  Just like a normal transaction. 

There doesnt seem to be a guideline for Short Sale Contracts for us (Realtors).  EVeryone does it different; every short sale is different.  Very frustrating for Seller, Buyer, Both Realtors and yes..the Banks.

I would love to hear more stories on experiences w/a short sale deal (both sides).

Posted by Cindy Lee almost 5 years ago

Hm, we've been doing short sales for a bit over a year now and never had one that wasn't accepted by the bank. Lucky me, I'm Cola's 5%.

 

Posted by TheMillsTeam YourSebringRealtors, 863-202-0729 (ERA Advantage Realty) almost 5 years ago

OK so why are folks confusing short sale addenda with Law? This is a scary thing I'm seeing here. Do your research and come back and post the law PLEASE. The only way we can learn is know the law and how we use it to protect our customer/clients.

Your board generated addenda and MLS rules have no baring on this conversation. In fact they are probably the number 1 reason for confusion with Short Sales.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

In Idaho we have the same clause that many other states have in the way of a Short Sale Addendum.  But it is my understanding that you do not have to use the addendum.  In our office there are a number of us who choose not to use it to work on a higher level with our buyers. I don't usually use it if it is an offer with in our office....but if it is with an outside agent I have not worked on a short sale with I will use it to protect my buyer....in case they are non responsive.    We do not want them to walk if it is premature to walk.   We educate our buyers tht the process is long.   Then we are very active in getting it approved....some times even educating the other Realtor on the process....that is a whole nother topic!  LOL  But rarely do I have a buyer walk away unless the other agent is inept and does not respond to my requests for updates.   ( I have just had that happen on one and I was very happy to have them walk from that contract)   When we are on the selling side however...we try to protect the buyer as well....or maybe offer reassurance is a better term.   We have specific time frames (60 days) that the earnest money is non refundable while we are negotiating.    THat has also cut down on the number of buyers who walk away prematurely!    We have had a lot of success this year on our short sales....I believe we are at about an 80% close ratio. 

I wish we could do non short sale transactions in our area but sadly that i the majority of what our market is comprise of.  

Deborah Byron Leffler

www.move2nampa.com

Posted by Deborah Byron Leffler BzyBee Real Estate Lady! (Keller Williams Realty Boise) almost 5 years ago

BB- our Realtor board came out with a short sale contigency addendum a few months back, which has helped with the confusion. The contingency lets you choose to accept or decline any of the following:

  • sets a date for the buyer to be able to walk away should it take the bank too long to respond
  • allows for the earnest money to not be collected until written approval from the bank is received
  • allows for the home inspection to not take place until written approval from the bank is received
  • and gives the option for the home to stay active on the market while waiting for approval

The extra form keeps everyone in check to know exactly what is expected of them. It IS a contract, and everyone knows it, and also protects the buyer and seller, not leaning towards one side. I collect alot of earnest money for my short sale sellers, the last one was for $5000....keeps the buyers from walking away too easily.

Posted by Jennifer Kirby, The Luxury Agent (Kirby Fine Homes) almost 5 years ago

Tim-

Why in the world would ANY REALTOR waste their time with a buyer that can walk away if the wind blows the wrong way???

I dont understand it... IT IS A CONTRACT! 

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) almost 5 years ago

These are all valid points above BUT the bottom line is that the Banks have NO PROCEDURE for short sales.  Or if they do no one knows what it is.   Banks should be required by law to provide a statement of their process so both seller and buyer have realistic expectations.  To my mind both seller and buyer are holding out for short sale approval by the banks who hold the trump card.  I would like to ask congress to make it a rule to have the procedure for short sale handed out at the time offer is submitted by the banks.  I am appalled that we allow the banks to keep changing their terms and are NOT held accountable.  Surely we can do more for our fellow Americans during these difficult times.  Is is not too much to ask for the short sale procedure to be stated clearly and concisely for all parties .  I believe this would aleviate a lot of the confusion and anxiety.  

I disagree that offer is a contract in a short sale until third party approval is obtained because most short sale situations will not allow Seller to pass clear Title without being "forgiven" by third party bank i.e. Short Sale.  Therefore, it may not be a contract .  So, I never submit earnest deposit until Bank has approved.  To my thinking this is the date the clock starts ticking -

What do you think can be done to improve the short sale confusion and save families from losing their homes?  

Posted by Sarah almost 5 years ago

Excellent post!

Posted by Tressa "Teri" Malone, Westfield NJ Area Properties (Keller Williams Realty Premier Properties) almost 5 years ago

Not sure why my post just stated Sarah

I wanted to be clear about who I am and who I work with and that I am an Active Rain member - thanks:

Sarah Mendel,  Broker with Keller Williams

Posted by Sarah Mendel, Broker Agent, Keller Williams 919 414 3148 almost 5 years ago

Here is another issue with short sales...

When an offer comes in on a short sale, if i dont feel the house will comp out for the amount of the offer, i simply inform the seller it is not in their best interest- "you should consider REJECTING the offer". Why is it SOME Realtors feel like they can take advantage of the bank. The BANK USUALLY knows the value of a house. These are the FIRST realtors to get upset and bad mouth short sales...

I had a short sale listed for 314900. The last house in the area sold for 289,000. However, my listing had many more upgrades. I received an offer for 230,000 on that house, i quickly rejected it..two TOP realtors in my area asked me why I had rejected the offer, i said it's simple, "do you think im doing my seller justice by taking such a low offer, waiting 30-60 days for approval then getting rejected...You see, i still have a duty to my seller, a RIDICULOUSLY low offer will put my seller closer  to foreclosure....

2 days later I had received a very nice offer on that house...close to asking...i was countered on that offer...but it was such a close counter the buyer took it...

 

 

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) almost 5 years ago

Great post!!! You are absolutely right. Getting educated is the key to handle short sales. I am on my third short sale course and it has helped me explain to my buyers if they are in a position to be involved in a short sale or not. If my buyer is in a hurry to get into a house, that is it: I will not help them with a short sale. I also will not take a short sale listing unless I have full cooperation from the sellers (producing w-2s, hardship letters, bank statements, etc).

Banks are also an important key for the short sale process to go smooth. I have dealt with some banks that were able to negotiate a short sale in 45 days. Others took over 6 months and nothing happened.

Very frustrating but you got to condition yourself to what is going on. I feel we will have to deal with short sales for a while still.

Posted by Ana Ramiscal almost 5 years ago

well after reading all of you i can see a common trait that seems to prevail for many, that you are not educating the buyer sufficiently to understand the PURPOSE of doing a short sale and the seller that you , in other situations, are representing as well. most people going into foreclosure do not understand that they are asking the bank for a favor, a real favor, to cancel a HUGE chunk of their debt. it is not the bank's "fault" that the market went down. the truth is:

that the buyer contracted with the bank a loan for a certain sum of money and promised to pay it back IN ITS ENTIRETY. this is a personal loan! it has a contingency upon which the bank insisted before releasing the money. that contingency is that an asset of equivalent or greater value be pledged as a collateral. this asset could have been anything, even jewelry or any other property that the borrower had legal title for. it just happens to be common that the property purchased with the money borrowed is the one used as a collateral. the paper that secured that property to the bank is called a mortgage and is given by the BORROWER to the bank.

If the value of the property lessens below the remaining amount of the loan, the bank is entitled to ask for additional collateral. in any case, the borrower having made a personal loan is still responsible for the full amount of the loan.

No matter the value of the property, the borrower still owns the property and that has nothing to do with the bank, except that the bank hold a lien against that property as withnessed by the said mortgage documents.

in the shortsale process which is when the property value goes lower than the balance of the loan it pledges, the borrower is merely asking the bank 2 things. one is to release the property lien for the value of the property and use the proceeds to cover a part of the loan, and the second is that they (usually) are asking the bank to forgive the remaining debt.

the first part is not really a problem for the bank, even if the house is worth $1, because the borrower still owes the difference. it becomes a problem for the bank when they would release the mortgage on the property and allow that property to leave the hands of the borrower. because at that point the bank has no more recourse to get the balance of the loan. the bank may ask the borrower to pledge another property, personal or real, but likely the borrower has none.

in view of these facts, it is wise to let the borrower (seller) know that the bank is doing them a favor to accept the shortsale offer and as such they will try to get as much as possible, and still could go after them for the balance, but the bank must make a decision, and that takes time.

as well the buyer should understand those facts and that they are also getting a good deal for the property. And that is why it takes time. but it is up to you to set up the mood!!!! you are the folks in the middle, that's what you get paid for.

folks.. get your facts straight from the beginning and it will make every transaction much smoother. tell your buyers that it may take up to a year. if they can't take it, show them another house!

and as of the buyer, if you want to list their house, explain to them what they are really asking for. most folks do not even understand the mortgage/loan/deed terminology, nor how a contract is binding, nor how the closing is just the finalization of the transaction which started when the contract was accepted. most think that they are "paying a mortgage" and that the house belongs to the bank till paid off.

as of the P/S contract, explain to both buyer and seller that if the only contingency left is the approval by the bank, then that IS what is binding and they cannot release the contract unless by mutual accord or the bank refuses.

if you have a soft spot for the seller. understand that NO one forced them to buy overleveraged a property. but if they have a genuine hardship, like loss of job, family, health etc, then do your best to have the bank understand that.

another tip: CYA. write a document with all these explanations and have it read and signed by the buyer and the seller. so that if it goes to court, they you can exhonerate yourself by proving that you have divulged the proper explanations of the shortsale process and they cannot claim they didn't know.

as of the contract, it is just a list of contingencies that the buyer and the seller agree upon for the transaction to go through. any of those can be changed to the agreement of all parties. so don't be stuck with a piece of paper. the whole contract can be voided and replaced with different terms any time both parties agree, and the previous one annulled. the only contingency that would remain is the approval of the offer by all lienors if no foreclosure, or by the main ones. successful agents know this.

this being said, because the bank want always more money, it is wise to write the 1st offer low!!!!!!!!!!!!

say if your buyers are offering 100k for a 150k 1st loan and a 30k 2d loan, know that the 1st bank may only give say 2k to the 2d, but the 2d bank wants 10k. then the buyer must come up with another 8k. it is therefore wise to make the 1st offer 90k and see what the bank comes back with. doing this will save a lot of time because then your buyer will have the extra available. also if your buyer is approved up to say in this case 125k, have them get a letter of approval for 90k instead. this way it wil restrain the 1st bank.

often the banks may be satisfied with the offer, but they MUST try to get more. it's their duty. know this from the get go and set your offers accordingly: high in closing costs and low in total offer. write the hud with the closing costs paid by the seller, add a seller contribution, etc. then this gives you margin to play with the banks and others (do not forget HOA and Taxes). at a minimal impact to the seller and the buyer. if you try to get the deal straight immediately it will not go, so put all you can on your side and then ease off as the bank plays ball, this is what the banks do as well and expect you to do. just make sure you can PROVE your low offer in all honesty.

in final thought, remember that a shortsale is a "reversed" purchase. meaning that you must convince the bank that the seller CANNOT afford to remain, AND the property is NOT worth as much as they want, and the buyer cannot afford more. if you can reset your values to that, then you got the shortsale in your hand.

by the way, property value is subjective.

Posted by fabrice almost 5 years ago

The short sale addendem we use in California allows for buyer to specifiy that the terms of the contract all timelines) and the deposit don't take effect until the lender has approved the contract.  A buyer can choose to not check these boxes, but why deposit money, run timelines, pay for inspections, etc. only to find out the bank has not approved the sale.  Once the lender has approved the sale, deposit is made, escrow is opened, all timelines start and one proceeds in the normal manner.

 

Posted by Russ Grant almost 5 years ago

@JK..I like what your boards "short sale contingency addendum" covers.  Kudos!  That is clear. 

I agree w/Bryant on the boards confusing and not sticking their #$@* out there and make it clear for all.

As a buyers agent, I want my buyer to be able to get out of a contract w/out any escrow loss. 

Sorry Bryant, your post came to me in my email this morning and got me all fired up.  I agree w/many of these posts but look at them, they are all different.  Put them all together and make it right & understanding.

Now, I am off to help negotiate w/a Buyer for a new construction home.  Smooth! 

Posted by Cindy Lee almost 5 years ago

BROKER B,

First, congratulations on being featured and the apparent success with the Superstars.

What hope do we have to expect the Buyer to know what is the fact when they rely on AGENTS that don't know the meaning of a contract. I still get angry calls from agents telling me their client will not make a deposit until the Lender approves and SIGNS their offer. OH DEAR!

Posted by Sidney Jimenez, CDPE, Short Sale Expert, 954-665-9449, (Keller Williams) almost 5 years ago

When I have a short sale listing, I try to price it where I think it will attract some attention and also have a chance of an offer in that range being accepted by the lender.  But since most lenders will not start talking to anyone regarding the short sale until there is a contract, it is just a guess, and that is one of the biggest issues I have with short sales.  I just want to get in some kind of offer to start the process. 

When I represent buyers on short sales (more of my business), I never take an escrow deposit or start any of the time periods in the contract until there is lender approval.  Some agents in my market price their short sale listings SO ridiculously low to generate offers, I tell my buyers that the price advertised may not be accepted by the lender.  Then they have to sit around for 6 months waiting to find something out....

Sure, a signed offer is a contract, but if you don't even know if they contracted price and terms will be the final price and terms, it gives the buyer an easy out.  Most will stick it out the default 30-45 days in our FL short sale addendums, but are generally past that time period when lender approval is finally (if ever) received.  Then, if they original buyer walks, the listing agent now has an "approved" short sale price they can advertise and another buyer usually materializes quickly for the approved short sales with a guaranteed price and faster closing time frame.

Posted by Sue Ellis (Prudential Tropical Realty) almost 5 years ago

Already 50 replies to this topic, I think it shows, exactly, what a "train wreck" short sales are in general. Further, it shows the differences among state's laws and various contracts.

There are the legalities of the contract and then there is the practical matter more often called recourse. One post hit the nail on the head. Get a bigger deposit! Buyers that are  unwilling to put down a bigger deposit simply are risking what little they do put down when they walk. Often walking away from $500 or $1,000 or even $5,000 may be the buyer's choice if he finds a better deal while waiting or simply a deal he can actually close on.

First, I avoid short sales at all costs. Second, when I'm "pushed" into a short sale I ask for more down to "push" the buyer. Even when I know I have real buyer, I know the sale will almost always fall apart after the contingency period for the bank, minimum 30 days and I use 45 days. I have NEVER received a response in 45 days or even 60 days. While waiting 60 days or more the market and the inventory has changed. It could well be crazy to stay in the deal.

 

Posted by Bob Pisa Downing-Frye Realty, Commitment, Service, Satisfaction... (Downing-Frye Realty, Inc. Naples, FL) almost 5 years ago

Brian - I agree with your post all the way until the end when you write, "If your Short Sale listings are not closing. Get training. You’re doing something wrong".  You can do EVERYTHING right and still have to wait out some of these very very slow lenders.

Posted by Tchaka Owen (Keller Williams Realty) almost 5 years ago

The short sale addendum for California was created by the California Realtor Association.  It is a contingency based on short sale approval.  The buyer's deposit is not placed in escrow until the short sale is approved.  Our current problem is our local MLS does not enforce changing the listing to pending with release.  Short sale listing agents continue to submit offers.  They do not have their sellers sign contracts (therefore not binding to either party) and buyers are left never knowing whether their offer is the one being submitted to the bank or whether their offer was trumped last week.

On my short sale listings, I submit highest and best. I change the status to pending and provide weekly reports to the buyer's agent.  I have only lost one buyer in the last 6 short sales.  I believe buyer's agents would work with the program if they felt the process was reasonable.  When I represent a buyer on a short sale that I know t the listing agent is not following short sale standards or MLS rules, I simply use the short sale addendum.  The contract is not a ratified contract (therefore enforceable) until the lender has approved the short sale. 

I look forward to hearing what the negotiator says about the approval process. 
CJ

Posted by CJ Brasiel 408-406-6035, Choose a real estate partner with a different view (Veridian Realty Group) almost 5 years ago

Bryant, I can't agree with you more about buyers "just walking away", but in California the contract is written for the advantage of the buyer.

If you're talking contracts and short sales, and one uses the short sale addendum it becomes part of the contract in California. Leaving the short sale part out, in our California contracts, a buyer has 17 days after acceptance to cancel and walk away for any reason. The confusion comes with the short sale addendum, because it can change when the timelines begin.

Posted by Lisa Hayashi almost 5 years ago

Great discussion:

The SS addendum used in the Multiple where I live gives the buyer a choice at time of signing to have the option of terminating the agreement anytime prior to delivery of Lender consent.

>The buyer may or may not (check one) terminate this agreement at any time prior to the delivery of Lender consent. If the Buyer terminates this agreement the earnest money, if deposited, shall be refunded to the buyer.<

To Bryant's point about whether the SS addendum is law or not, if it becomes part of the legal contract if used, that makes it, at least in this context, legal (law).

I personally would not counsel my seller clients to enter into a contract accepting the buyers ability to terminate at any time.

Also, to Bryant's point, again all real estate is local.  Our office policy is such that we are only to use, and only licensed to use MLS forms in our transactions. We are a small office without the benefit of a legal team to generate forms and language on our own.

 

Posted by Dean Curtis (Coldwell Banker Kittitas Valley Realty) almost 5 years ago

This is indeed an important discussion.  Frankly it comes down to what a contingency is based on the nature of the contingency.  For example, financing is a contingency that has specific parameters and obligations regarding the buyer and what the buyer must do.  Completely different is the contingency for inspection, which is indeed a "walk away" contingency.

This is such an important subject that I will write a blog on it this week - from the legal perspective.

Posted by Richard Zaretsky, Florida Real Estate Attorney (THE ZARETSKY LAW GROUP P.A. - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY) almost 5 years ago

To reduce the fall-out rate, I deal with the buyer's agent upfront. I tell them that they MUST put a date on the short sale addendum in paragraph A that is at minimum 60 days out and preferrably 120 days out. If there's no date, there's no contract.

I also tell them to leave the box in paragraph B 2 unchecked because that deposit WILL BE released to escrow.

The reason deals fall apart, I mean let's face it, is because buyer's agents are writing multiple offers for these short sale buyers. That's the action that has to be stopped. If they want to submit their clients to possible litigation by writing more than one offer on other homes and breaching the good faith contract covenant, so be it, but they're not going to do it on my transactions.

I ask the buyer's agents to send me in writing a promise that they will not show their buyers any other homes while waiting for short sale approval and, if they have outstanding offers, they will withdraw them. If I find out an agent has lied to me -- and it's not hard to run the defaulting buyer's name through the tax rolls, pull up the transaction in MLS to determine the name of the buyer's agent -- I will report them to the Board of REALTORS for violating the Code of Ethics.

I say enough of this crap already.

sacramento short sale agent

Posted by Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents, Put 40 years of experience to work for you (Lyon Real Estate) almost 5 years ago

I think it would be interesting to see an actual court case that has enforced any penalty against a buyer for walking away. Would they have grounds to enforce specific performance against the seller then for the contracted price? There doesn't seem to be any real case law, just alot of supposition on both sides. I'm not an attorney but it would seem that for a seller to have the right to enforce part of the contract then the buyer would have to have the same rights and if the seller cannot deliver on their part of the contract then the whole contract would be moot.

I don't think sellers who don't have the money to get out of a short sale would have the money to litigate a case for the escrow monies. The buyers might but I don't think many attornies would want them to bother with a case where there isn't much possible in terms of a judgement. There are alot of different offer to purchase documents out there and there could be alot of clauses that could be written to address these issues but that's usually left to attornies here in Massachusetts.

I'm surprised we haven't seen anything in the real estate legal notices about litigation started on these issues yet. Perhaps enough time hasn't gone by yet but I'd be interested to learn of any pending or adjudicated cases.

Posted by Scott Nelson almost 5 years ago

I haven't read all the responses but I would disagree with the overall statement that a approval is like any other contingency and should be treated as such.  The basis of a contract is to spell out specific criteria and agree upon it.  Unfortunately, banks do not adhere to specific timelines, obvious approvals, etc.

I have had banks turn down over market offers, negotiate forever, or even just disappear for over two weeks when an approval letter was promised the next day.  In fact, right now I have a marine couple who needs to get their escrow going and both first and second agreed verbally and "put" in the letter request.  We should of had them over a week ago and neither has shown up and both negotiators are not returning calls or emails.

The marine couple has a husband about to head to sea and this is completely impacting their confidence and his family.  He has the right to walk because the bank apparently has the right to poor business practices, horrific service, and overall lack of organization.

That is my opinion and I see where you are coming from but it assumes banks will follow a specific and ultimately successful course of action.  Bottomline - if the bank can shut the deal down at anytime so should the buyer.

Stefan West

Posted by Stefan West, Temecula-Murrieta-Menifee CA Real Estate (West Realty) almost 5 years ago

Bryant:  I love your post.  A favorite topic of mine.  In our market we have buyers agents that have contracts on five or six short sales.  They aren't ratified until the buyer gives notice removing the other contracts.  That's the clause that has been written in by the buyers agents.  Who in their right mind would commit their sellers to a P.O.S. wanna-be contract like that?  And for those buyers agents guilty of this practice, and constantly lamenting that their buyers can't find a house......it's no wonder they can't find a house.  You haven't really offered to BUY one yet.

Posted by Chris Ann Cleland, Associate Broker, Northern VA (Long & Foster REALTORS®, Gainesville, VA) almost 5 years ago

Great Information. will park and read. thanks for sharing!  these short sales can be extremely controversial.  Bryant and Wendys class has helped a great deal on a lot of this.

Posted by Ginger Moore (Wilkinson & Associates Realty) almost 5 years ago

I was once a real estate agent back in prehistoric days, and I still actively deal with the buying and selling of properties as a principal (usually not involving agents). And before my retirement as an active loan officer, I did get the pleasure of dealing with quite a few of these short sale situations from the lender side. I have also negotiated short payoffs for many refinances (and never had anywhere near the trouble that real estate agents seem to complain about so often)

I am amazed by the number of people who clearly confuse Board contract addendums with the law. The law is not so substantially different state by state. Just because something is printed onto a contract addendum doesn't mean that is how the contract must or should be negotiated.

It also seems to me that people throw the term "bank" around very loosely. Most loans are dealt wiith at the short sale negotiation level by a servicer and not by the actual owner of the loan. There are guidelines, rules, regulations, servicing contracts, mortgage insurers, and board approvals they have to deal with before issuing that approval. All of which they were never set up to deal with in the first place before receiving a deluge of short sale offers and foreclosures.

If your Board contracts are as worthless as they appear to be in the case of a short sale, why would those banks give any priority to processing those approvals in the first place? Why go through all the immense hassle involved in getting the approvals and calculations necessary to give that "bank approval" when the contract isn't worth the paper it's written on? Might as well just be calling the offers in over the phone.

Thanks!

Carl Pruitt

Posted by Carl Pruitt, http://FHALoanAdvice.com (FHA Loan Advice) almost 5 years ago

Liane wrote: I now write into my offers on short sales "Listing to be put PENDING on MLS and if offer is accepted by Seller, the Seller agrees to only submit this executed contract to the lender for 3rd party approval".

As a listing broker, I would not accept this kind of verbiage in any contract.  "Active-Contingent" is the appropriate status (if available in your MLS).  The contingency os the lien holder(s) approval. Too many buyers terminate and move on.  I do disagree with the "let's see how many offers I can collect" types but do want to continue to look for a back-up contract.

Tom Branch, CDPE | Broker Associate | RE/MAX Dallas Suburbs | http://www.ntxshortsales.com

 

 

Posted by Tom Branch, Broker, CDPE, SFR, ACRE, Plano TX Ambassador (RE/MAX Dallas Suburbs) almost 5 years ago

Bryant-

Seems that the Seller needs to be the one stating a contingency.  If they do not state that the contract is contingent on the lender approving the Short payment, they are laible for selling the home at the agreed on price?

Thanks for the insight.

Posted by Jim & Cathy Wood Greater Nashville Area Real Estate (Crye-Leike Realtors, Inc.) almost 5 years ago

A contract is a contract!  If a buyer is purchasing a "short sale", then they need to be informed of the time lines it takes to approve a short sale.  We have a rider that states a deadline for the short sale to be approved, then the buyer can cancel the offer......not any different than a deadline for the buyer to obtain financing.  So many realtors in our area have no idea what kind of paperwork it takes to put a short sale together.

I have worked over 25 short sales this year, losing 2 to foreclosure.  "Short sales" did not start out being part of my business plan, but with changing times, it is now a major part of my business.  Other agents are running away instead of helping sellers face the most difficult times of their lives.

Our biggest obsticle is not the bank.....it's educating buyers and other realtors.

Posted by Kay Van Kampen, Realtor®, Springfield Mo Real Estate (RE/MAX Broker, RE/MAX Solutions) almost 5 years ago

Bryant, just the other day I wrote up an offer for my buyers on a short sale.  The listing agent then tells me that he forwarded the contract to the seller's attorney to communicate with the bank but  then tells me NOT to forward our contract to the buyers attorney just yet and we'll hold off on attorney review?  WHAT? Was I missing something?  A contract becomes legally binding in three days!  I forwarded over to their attorney but it now appears that the bank declined their offer.  Thanks for the great post!

Posted by Gina Chirico, Real Estate Agent - Essex County, New Jersey (Lattimer Realty) almost 5 years ago

given the many backdoors in any sale contract and the uncertainty of ANY short sale it should surprise no one that a buyer, or their agent, would treat the sale as a question mark at best.

the seller may be inconvenienced but the fact remains that they are offering a property on terms they have virually no control over as regards the pace or certainty of a lenders review and possible approval.   that a buyer might say "to hell with this" is a likely outcome that all sellers must be prepped for.  any agent that takes a short sale listing knows full well what they are getting themselves into...or should.

bryan, this has NOTHING to do with training...the lenders are simply unable to deal with the files in a businesslike manner.  we have all been front and center to a file that got ignored, lost, denied, reassigned, passed from desk to desk, or whatever for months while the buyer stood patiently by as rate locks expired, school years started, and babies were both conceived and born.  i have two files going on 19 months with C/Wide...and can show you fax transmission receipts for the submissions four times that got "lost".  it is now a game...see how many years i can keep a short sale from a foreclosure.  i am betting four years.

that buyers figured out how to structure deals that allowed them to terminate a deal at will is just them wising up.  the common standard here in Calif is that no money goes to escrow, and no contingency periods start to run, until the lender approves the terms and gives their go-ahead. 

i have discussed the nature of the phraseology in the sales contracts and addendums and have a suspicion that the contracts themselves may be illusory.  Richard Zaretsky, can we have your attorneys thoughts on this issue.  i suspect that many of the deals are enforceable by neither side.

the rules of engagement for a short sale are completely different than for a traditional sale.  that's just the way it is.

everyone raise your hand if you'll be glad when this S/Sale BS is over.

 

 

Posted by Michael Ford, California+Oregon (EncinitasHomes.com) almost 5 years ago

What this discussion shows is how badly screwed up short sale and short sale educaton is...

Bryant sufficiently badly states short sale law and procedures that someone following his advice might well be found guilty of malpractice in the west.  He may however be perfectly correct in at least part of the east.

Our real practice with short sale buyers is basically to offer on anything of interest.  We may well have a buyer with 6 or more offers out.  When bank approval comes through the buyer determines if this is the one to take.  We then cancel the rest. 

Note that we have yet to see a short sale where a bank counter offer was not involved.  Thus even a buyer on a hard contract would have the option to bail.

On the seller side it is standard to list 10 or 15% below the reasonable comps.  The intent is to get an offer to start the short sale discussion with the bank.  Interestingly banks often accept offers 10 or 15% below the comps.

Practice of listing agents is widely variable.  Some simply forward unaccepted offers to the bank.  This lets them leave the listing in the active and available status on the MLS.  Others take one offer and go to contingent on the MLS.  Some will take offers and forward all rational ones to the bank.  Others do one and wait until the bank responds. 

The area is loaded with interesting conflicts.  Does the listing agent have any duty toward the bank?  Is the listing agent required to get best dollar for the seller or merely anything that satisfies the bank?  In one case I believe my clients best interest is simply to postpone the sale or foreclosure.  Is it correct than for me to run a stall and drag out the process? 

 

Posted by Donohue_Team almost 5 years ago

The list agent and the seller must uphold these policies, there are so many agents running around and putting multiple offers in on properties, if the buyer put together a strong contract and earnest money with specific short sale approval deadlines than the buyers would feel more responsibility to stay with the one offer, same holds true than to the list agent once they get the offer and the earnest money all other offer should know they are in backup.

Posted by Tatyana Sturm, Denver Realtor, GRI, Denver/ Aurora CO Relocation (Exit Realty DTC) almost 5 years ago

Before people comment and act like they "know" exactly the way it all works, they should preface their remarks by the words,  "in my market" or "in my state". Each area is different and you should not pretend your an expert in how it works in all of the worlds real estate. Seriously, why is some lawyer in (fill in the state) commenting on how the contract reads in my market?

Just my opinion.

And to Bryants comment of "If your Short Sale listings are not closing. Get training.You're doing something wrong" I don't think that is entirely true. In my market, many banks are asking for large promissory notes before they will accept the sale. Or, some bank (mainly the 2nds) are saying no to the sale just because they can. No rhyme or reason, they are saying no. So, all the training in the world can not prevent that.

Posted by Andrew Martin (Keller Williams - Danville) almost 5 years ago

A signed short sale contract when the lender has not approved the short sale already, is kind of like a signed contract with a financing contingency when the buyer has not yet talked with a lender about getting pre-approved for a mortgage. 

Yes the contract is binding on both parties, however nobody knows if the contract has any chance of ever making it to a closing at the contracted price and terms.  If the buyer has never gotten pre-approved by a lender, then they don't know if they qualify for a $200,000 house or a $100,000 house or maybe they don't qualify for any house at all. 

It's the same with an unapproved short sale.  Maybe the lender will approve the $100,000 contract price, maybe the lender will want $150,000, and maybe the lender will deem there is no hardship and won't grant a short sale at all.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) almost 5 years ago

Bryant, thank you, thank you, thank you!  I am working with a first time homebuyer, who had been working with another agent, where they put several contracts in on different properties that weren't accepted by the lender. (Short Sales)  They asked me why they couldn't write multiple offers on properties, and see which one would be accepted. I asked them what happened if they were all accepted! He said, then he would just withdrawn the offers from the others. as that is what the other agent had told them they could do. I told him that a contract is a contract, and unless it is not accepted by the lender, or  financing couldn't be gotten, it couldn't be withdrawn. These are contingencies that  bind the contract. Where did this misconception start? A contract is a contract! Who is working with these people, and when did this get to be such murky water?

 

Posted by Debbi Schlesinger (NorthStar Realty Services) almost 5 years ago

Bryant,

Your right about the short sale contract. You can treat them as a regular sale with a contingency, but certain aspects causes out of the ordinary situations to happen.

I think it gets complicated when a seller doesn't care about the home short selling or not and really wastes everyones time. Remember, a short selling seller has alot of homework to prepare for the listing agent and it has to be perfect. This combined with an agent who really doesn't know how to handle the paperwork for the bank. The funny thing is about these transactions is The distressed seller signs the listing agreement, yet he / she makes no real decisions on the transaction. The bank or lender does.

A short sale is only as good as the listing agent handling the transaction. With the process constantly changing and bank portfolio's constantly changing hands, listing agents really have to be up to date. Having said that, a buyer could fall in love with a home and never really have a chance to obtain the property because of the incompetent agaent.

ALWAYS interview the listing agent BEFORE you show a property to a potential buyer. There are a series of questions to filter the agent. If he / she does not have the answers, stay away from the property. You will most likely see it as an REO sale later on. This can eliminate alot of heart aches.

Thanks,

 

Posted by Bob Dickinson (RE/MAX Excalibur Scottsdale, AZ) almost 5 years ago

I had one short sale experience.  The buyer had owner approval, and we waited for third party approval.  After FIVE MONTHS of waiting, we walked.  It was unfortunate, but in the end the buyer did eventually find a property with a completely willing seller.

I felt bad for the property owner, but the bank never did say yes or no.  We kept extending deadlines for a response out of them.  The original deadline allowed 60 days.  We extended at first a week at a time, then a month at a time.

All they would have had to do is give us an answer.

By the way, it was a cash offer, within 1% of three solid comparable sales.

Posted by Debbie White (Prudential Southeast Alaska Real Estate) almost 5 years ago

Great post!  Very well put.  I always inform my buyers who write an offer on a short sale that patience is key.  I also inform them that here in Nevada, they have a 90% to 95% chance of the "short" not being accepted by the bank.   Unfortunately, those are the stats here.  Only 10% of all short sales actually get accepted and close escrow.  And, I agree, if you need to get training on the listing side, get it!

Posted by Brenda Caruso (Universal Realty) almost 5 years ago

It makes sense to return the EMD even after an execution but still pending lender apporval so the lisitng agent can change the status on the MLS from AWC to ACTIVE.  It behooves the lisitng agent, that is my observation.

Posted by roxy Perry Realtor* US PREFERRED REALTY Mesa Arizona almost 5 years ago

Wow... what an avalanche of confusion!

It appears that your States and the forms they print are merely adding to it. Different rules in different places.

I try to keep up with these issues for the benefit of the real estate professionals I work for - when I write their promotions I need to be truthful. But it appears that one size does not fit all whe it comes to short sales.

My question, after reading all these posts, is how long is it typically taking to get lender approval on a short sale? Also are some lenders easier or more difficult to work with than others?

Marte Cliff

www.marte-cliff.com

Posted by Marte Cliff, Real Estate Copywriter almost 5 years ago

On a regular offer if you bring a ready, willing and able buyer to the table who has met all the seller's terms you have earned a commission. The problem with short sales is the use of the MLS by agents who offer property at half its fair market value. This practice of listing properties below previous sales is what causes the problems and each of us should complain to the MLS to stop this practice. Because buyers have been burned so many times on short sales they find agents who will write offers all day long hoping one sticks. We as professionals need to require an escrow deposit with every offer...not a photo of the check. My office requires a $1,000 because we don't have time to fool with buyers who are represented by agents who don't understand the difference between short sales and REO.

I specialize in REO and all the major banks are discussing short sales being listed with authorization from the seller and the bank where the price, commission and asset managers contact information will be known. That will stop the silly offers that make us all look unprofessional.

Posted by Cliff Roe almost 5 years ago

In some State;like Washington, the North West Multiple Service, has adopted a rule regarding short sales. In short, the buyer and seller sign an addendum to the purchase agreement (called a form 22SS) That allows the buyer to cancel the contract at any time, for any reason, during the time period prior to the underlying lender's  written acceptance of the short sale terms. This has caused a phenomenon, where buyers will put offers on multiple properties ad then take the first one to reach mutual acceptance with the lender and then walk away from the other contracts with no recourse. I have been working as a short sale negotiator for 4 years in Washington and I can tell you, this new rule has made it almost impossible to keep deals together.

Posted by John Eddy almost 5 years ago

With the amount of inventory available and the lack of bank interest fewer agents are willing to show short sales. The homeowner is in most cases remaining in the home. At least the homeowner is cutting the lawn, keeping vandals out, paying utilities, and etc. In the coastal Carolina area most foreclosures are not in great shape, but far from being trashed. Prices much better than shorts and they do close quickly. We are seeing more 'approved' short sales. There is no reason for acceptance not to be given within 35 days on those or the back simply is not serious and simply testing the price range. Non-distressed sellers know they have to match prices in they are motivated to sell which leads to farther questioning the reason for buyers to consider a short. Actually, you can always find several short sales listed at prices higer than foreclosure and non-distressed sales on comparable listings.

Posted by John Rakoci, North Myrtle Beach Coastal Carolinas (Eagle Realty) almost 5 years ago

OK, Bryant,

 

I see a whole bunch of confusion here.  And Bryant, you are dead wrong about what you are writing.  Please read all the comments by the agents that are pointing out the terms in the SS addendums.  They are real and so there is no binding contract or any ernest moeny put up until the lien holder approves.  The buyer winds up negotiating with the lien holder.  This takes time and we do not know the outcome and so therefore it is not even considered a contract until there is agreement on price.

What you are proposing is ludicrous.  In a normal buyer-seller contract we do not have a contract that is binding until all parties agree in writing to the same terms.  Either side can walk before that point in time because there is no contract.  And what you need to understand is there is no contract in a short sale until the lein holder, the buyer, and the seller, agree to the terms.  What you are doing is confusing a few agents that are thanking you for what you wrote, when, in effect you are setting them up for potential lawsuits.  Maybe things are different in Florida then here in Washington and a whole lot of other places. 

As a listing agent I do not care how many offers I get in.  I submit the first one and hold the rest in back up any case there is no agreement between the first buyer and the lein holder. 

And as a buyers agent, how can I represent my buyer by forcing them not to look for other houses when the price the lein holder may ultimately demand for the house is not only more then they want to pay, but also more then their lender will approve them for?  What you have opened up here is a can of worms for us all.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 5 years ago

It is a legally binding contract but I have found a few loop holes in it when the bank does not respond.  In Minnesota there is a time limit on all things and no such thing as an open ended contract.  All of our contracts have to have closing dates and if the seller does miss that date then the buyers can walk.

Posted by Teresa Boardman (Saint Paul Home Realty) almost 5 years ago

I agree that a short sale contract is a contract that is contingent upon the lender(s) approving the short sale request.  I am only familiar with the California short sale addendum, which essentially contains two options for the buyer.  Option 1 is, the lines are not modified (i.e., inspection contingencies and deposit of earnest money are as if the contract were not contingent on the lender approval).   Buyers rarely elect that option as it requires them to deposit their earnest money and spend money on inspections without knowing whether the bank will approve the short sale request.  Most buyers will choose option 2 which specifies that all time lines start the day after the buyer receives written notice of the lender consent.  The CA short sale addendum also contains the following language:  "Buyer and Seller understand that Short-Sale Lenders (i) are not obligated to give consent to a short sale; (ii) may require Seller to forward any other offer received; and (iii) may give consent to other offers.  Additionally, Short-Sale Lenders may require that, in order to obtain their approval fora short sale, some terms of the Agreement, such as Close of Escrow, be amended or that Seller sign a personal note or some other obligation for all or a portion of the amount of the secured debt reduction.  Buyer and Seller do not have to agree to any of the Short-Sale Lenders' proposed terms.  Buyer, Seller and Brokers do not have control over whether Short-Sale Lenders will consent to a short-sale, or any act, omission, or decision by any Short-Sale Lender in the short-sale process."

Some agents take the position that the short sale contract is not really a legally binding contract because of the language in paragraph (iii)above as they believe that the Short-Sale Lender can somehow dictate which offer the Seller should accept, essentially giving the Short-Sale Lender the right to interfere with a contract that the Seller accepted and forcing the Seller to sell the house to another buyer whose offer may be just a backup offer.   There are listing agents who will take that position, rightfully or y does not really matter when you are working in the field.  It only matters in the court of law.  As long as there is no legal precedence that addresses this issue, there is no consequence to wrong interpretation.  It's frustrating, but having to deal with frustration is unfortunately part of dealing with short sales.  It's just unfortunate that the frustration is caused by the listing agent.

You might wonder why a listing agent would want to take the position that the short sale contract does not bind the seller.  There are listing agents who do not have the offer signed by the seller or they will have the offer signed by the seller but do not deliver a copy of the signed contract to the buyer, which means that acceptance of the contract was not properly communicated to the buyer and you really have a only signed expired offer.  Of course, the Short-Sale Lender does not know whether the acceptance was delivered to the buyer.  Since the acceptance was not delivered to the buyer, the listing agent will not change the MLS status to contingent as there is really no properly accepted offer.  When the buyer's agent asks for a copy of the signed offer, the agent is told that it does not matter whether the seller signed the offer since the Short-Sale Lender can approve other offers making the Seller's acceptance of the buyer's offer irrelevant.  Please understand that I do not agree with that reasoning.  I am just telling you what some listing agents told me.  I believe that it does matter whether the seller signed the offer.

Now back to the subject of whether a Buyer can walk before the time for receiving Lender approval has expired.  I believe that technically speaking, a buyer who cancels the agreement (assuming there is one) prior to the Lender-Approval contingency date, breaches the contract as the Buyer agreed to wait for the lender consent until the specified date.  As mentioned earlier, most buyers do not deposit their earnest money until they are notified that the lender approved the short sale request.  Thus, as a practical matter, there is no adverse consequence to the buyer for breaching the agreement.  Since most CA purchase agreements contain a liquidated damages clause, the Seller would have to sue for deposit money.  Not only is it highly unlikely that a short-sale seller would bother to do so, but it's very unlikely that they'd win as the buyers still have the inspection contingency that essentially gives them the right to easily walk away even after the short sale approval contingency has been met.  Furthermore, there is also a 3-day right of rescission attached to the NHD report and most sellers will not provide the NHD report to the buyer until after short sale lender approval has been secured. 

In summary, I am of the opinion that a short sale offer that was accepted by the seller and delivered to the buyer results in a legally binding contract that is contingent upon the short sale lenders' consent to the short sale.  When the buyer walks prior to the short sale approval contingency deadline, the buyer is in breach, but there is mostly likely no adverse consequence to the buyer for breaching the agreement. 

Posted by Ute Ferdig almost 5 years ago

I didn't read all 91 comments before posting, so apologies in advance if I'm repeating someone else. But a problem here in southeast Michigan is that a lot of the listing agents don't know what they're doing. They don't want a time frame put into the short sale contingency, they want to keep the listing as active and continue to submit offers, they want these conditions and still want the buyer to pay for a home inspection before the seller contingencies are removed. Admittedly I don't list many short sales and have used a company to handle it when I do. And not every listing agent is unreasonable about the contingencies described above. But unfortunately brokers will let any agent in their office list and handle a short sale without regard to ability.

Posted by Jackie Hawley, Southeast Michigan Real Estate (ReMax Encore) almost 5 years ago

I will avoid short sales as much as possible. It continues to amaze me how little pressure we are putting on the banks to streamline the system.....We need to be forced to get a listing agreement from the bank with the list price up front from the bank. Otherwise we are just advertising homes that cannot close....False advertising?...I am telling my buyers that a short sale is a very very sloppy bid process whereas the bank has very little if any legal obligation to be fair or timely or perform in the process....Then there are the classes that pop up to try to teach us how to navigate all of this.....I think these schools have to start trying to teach the banks instead.....Bottom line is that we cannot ethically list short sales without having a written agreement price confirmation from the lender(s)  up front before we put them active in your M.L.S..... We need to make the banks use our process instead of the other way around....The odd mindset in the RE profession is to profit from the chaos....Well it is the banks that are profiting from having all of us as we act as free property managers while they decide if they want to forclose or not............... 

Posted by Patririck Cooper almost 5 years ago

My experience has been that with short sales, the bank becomes the face of the Seller. Every time I've done/attempted a short, the buyer and seller have come to terms and stand shoulder to shoulder against the bank.

Without fail the banks actions alienate and tick off the buyer and often the seller as well.

If I'm representing the buyer I include a short time frame for the bank to respond. If I represent the seller I include that no money will be deposited in escrow until the bank agrees to the short.

I know that's not standard protocol but, the overwhelming majority of these deals fail. A C'wide rep told me they were getting close to 40,000 short requests per week in CA. You can be darn sure they're not closing 40,000 shorts per week and don't seem to even want to. This would make the percentage of shorts that actually sell, very small! 40,000 per week for JUST ONE LENDER!

On a short deal, the final say is an entity that doesn't return calls, has a bad attitude from the first contact through the close, is grossly overworked and under qualified for their job,  they get a paycheck regardless of anything closing or not, they bend over backwards to rip your commission, and can change any part of any agreement they've made at any point in the transaction regardless of anything they've put in writing.

I've come to believe that having as few knots to untie as possible when the crash comes is a good way to go about it. I'm encountering more and more Brokers who feel this way.

Realtors could and should band together and boycott shorts with abusive lenders and if we were all making buckets of money right now, that could actually happen. Unfortunately, when you bring these banks their best solution to get them out of THE JAM THEY GOT THEMSELVES IN, they are quick to make you feel as if they are the ones doing YOU the favor.

Personally, I avoid short deals the same way I avoid a bee hive! There may or may not be honey but either way it's gonna hurt like he!! to find out.

Posted by Pete Buckley (Independent Broker/Realtor, North San Diego County CA.) almost 5 years ago

Wow you sparked a firestorm of debate with this topic!! In Nevada, where I live- you can withdraw on a contract at any time before it's accepted...I have noticed that often part of the contingency of whether a bank accepts or not is addressed in a -"earnest money is non-refundable during a certain time frame clause." This basically states that a Buyer cannot cancel until the bank has had X number of days to process the short sale request. This seems somewhat fair... it would be nice if the bank actually did their part to deliver a short sale approval in a reasonable and responsible time frame.

Jeff Burnham-The WIZARD, Rosen & Co., Las Vegas NV

Posted by Jeffrey Burnham, The Wizard (Encore Realty ) almost 5 years ago

Great Post! Bottom Line...a contract is a contract is a contract. If presented and accepted by all parties it is a LEGALLY BINDING CONTRACT. As you stated, there may be contingencies that will allow for termination of the contract, but if not in the specified time periods, it is breach of contract. Seems pretty simple to me......

Posted by Stephanie Reynolds, East County San Diego Homes 619-838-4408 (Integrity First Financial Group, Inc. ) almost 5 years ago

You're absolutely right.  A contract is a contract.  And my advice to my buyers are that they cannot just walk away from the contract...UNLESS the settlment date has passed and the transaction has not closed.  If the seller doesn't go to settlment by a certain date the contract becomes null and void.  Now, if the listing agent allows the contract to go past that date and comes back to me and my clients to extend the contract, then my clients have that choice to make. 

My clients get tired of waiting I advise them to wait for the settlement date on the contract to be passed then ask for their depost money.  They have every right to dso so.  Every contract has a period of performance and banks cannot just leave things hanging indefinitely.

 

Posted by Terry Iwaniw, Realtor - S NJ (Avalar Atlantic Properties) almost 5 years ago

Bryant,

You are absolutely correct... it's another contingency!  However, in my opinion, the lack of "time" control and Bank communication pushes up the frustration level of the American public!  We want EVERYTHING done yesterday!

Kathy Opatka

Posted by Kathy Opatka, Serving Ocean City, MD, & The Delaware Beaches (RE/MAX CROSSROADS) almost 5 years ago

This exchange of information and experiences is a "must read" for each state's laws are different.  Read, listen, and LEARN!

Posted by Wayne Palmer, Eddie Palmer (WNC Dreams Realty) almost 5 years ago

Nope, it's not complicated and I give 45 days for them to get the third party approval from all third parties that need to approve and THEN we move on!

Posted by Renée Burrows, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 5 years ago

Hi Bryant.  I concur that a contract is a contract is a contract.  However, all that I have seen give the buyer the right to walk anytime prior to short sale approval by the lender.  Here is typical language in our contracts.

Buyer's Rights:

Buyer may search for another property and terminate the Purchase Contract at any time prior to Buyer's receipt of written approval of the short sale

We have similar language for backup offers allowing a buyer to walk whenever he pleases prior to becoming primary.

We should all recognize that conventions vary greatly across the nation and just because local conventions are different does not mean we are ill-informed need to get training!

Posted by Richard T. Dolbeare, R(B), ABR, CRS...Hawaii Multi-Island Specialist (Keller Williams Realty) almost 5 years ago

Well put.  Both buyer and sellers have to be properly educated on the process and if an agent is unable to do so, they probably shouldn't be attempting these short sales. 

Posted by Brian Hurt, ABR, E-Pro (Keller Williams Premier Realty) almost 5 years ago

I have similar thoughts with Andrew Martin.  Every market and Board of Realtors may have their own "Short Sale" addendum and or a "Distressed Property" addendum.  (Note a short sale transaction may not involve a distressed property situation.)  In addition, an office may have their own addendum or policy regarding structuring a shortsale.  These addenda may place certain conditions on the listing agent to submit the short sale package and or get lienholder appovals within certain time periods or the buyer can cancel and "walk away" from the contract. 

Please note though that once the shortsale package is submitted and verified that it has been received, the listing agent must communicate with the lender at least weekly to followup; i.e., ask the lender where they are in the procees, if any other documents are missing or being requested, whether there is a trustee sale or foreclosure date assigned, when to expect a call from the opener, negotiator, etc.

I agree with Bryant, Any One listing a shortsale, should have some training or refer it out.  Otherwise buyers and their agents can and will most likely get frustrated.

Also, even with a trained shortsale listing agent, buyers agents need to know that the escrow transaction is much different than non-shortsale transaction.  You can't really expect a quick closing if your client is thinking they are going to get a "steal/deal" and the sales price is way lower than market value or if the lender is overwhelmed by the volume of shortsale transactions. 

Especially today, every day is a new day for lending and real estate...

Posted by Ronda Ching Day almost 5 years ago

Besides, listing a short sale property correctly or handling it appropriately per the different bank(s)'s procedures, both listing and buyer agents need to educate their clients and communicate with the other agent so less frustration occurs for all parties.

Note shortsale transactions do require a Lot More Work

Posted by Ronda Ching Day, Realty Executives Oahu (Honolulu, HI) almost 5 years ago

Besides, listing a short sale property correctly or handling it appropriately per the different bank(s)'s procedures, both listing and buyer agents need to educate their clients and communicate with the other agent so less frustration occurs for all parties.

Note shortsale transactions do require a Lot More Work and

Posted by Ronda Ching Day, Realty Executives Oahu (Honolulu, HI) almost 5 years ago

PATIENCE!

Posted by Ronda Ching Day almost 5 years ago

Agents need to educate their buyers about the short sale process and the purchase contract and the implication of walking away from a short sale contract.  They should know that it will take time to get the approval from the lender.

Posted by Mayra Espinosa, 650-996-8961 San Mateo, Short Sale Agent/Foreclosures Certified (McGuire Real Estate |Burlingame CA|San Francisco|) almost 5 years ago

Bryant,

I missed this one.

It turns out that was good, because now I've read 103 comments. It's appalling that you and Susan seem to be the only ones concerned with the dates in a contract! There is a major difference in a contract in which the date for third party approval has expired but not the closing date and one within the agreed upon time frame.

I could only hope with the proliferation of "short sale addendum's" that the buyer's agent would have included a date specify for third party approval and have explained it's importance to the buyer. buyers should never sign a contract for longer than they are willing to wait. Just as sellers should never accept less time that they and their agent deem necessary.

I've seen lots of discussion about which sellers should attempt a short sale, but I've yet to see one mention other than mine that states the obvious: "Not all buyers should attempt to buy a short sale!"  Buyers in need of a quick or even reasonable closing should normally avoid short sale listings! This can be hard in some markets, possibly imposable in some (ie: North Las Vegas?), but if you're a buyer's agent you have to point out the potential problems and delays.

I blame the REALTORS. Buyer's agents not warning and preparing the buyer and listing agents submitting muptial seller accepted offers on the same property.

Keep up the good work it is shamefully needed!

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) almost 5 years ago

1. In California any decent real estate attorney could get the buyer out of short sale contract which uses the standard California Association of Realtors forms.

2. If the forms are used properly by the seller, than any seller can get out of an short sale contract. 

My reading of the CAR short sale addendum is that written notice of approval is what is delievered to the buyer, not the lenders approval.  The terms of the lenders approval are not any of the buyer's business.  In my legal opinion.

If the parties to a short sale "contract" use the California Association of Realtors forms properly, neither side is bound to the "contract". 

By the way I am also licensed attorney and Realtor  in Florida and I would never agree to use the FAR short sale  form as it was constituted last year.

 

 

 

Posted by John McConnin (McConnin & Company Realty) almost 5 years ago

The postings here are real and by Realtors who take their profession serious enough to read and respond with their thoughts.  It is appreciated. 

We as Realtors are looked upon by Sellers and Buyers for short sale guidance.  Talk about not being on the same page, this shows we have many different thoughts about this.  Just think of the Realtors out there who don't take their profession serious enough to do their job.  Many of us have clients who dispute what we say because what they have heard from others and what the media has written, this could be why.

Contract is between the Buyer and Seller.  Short Sale contingency is between the Seller and their lien holders, not the Buyer.  Financing contingency is between the Buyer and their lender, not the Seller. Etc.

Like most everyone else, I am not an attorney, accountant or lender.  In Florida, to my knowledge, we have a binding contract when legally competent buyer and seller negoiate for a purpose, have agreed to all terms including contingenices, consideration was given, and the contract was executed by both and delivered.   

A contact with continguency addendums is still a binding contact with a specific timeframe to perform.  Once a timeframe has expired, then it allows; the contingency to be removed, contract withdrawn without harm, or re-negoiated.  Period. 

Short Sale delays and misunderstandings are caused by Seller's, Realtor's, Lender's and the media.  Rarely one is the only cause.  I have closed short sales in 2 weeks and 6 months and had Lenders totally deny a short sale months after the offer was accepted by the Seller.  This is a whole seperate topic.

Thanks for letting me ad my 2 cents worth in and to Bryant for stirring the mix and making us think.

Tom McClellan,     Prudential Florida Realty,     Bradenton, Fl.     8 years Realtor, 22 years Banker

Posted by Tom McClellan almost 5 years ago

My problem with short sales is that we have some listing agents in our area that list the homes at a price the lender will not consider. I had a lot of calls and emails on a property from my IDX that another agent had listed at $99,900, the outstanding loan balance was over $200,000. I called the agent to show he told me he had several offer some in the $120's was looking for more offers and was wating on a reply from the bank. He kept the list price at $99,900 I had lots of people email me some had driven by (our IDX gives the address) and wanted me to show it to them and were ready to buy if the inside looked like the outside. I had to tell people over and over that the listing agent set a low price that the lender would not take trying to start a bidding war and he told me he had offers i the $120s. I think this tatic makes us as Realtors look like crooks.

Posted by Alan Grizzle, Full Time Realtor, Lifelong Resident of Dahlonega (Chestatee Real Estate) almost 5 years ago

John, My sellers do not use the Far SS addendum either. Since you practice in CA what is your opinion of their SS addendum and do your sellers use it?

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Tim Burrell, Thanks for the comment. Now let me ask you a question. Am I wrong or are you wrong for using an addendum that clearly jeopardizes your sellers chances of having a successful short sale closing? I received the clause that you sent me.....

"Buyer may terminate the Contract at any time prior to the Lien holders Approval by written notice to Seller l, and, in such event all earnest money shall be returned to Buyer."

Why would any agent looking out for their Seller agree to leave this in a contract?

Again I am asking folks to provide me with the LAW in your State that states that the buyer can just walk away form a contract and get their deposit back. What you sent me was a board addendum.

I hate to be a nit picker but our boards do not make laws and neither do attorneys. Just because it it approved by the  Bar does not mean we have to use it. Nor does it mean it’s right.

This post states that a contract is a contract and that the buyer can not just walk away from a contract and expect to get their deposit back.

I'm not talking about offers. I'm not talking about foolish board addendums. What must a seller think when we have them sign an addendum that clearly is looking out for the buyer and not them?

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Tchaka, There a big difference between waiting out a slow lender and not getting a short sale approved. I completely stand by my statement that if you are not getting yor short sale listings closed them you need training. Here are a few reasons why.

Not all sellers qualify for a short sale. We need to be able to know which ones do.

Not all lenders will consider a short sale. We need to know which ones do.

Some seller will be required to bring cash to closing or be asked to sign a note. We have to be able to know which ones are at risk and make them aware of it BEFORE we agree to list the property.

We have to work only with qualified Sellers.

We have to know when to submit a SS package and what goes in it.

We have to know what price will be accepted by a lender. This should not be guess work.

We have to know what offers to accept and which ones to deny. Price is very important as is motivation and expectations.

If we know BofA is going to take 4-5 months to approve a short sale then why accept a contract with a 90 day close?

There are mnay more things that we can learn that can increase our closing percentages to just about the same as a normal listing.

 

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Bryant ~ Great thread! Grateful for all the responses.

IMO - No man can serve two masters (without some element of frustration). As listing agents we try to serve our Seller's best interests but are at the mercy of the bank's 'service providers' processing the SS deals who have admitted (to me) that they are overworked and simply do not care if the Buyer walks. Yet most Sellers are in distress and simply don't have the time to wait for the banks to make a decision as it is. Therefore, it is our responsibility to make sure the Sellers and Buyers are well informed to know all possible outcomes. We get initialed and signed acknowlegements from our Sellers of the potential outcome(s) prior to listing their home(s) SS.

Again, thank you everyone for your great input and contributions. I've learned a lot. And though I have and do work short sales (both sides), I have to admit I'm with Pete Buckley ~ "Personally, I avoid short deals the same way I avoid a bee hive! There may or may not be honey but either way it's gonna hurt like he!! to find out."

I'd just asume avoid them if I could.

Posted by Jackie Kurtz almost 5 years ago

Donahue Team, I'm not stating short sale law I'm stating contract law. But mostly I'm stating my opinion. Your comment shows exactly why we have so many issues with short sales. Short sales are the wild wild west because we allow it to be. It doesn't have to be that way.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Great Post, Bryant.  Clear & Concise.  Perhaps you could call the listing agent for a property on which my buyer placed an offer to provide short sale training.  Other than an incomplete contract (despite her assumption that one exists) I've received little/poor communication, and she seems to think she can fall back on the "it's a short sale" excuse (as well as the "I'm overloaded" excuse) for same. 

Perhaps she has other offers of which I do not know?

Posted by Derek Noggle (Beach & Luxury Realty, Inc) almost 5 years ago

Jirius, It is the Short sale addenda that are wrong. We are not required to use them. My point is that by using these addenda we are doing our sellers AND buyers a disservice. I thought our jobs were to help buyers and seller buy real and sell real estate? You can't do this by writing contracts that are not enforceable. 

Now if you chose to continue having buyers walk whenever they want then by all means keep using those worthless board addenda. I chose to protect my sellers.

The lender is not a party to the contract in any State. The contract is between the buyer and the seller. Once they have agreed the terms and conditions there is a valid and binding contract. One of the conditions is that it is subject to the sellers lender agreeing to a short payoff. This condition has been agree to by the buyer and the seller and therefore they are now under contract. Are you saying this is not correct?

Now I agree you can attach the Washington SS addendum but my question is why would you? If you are working for the seller why would you let this completely buyer weighted addendum be a part of the contract?

Is there a law in Washington that states that you have to? If so...show it to me. I do not believe it exists.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

OK you guys have left some really great comments. Some I agree with and some I don't. But that's OK. I wrote this poost so we could have a discussion.

It's clear after reading through these comments that the consumer doesn't have a chance in hell of being protected in a short sale transaction. We are the ones that are supposed to know what we are doing and clearly we don't.

How can we be so apart in our thinking?

How can our State boards come up with so many addenda that are completely anti consumer?

Why do we as REALTORS(R) continue to think that we have to use board approved forms that are harming our customer/clients?

Can anyone on this thread honestly say that having a non binding contract is a good thing? 

I really need to think about all of this. Something needs to be done about the lack of consistency in handling Short Sales. We blame it on the lenders when the reality is we are the ones creating confusion.

By the way, I am not a short sale expert. I'm just a small time Broker trying to do my best for my customer/clients and trying to bring some clarity to Short Sales. Short sales are serious business. We are messing with folks financial future. As a group we need to keep having these discussions so we can all get better at what we do.

As always thanks for all of your participation.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

BB...

Wow, looks like I finally got some support from some other DAs! This converstion has gotten VERY intersting!

Posted by Richard Weisser, Richard Weisser Coweta Newnan Homes for Sale (Better Homes and Gardens Real Estate Metro Brokers) almost 5 years ago

I just had a buyer who put an offer in on my listing after she decided to pull out of a short sale 'because it was taking too long'.  I asked this buyer's agent how she got out of the contract and was told, they didn't submit a contract.  They submitted an offer to purchase.  Now this is what the short sale listing agent submitted to the lender?  No wonder it was taking a long time.  It probably got put to the bottom of the lender's pile or just tossed. 

You are right on, Bryant, with your post.  Also, the lenders are slow due to sheer volume and also not having adequate trained manpower to handle it.  However, short sale packages that are submitted incorrectly combined with buyers not being educated in the process is contributing to an even slower process as well as a failed one.

Posted by Barbara Altieri, REALTOR - Fairfield County CT Real Estate (RealtyQuest, Fairfield and New Haven County CT Homes for Sale and Real Estate) almost 5 years ago

In Ca, there is a short sale addendum that allows the deposit money to not even go into an escrow account until short sale approval. There is also a contingency date in the addendum that allows the buyers to cancel if the short sale hasn't been approved by a certain date. But yes, it still is a contract, however I wonder if a withdrawl of offer before short sale approval would hold water?

Posted by Kerry Jenkins (Prime Properties) almost 5 years ago

BB...

I disagree ... we are not to blame here ... it's the lack a a method or process.

I'll use your buyer financing contingency example.

There is a process, a highly regulated process for a buyer getting a loan. It is clear and understandable.

There is no uniformly accepted method or process for getting a bank to approve a short sale. Why is that so much harder than approving a loan?

As we have learned here, everyone is doing it differently but it's NOT our fault. Someone has to create a sane process for doing this with ANY bank!

Posted by Richard Weisser, Richard Weisser Coweta Newnan Homes for Sale (Better Homes and Gardens Real Estate Metro Brokers) almost 5 years ago

Richard, I didn't say we are to blame I said we are creating confusion. This is quite evident just from reading the comments on this post. Sending lenders multiple offers and contracts that are not binding or for too low of a price creates confusion. It backs them up with unnecesary paper work. Did you know if a buyer walks on a short sale transaction in most cases the file is closed with the lender and you have to start all over again?

I have handled Short Sales with most of the major lenders and they all have a system. It may not be the best system but it is a system. In fact most of them have the same system. Not only that but if asked they will give it to you. Thanks for your comments.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Wow this is an interesting discussion.  BB I hear you.  West Coast states have chosen to adopt contingencies in the contract which potentially harm the seller and overwhelmingly favor the buyer.  While my buyers have been unwilling to agree to terms such as the ones you use, I hope real estate agents are clear that we don't have to use our state generated legal forms.  You can hire your own company attorney to generate a more seller protected addendum. 

I have had my attorney generate multiple buyer offer addenda for me in the past.

I am surprised the CA hasn't adopted an addendum more like what you use because they are hard hit with foreclosures.  Out here only 25% of short sales close.  Part of the lure of the short sale, for a buyer, is supposed to be getting a deal on the house.  That is the lure for waiting. When a short sale is the same as other similar homes...it's a no brainer...go with the other house.

To me it's a no brainer.  When a buyer signs a contract all terms are negotiated AT THAT TIME.  If the seller doesn't like the unilateral cancellation idea, they revoke that from the addenda.  Just because it is in the short sale addenda doesn't make it law. 

I don't get agents that write up multiple buyer offers without an addenda for that. If I were their broker their license would be back at the real estate agency for pulling that junk. 

 

P.S. Bill I did write a blog post about whether or not buyer were the right temperament for a short sale.  While our current contracts favor buyers, I am not one to take that lightly.  I do realize what is at stake for sellers, and ask my buyers to take that seriously as well.  So far, only one has written an offer on a short sale.  The rest pass.

 

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) almost 5 years ago

In response:  I've been doing short sales for over 2 years now.  Every negotiator I've worked with wants something a little different even at same lending institution.  So some want all contracts (they can see more cash/timelines) while others want only the highest and best.  As a Real Estate Agent representing the SELLER I follow what is in their best interest. 

Also another point: In Hawaii we do have Short Sale Addendum specifying performance dates but we also have a broad C51 Inspection clause which lets a buyer pretty much walk on a contract for a variety of reasons.  Therefore if they want to withdraw prior to approval it is best to move on and have that backup offer ready for the lender.

Each state seems to handle things in a slightly different way and I see that reflected in the answers to your post.


Aloha, Gina Duncan

Fine Island Properties Team of Keller Williams Realty Maui

 

Posted by Anonymous almost 5 years ago

In California there is also a form putting a deadline on the time the buyer is obligated to wait and frequently the buyer does not put the deposit down until the bank gives the green light.  Until banks get their act to together in regard to short sales I would never recommend giving a deposit until the bank agrees.  I am not alone in this regard, it is common practice.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) almost 5 years ago

In relation to Gina Duncan's comments as I am also from Hawaii, on the short sale transactions that I've done where I represented the buyer, I have used a company specific addendum which basically helps to protect my buyer in the event they have an offer working on a short sale property and come across another property of interest which they would also like to consider purchasing. 

In a nutshell, this addendum, which has been used by many offices here in Honolulu, is presented to the sellers and their bank and states that while they are processing our short sale contract offer, the buyer(s) are free to continue looking for alternative properties and in the event we find one that we will be pursuing, provided we did not receive written acceptance of our short sale offer from the lender, we can withdraw our offer and move forward with the alternative. 

On one of my deals, my buyers put in an asking price offer because he absolutely wanted to get this particular house, but being a short sale, was well informed of the lengthy process that lay ahead.  So, we put in our offer, the seller/owners reviewed and accepted our asking price offer, signed off on the purchase contract and their agent submitted all of the pertinent documents to the lender for their approval.  This went on for 70+ days before we heard anything back from the lender and all that I was told on a weekly basis was that they're still reviewing the file.  Meanwhile, my buyer happened to see another home that was practically identical to the short sale one we had an offer working through but this time it wasn't a short sale or distressed home.   So, aside from the fact that it was about two streets over from his initial choice, he wanted to make an offer for that one as well.

My buyer was concerned that he was locked into the original offer but because we had signed off on this short sale addendum which did state that until we receive a written acceptance from the lender and had been submitted to both the sellers and the lender, we can continue searching for alternative properties and should we find one that suits the buyers needs and desires, we are able to withdraw our offer and all terms and conditions shall become null and void. 

To sum that up, we withdrew our initial offer, put in a new offer on the alternative home and we closed within 30-days. 

So, I'd say although a short sale contract is still a contract, as long as you continue to practice your fiduciary responsibilities for your client, you'll do what's best to protect them and their interests.  And, I feel that an addendum like this helps to do just that. 

Great blog...thank you for sharing.

 

Posted by Michael H. Sasano (Kama'aina Realty, LLC) almost 5 years ago

I'm a Colorado Realtor, and about 85% of my listings and sales are short sales.  I have 17 open files as of today.  I have gotten approval on EVERY SINGLE ONE of the short sales I have negotiated on since Jan., 2008.  I realize that's not always going to be the case, but if you know what you're doing, present a complete package to your lender(s) and keep the lines of communication open, you CAN close short sales and save a LOT of homeowners from the stigma and FICO pain of foreclosure.  A short sale results in financial recovery a lot sooner than a foreclosure or a deed in lieu.  No, the banks do NOT want the property back.  I've never seen a case where it wouldn't have cost the bank(s) more to foreclose than to accept a short sale.  Lately, it's been getting longer to get approval letters, and that is a tremendous frustration.  Also, the variability among different banks, and even different negotiators at the same bank is tremendously frustrating.  I've even had a negotiator where he was so rude, I terminated the conversation, called back later and got the SAME NEGOTIATOR, and he was sweet as pie.  They're just under intense pressure.  Don't add to their stress and it won't add to yours, IMHO.

I had one short sale where I got approval and THEN the buyers bailed.  That did it.  I no longer work on a short sale until I have an earnest money deposit of at least $1000 at the title company.  A prominent RE lawyer in CO, Oliver Frascona, says if you don't want either party to be able to bail prior to lender approval, strike it from the short sale addendum.  I don't go that far, but I do explain VERY explicitly that this is NOT your typical transaction and it may take months (my last two took seven months, but I've had closings within two months, too).  I also say my seller will only sign ONE contract (usually the highest and best, but not always--and it's the SELLERS HOUSE; they really DO get to decide which offer they'll accept, and an all cash offer with fewer contingencies may be more attractive to the seller, even at a lower price) and I will only work that contract until I get approval by the bank OR there is no possibility of agreement to that short sale offer (i.e. the bank denies approval or counters at a price higher than the buyer wants to offer). I usually have one, and sometimes up to six back-up offers behind the highest and best, and I start calling back-ups when the first offer can't be closed.

I also HATE, HATE, HATE the way my local MLS allows short sales to continue to be listed as Active.  Then, in the terms portion of the listing, the listing broker must say "active pending lender approval".  So, you pull a bunch of listings for a buyer, only to find that half are not REALLY active.  It needs to be a specific category, just like UC or SOLD.  None of this "Active... but not really" crap in the fine print after you've made your showing appointments.

Great, thought provoking posts.  There's a lot of money to be made in short sales, and I, personally, find it tremendously satisfying to help prevent foreclosures.  They are just devastating to a homeowner's ability to borrow in the future.  A short sale signifies that the seller is trying to work out the best solution in today's depressed market.  Now, if the lenders could just get their acts together.... 

Posted by Jeri Groves (Groves Homes, LLC) almost 5 years ago

I believe Jeri Groves said it perfectly when she said she makes sure she sends in a complete short sale package and maintains open communications with the lender.  I've dealt with agents who were just as knowledgable and successful with short sale transactions and others who have no clue what they need to prepare for "prior" to taking on short sale listing. 

Working with an experienced agent in the short sale business is wonderful and I strongly encourage you to find out who these agents are within your area and keep their names handy so you'll know that if you happen to represent a buyer on a short sale property, you'll know what you can expect once you've put in the offer.  Otherwise if you end up with an agent who simply takes the listing, puts it on the MLS, and then just works it like any other listing, you'll be in for a very-very-very long transaction. 

Posted by Michael H. Sasano (Kama'aina Realty, LLC) almost 5 years ago

Well, this has got to be one of the most contentious discussions we've ever seen on AR, or darn close to it. As a rule, we try to stay away from short sales, since in our experience they can be anything but "short"...unless you're talking about patience levels!

So far, this is what we've been able to glean from this thread:

  1. A short sale contract is the same as any other contract...or it's not.
  2. Short sales should use appropriate addenda to delineate contingencies in the contract...or not.
  3. Buyers CANNOT walk away from a short sale contract...or they can.
  4. Short sales are easy, if you know what you're doing...or not.
  5. Banks are exceptionally motivated to work with sellers in a short sale...or not.
  6. You have to change the status of a short sale listing in the MLS...or you don't.
  7. Much of the West Coast (CA, OR, WA plus a few other inland states) seem to be from an alternate universe. (No offense!! We like alternate universes!!)

Our point is this: it seems that nearly every state, even some counties and cities, have differing ways of handling short sales. Some let the buyer walk any time, some don't. Some use addenda, some don't, etc etc. Since we probably have agents from every state in the Union on AR, maybe it would be good to start a series of posts on "How Short Sales Are (or should be) Conducted in (fill in jurisdiction here)". This post is well on its way to 200+ comments, filled with contradicting information and conjecture. Maybe someone could create a new group just for these posts so that any agent could go to that group and look for the post from his state and know that the information woould be (or should be) correct. It's obvious from the comments that the West Coast is in a world of it's own, and other states as well have differing ways to interpret short sale procedures. Even basic contract law seems to be an issue between various states. Broker Bryant has opened up a big old squirmy can of worms with this post, and we see the comment stream multiplying exponentially as more and more agents weigh in with "how it's done" where they live. It's a great discussion, one that has brought to light just how confusing and fragmented the world of short sales really is, and one that perhaps warrants its own little world within the Rain. Just a thought.

Great post, BB! Now we know why we steer clear of short sales!

Posted by Pat & Wayne Harriman, Broker/Owners, Wallingford CT Real Estate (Harriman Real Estate, LLC (203) 672-4499) almost 5 years ago

Bryant,

 

Yes, I far as I am concerned we all have to use the Washington State SS addendum.  I do not think it is law, but we are required by our brokers to use it, and I have never seen a short sale contract without it.  As to why I would use it if I was the listing agent, the buyers agent uses it and if I tried to get rid of it, we would have a major problem.  I could lose my license or wind up in court, or both.  In any case, I do not care because the offer starts the SS process and once I start negotiating price with the lein holder, we get their bottom line.  If the offer was canceled by the buyer, I will not care because then I can advertise the sale as a bank approved price.  And that makes it a quick and easy sale.  I just had that happen on one of my listings, and there were no negative consequences.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 5 years ago

I agree... it's a contract. However, if it's a FAR/BAR contract, there are MANY ways to get out of it. The easiest ways are through the inspection clauses. And if D&N are deleted, there's always the financing clause, although the bank probably already did their research on the buyer and tossed out that clause. But I know of one way in particular, that can help a buyer to cancel a contract, but I'm not giving any details. I learned it in a contract class, and I keep it to myself until I need it. I will say, it has to do with the deposit, and how it's written on the offer.   ;-)

Posted by Lisa Hill, Daytona Beach Real Estate (Florida Property Experts) almost 5 years ago

Interesting discussion. Many of you have commented on the differences between your local short sale addenda and several of you have discussed the differences between your locally recommended addenda and the actual local/state laws. Some of you talk about ignoring your board's addenda. I find I often have to do this as well in order to best serve my clients. However, watching the evolution of the short sale addenda in the three states in which I work has been fascinating. It is easy to see that the addenda have a huge impact on the local real estate culture.

I work in DC, VA and MD and they have different ways of accepting short sale offers. It is always interesting to see how differently the three states address issues that arise in real estate. Whether we like the local addenda or not, these documents have a real impact on how many offices/agents/brokers address short sales and how they use the tools that their disposal. I am really looking forward to the interview with the short sale negotiator because I have been curious how the differences in the short sale process across the states impacts the lenders decision making process.

Thanks for this interesting, and sometimes heated discussion.

Dana

 

 

Posted by Dana Hollish Hill, Vice President & Associate Broker (Buyer's Edge Company, Inc.) almost 5 years ago

BB,

It needed to be said!   Buyers can't just walk away.

We just had this conversation at our dinner table.  Since my wife mostly works with buyers she had a different opinion about buyers walking away.  I told her they must stay until the time has expired.

Also setting the expectations is sooooooo important.

Ray

 

Posted by Coldwell Banker Camelot Realty, Homes for Sale Mount Dora Realtor (Coldwell Banker Camelot Realty) almost 5 years ago

REAL ESATE AGENTS are submitting offers to the mortgage holders for the soul purpose of getting the bank to respond with an acceptable value. These contracts are referred to as unexecuted contracts. (not signed apparently) They also will submit mulitiple offers (unexecuted) to the lender simultaneously. No escrow required until third party accepts way below market offer meeting all conditions of offer. These mulitiple offers are garnered from list prices well below market value. One national real estate  brokerage teaches extensively on this practice.

It is not the consumer who has created this mess. It is real estate people who are trying to squeeze out a living by loading their pipeline with as many of these opportunities as possible knowing less that 20% will turn into money. As we've heard in earlier times, "Physician heal thyself!" The consumer is not at fault here, but real estate agents are. How do you suggest we expose these culprits?

Posted by Watching the crash...from 10,000 feet almost 5 years ago

Bryant, You are absolutely right.  I have been saying this for awhile now.  The number one reason short sales don't close is because of non performing buyers, NOT lenders.  The number one reason that buyers don't perform is that both listing and selling agents can't, won't, or don't know how to set proper expectations and lay the ground rules for short sales.  In other words, THE AGENT IS AT FAULT!  Folks, if you aren't educated enough to know or convey the rules of a short sale, then what are you doing dealing in short sales? 

www.short_sale_expert.activerain.com

Posted by Joseph Alfe (Short Sale Processing Inc.) almost 5 years ago

Bryant,

Great discussion.  As an FL attorney, I pose this question to the agents and other attorneys as to what they instruct their buyers as to what constitutes "written notice" under Paragraph FAR's Short Sale Addendum to cancel the contract for the failure of the seller's lender to approve the short sale in the allotted period.  I have seen buyer's agents present a FAR "Release and Cancelllation of Contract for Sale and Purchase."  In my opinion this is not sufficient notice per the terms of the contract.  Any thoughts?     

Posted by Gina Silvestri almost 5 years ago

Broker Bryant, you're right, it's not complicated, but it does vary from state to state.  Here in Texas, I actually, after reading the Short Sale Addendum required by our state, called the TREC legal hotline - twice - to make sure I understood it before explaining it to my client.

The clock on the option period here (say, 10 days, though it's negotiable) starts running on the initial execution date of the contract, and keeps running until 10 days after the amended execution date (when the bank gives written authorization).   So the buyer can walk at any time for any reason during that period and get their earnest money back - per the contract.  As you say, a contract is a contract, and under our contract, the buyer can, indeed, walk.

Posted by Tricia Jumonville, Texas REALTOR , Agent With Horse Sense (Bradfield Properties) almost 5 years ago

CJ,

 

I couln't have said it any better myself, although I have tried if you read what I wrote earlier.  Bottom line, how can wwe ask a buyer to uphold their end of a contract where price is not determined?  Therefore, it cannot be a legally binding contract for all practicale purposed until the lein holder and the buyer agree on a price.  Then the clock starts ticking and ernest money is deposited.

Currently, I am representing a seller and it has been 2 months since we submitted an offer and no BPO has been ordered yet.  I am representing a buyer and it has been 3 months since we signed around an offer and still no BPO ordered.  Both are with B of A.  If this is the kind of service we get as experienced short sale agents and negotiators, how can we expect the buyer to just sit and wait forever?

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 5 years ago

I advise my buyers to KEEP LOOKING even if they are in contract on a short sale.  What good is it if my buyer waits for 4 months only to find out that the lender doesn't approve of the sale.  They've missed out on many homes throughout the short sale process.

In California, we have a short sale addendum that allows for the deposit to be held and all timeframes to begin upon lender approval lender approval.

Additionally, the short sale addendum gives the seller the power to cancel at any time for any reason.  That doesn't sound like a contract to me.

The bottom line is Short Sales are a potential train wreck for any buyer or seller and both parties have to accept the fact that the other party could cancel for any reason. 

Posted by Andy Parker (Azalea Realty) almost 5 years ago

BB, you are correct about the short just being another contingency. The whole problem is the short is predicated on someone that is not within the contract.  Financing has to do with the buyer, no mortgage, no deal.  The seller wants to sell, but has a slight problem there (bank) on doing that.  If the bank says no, the deal is dead.  The bank is not considered a part of the contract right? Not a seller, buyer, right? They still have their fingers in the pie mixing it up and causing chaos.  The buyers agent just has to be clear with the buyer on what should be expected. If buyers want to hear NOW, it's just not going to happen and they should go elsewhere. 

Posted by Lyn Sims, Schaumburg Homes (RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago) almost 5 years ago

CJ,

Actually in Oregon once the seller and sign mutual acceptance has occurred and there is a legally binding contract.  We just give buyers the option of revocation, much like we do with home inspections and appraisals.  It is a fully executed contract.

It is no different that waiting for the underwriter to approve the buyer's financing. The difference is that it can take 6 months.

I think people are confusing legalities with realities....yes realistically there is no deal unless the bank says there is a deal, but that is NOT the legal issue at play here.  Legally the buyer and seller have engaged in a good faith contract with terms they have negotiated and agreed to.

I don't get the submitting unsigned offers to the bank. That makes no legal sense whatsoever.  I think the question in play is not about legalities in the sense that there is a binding contract, but how do buyer and seller agents advise their clients in order to protect their interests. 

Buyers out here get to walk because no agent that takes their fiduciary duty seriously would advise their client otherwise, AND sellers need to lock in buyers and NOT let them walk because no listing agent that takes their fiduciary duty seriously would advise their client otherwise. 

The trick is in reconciling those two opposing issues and trying to get buyers and sellers to the table and negotiate terms both can agree to from the start.

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) almost 5 years ago

Great answer Melina. It seems that no matter when I have this discussion it keeps getting back to board addenda. We are not obligated to use board addenda. Nor are they "law". There is no doubt that the NAR has dropped the ball on short sales. Realtors(r) obviously need guidance. It would behoove NAR to have a panel of brokers that actually do short sales sit down and get a handle on this stuff. The way it is now is an embarrassment to our industry. We need to be leaders not followers.

Buyers and sellers are not taking contracts serious because we are not taking them serious.

I find it odd that folks keep mentiong that only 10% or 20% of short sales close. Yet if you talk to the agents that are actually doing them for a living it probably closer to 80%-%90 that DO close. What does that tell us? It tells us that many agents are just flat out dabbling in somehing they shouldn't be. They are harming the public.

I just don't get it.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

I got one for you, what about agents who forward multiple FULLY EXECUTED contracts to the bank for approval? What if I submit an offer and have it accepted by the seller then forwarded it to the bank only to find out a week later another offer was accepted and submitted after mine? I had an agent actually tell me: "I don't play games I send all offers to the bank, I get short sales all the time." My only thoughts were: I won't be submitting any offers on your listings and you obviously have no idea what you are doing. The sad part: My buyers loved her sellers property. Unbelievable!

Posted by Noel Padilla, CDPE (J. Luis Properties, Inc.) almost 5 years ago

BB - I read several posts, then jumped to the bottom.  Personally, I find it intriguing how many agents and even brokers seem to forget who their client is in the middle of a transaction.

Sometimes, agents and brokers alike start thinking that the BANK is the client; that they are controlling the transaction and that we just have to kowtow to them as though they were the seller.  The ONLY thing the Bank is in control of in our state, and likely many others, is whether they will approve a short payoff on the existing note/lien. 

Now, once they issue the Payoff letter, they'll include language that the payoff must be received in so many days, and there will be a number of other stips, but the Seller and Buyer who made their agreements in the form of a contract are still bound by the terms of that contract. 

I did find it humerous that some of our Boards apparently think it's in the Seller's best interest to let a Buyer off the hook just because the buyer asked to be released.   What a field day for an attorney who would want to sue the entire board, yet most attorneys work on retainer and need a client to foot the bill, but those rules are indeed humorous. 

I agree that NAR and the FEDS need to take a more active role in requiring standards from BANKS for their SS forms.  They slow up the process by each one being different in their Financial Statement requests.  This complicates things unnessarily.  There should be a standardized form, like a HUD-2 form, which they ALL use, by FED mandate.

I've done a number of SS deals now, but has switched from working them as the agent to working them as the investor, or both.  Studied the process for about 14 months (while I worked SS as the listing agent for investors and borrowers), until I got comfortable a process that appears to be working for me.  Took me a lot of time and I've developed a lot of my own forms, and though I am "knowledgeable", I don't think I could serve as an expert witness as to how a buyer can breach a contract without consent, if the contract is still in force.   

I would say, however, that when I'm working 30-40 files and closing 2-3 per month, it might be fun to come back to AR and reread a few of these posts.  Many are informative, some are just downright wrong (as in the fellow who stated that 95% of SS's don't close -- I'd say the ratio is about the same as the number of people who get approved for a home mortage, but in reverse). 

Some are truly misinformed or stating rules or laws that are unique to their state and thinking they apply to everyone.  As for me and my SS business, until I master the process in our state, I'll probably not start working SS's in any other states.  I'm pretty much swamped with the huge number of people in need of my help right here in Iowa, so there is little motivation to start pursuing business in states where I don't know the laws.   This post serves as a good reminder of why I don't want to do that.   

Anyhow, great topic, great post.  To our SS success!

 

Posted by Andrew Lietzow, MBA-Exec Dir Iowa Real Estate Investors Association - (IaREIA | Iowa Landlord Association) almost 5 years ago

I have participated in3 short sales as a listing agent and 2 as a buyers agent, and they all went through.  I am the process with 2 of each right now, and I hope they all work, although service from the banks is terrible.  I think the SS addendums we use are just fine, because they protect the buyer from an uncertain fate and do not really hurt the seller since I can get backup offers and if the buyer walks I can advertise it as an approved short sale with an actual real price.  Everybody wins and I do not know what all the fuss is about.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 5 years ago

Noel our short sale addendum allows the seller to accept more offers and engage in a multiple offer situation.  Agents do this practice because the short sale addendum allows it. It is actually written that the seller can continue to get offers and will submit other executed offers to the bank.  In fact an attorney told a bunch of agents at a local training to do just that.  This is another one of those situations that agents need to understand what the addenda allows and if they take their fiduciary duties seriously to their client talk with them about the pros and cons.  A new addenda can be drafted by an attorney.

I don't understand why agents are getting all upset about a business practice that is spelled out in an addendum.  If you don't like the practice, have an attorney draft a different addendum. People are acting like agents are doing something wrong, but if the short sale addendum says they can do it, they can do it.

I went back and looked. We have had 80 short sales close so far this year in my market. Only one was done by a CDPE, and the most were done the way of our addendum.  The median DOM from list until close was 176. I think the short sale process is less about whose system or addenda is right, but rather about having buyers and sellers that understand the process that lay ahead for both parties. 

 

Posted by Melina Tomson, Principal Broker/Owner, M.S. (Tomson Burnham, llc Licensed in the State of Oregon) almost 5 years ago

Noel-

How can any selling agent go under contract with more than one buyer???

One buyer, one contract. The SELLING agent must be CERTAIN to get the BEST offer for their seller. They should not accpet any offer, do the comps, do the homework....if you dont the bank will and you will wait 30-60, maybe 90 days to get countered.

If im on the other end (buyers agent) I ALWAYS explain to my clients the risk  and time short sales are. I also explain to them what the fair market value of the house they are bidding on is at that time and warn them if they bid too low, they may be hurting themselves.

For some strange reason when people see "short sale", even if the house in in immaculate condition, they feel they have to offer 60,000 (give or take) less than asking price...? This is where problems start.

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) almost 5 years ago

Jirius, You last comment states that all of your short sales close and the one above is questioning why a buyer would wait. Didn't you just answer your own question? I will reiterate that submitting a contract to the lender where the buyer then walks contributes to the time delays with lenders. Most lenders will not come back with an "approved price". They will normally close the frilew and make you start all over again. This creates twice the work for allll involved.

My point is that if ALL of us negotiated a solid deal upfront, submitted one contract to the lender for approval and made sure the buyer stayed under contract we could eliminate the majority of the issues with the lenders.

Just think of how much timesis wasted everytime we have to resell and resubmit a SS pacakge? Now multiply that by 100,000s of transactions where this is happening because WE as agents are not taking contracts serious.

Andrew, Great comment. I agree with all of it. We are the ones on the ground floor and we need to take charge and get us throw this mess.

Melina, It's frustrating because our Boards have let us all down by putting out these ridiculous addendums. And then agents, as you can see by this comment thread, take them as being the law. Our CoE states that we are to keep CONTRACTS binding by use of extensions and addendums. Using these board addendums giving everyone the right to just walk whenever they feel like it nulifies the contract completely. Why even bother writing it? These addenda are harming the public.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

 

 

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Bryant,

 

I will just plain have to agree to disagree with you.  I like solid deals, but I see no way that it makes sense for a buyer to not be able to wslk when there is no price on the property that is guarantteed.

But I do still prepare my buyers and sellers and take everything seriously.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 5 years ago

Jirius, You wouldn't be the first :) Thanks for the discussion. This is how we learn and get better at what we do.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

WOW! I don't know how I missed this great discussion and VERY SURPRISING statement by LICENCED agents! WOW!

Your post is spot on for Florida and most states.

I am always surprised at how agents confuse board addenda and contracts with the law. The law governs the statute of fraud and breach of contract. It does NOT Dictate what two parties can agree to.

Actually, if you get right down to it, your seller can ask the buyer to sign whatever addendum he or his attorney make up and the buyer has a choice to sign and abide by the contract or not sign or sign and NOT abide. Then there are consequences.

The reason that California agents talk about the low closings on short sales in California is because California is a TRUST DEED state not a DEED STATE LIKE FLORIDA. In Florida, we can drag out a foreclosure for almost 2 years and sometimes more. In Florida the judicial process must be followed and the DEED is judicially 'taken away' from the homeowner. The homeowner in Florida owns the home and then mortgages that home as collatoral for a note. In California, the bank who gives the loan, and owns the note, also owns the DEED and the DEED is not turned over to the homeowner until the loan is paid off, therefore the homeowner has a TRUST DEED. My first real estate license was in California and I remember much of the law portion of the real estate exam there even though it was many moons ago. SO in CALIFORNIA- the process of a foreclosure takes about 90 days. It is treated much differently by the short sale lenders there than here.

I spoke with a senior negotiator at a large lender about this for a great length of time. He was telling me that the way short sales are handled depends on each state's laws, whether it is a judicial state or not, whether it is a Trust deed state or a warranty deed state and whether all creditors have claim to the property or not.

I am SOOO surprised or should I be of the total misinformation agents commenting on your blog have about short sales.

A contract is a contract.

We had our attorney create addendums that we use for our sellers on short sales.

Our sellers WILL NOT take offers without earnest money down up front! If a buyer walks away, they forfeit their earnest money. PERIOD!

Our sellers WILL NOT take offers where the contract dates do not begin until the short pay off has been approved.

We do have buyers agents who say they will not oblige these terms but that is NOT up to them, that is up to their buyer. And of course, the buyer can say no, and then they don't get the house! SIMPLE! NOT ROCKET SCIENCE! Your buyer is NOT the only game in town. We have multiple offers on most all our short sale listings.

I am in shock at still how many agents think that the BANK is a party to the contract! The BANK IS NOT A PARTY TO THE CONTRACT. The offer and contract is a bi lateral agreement between the buyer and the seller.


Please get educated!

Posted by Nestor & Katerina Gasset, Realtors, Wellington Florida Homes For Sale (International Properties and Investments LLC) almost 5 years ago

Oh one more thing, for agents who say they want me to put my listing in pending status when the seller and buyer sign but want to walk away for any reason, ARE YOU SERIOUS?

First of all, none of my listings EVER go pending until all the contingencies are removed.

We submit one offer at a time to the short sale lender, we continue to market because IF the buyer walks or like usual these days can not get a loan, we need to have a back up offer in place. We take back up offers. Our job is to keep our seller from getting their house foreclosed on and if that does not sit well with buyers agents, than OH WELL! My job is NOT to make the buyer happy, my job is to work for our seller.

This is one of the biggest fights I have with our Board and MLS. They are all in favor of buyers and buyer agents and there is no advocate for my seller who is losing their home! Katerina

Posted by Nestor & Katerina Gasset, Realtors, Wellington Florida Homes For Sale (International Properties and Investments LLC) almost 5 years ago

BB- just confused why you keep saying these are board addendas. If the forms is from the California Association of Realtors and our office requires its use, I'm not seeing where we have a choice. Apparently there are major differences from state to state.

Posted by Jenny Durling, For Los Angeles real estate help 213-215-4758 (L.A. Property Solutions) almost 5 years ago

Here is the thing - and I do not know if this has been address becasue I only made it halfway through the comments.

A seller in pre foreclosure does not have the wherewithal to stand up in court or in arbitration and fight for a thousand or few thousand dollars earnest money. They are usually insolvent to begin with and flirting with bankruptcy options. This one glaring fact alone allows these buyers to walk all over them and violate the short sale contingency without penalty. Getting the house back on the market and finding another contract to stave off foreclosure is usually more pressing than fighting with a buyer who is not going to help you consummate a deal.

Besides if they are not even making their payments, shouldn't the forfeited escrow go straight to the primary lender? Depends on who you ask, right? LOL

Thanks for another excellent post.

Posted by Sean Barber (Charles Rutenberg Realty) almost 5 years ago

I have done some 'short sales' here in Tennessee. I use a TAR form here that gives the bank ( you fill out the number of days) so many days to approve the ;short sale' or the sellers or buyers can back out. Also i use anither form that the buyers and sellers sign telling them what a 'short sale' is.

Sheila Scruggs

Century21 Hendershot Realty

www.hendershot-realty.com

East Tennesse, Monroe County, Tn.

Posted by Sheila Scruggs almost 5 years ago

No BB, no confusion about board addenda and state law.  I was just making a comment that states do have varying laws governing short sales.  Add to that that there are many, many different board addenda and it makes it difficult at best, and next to impossible at worst, to have a good discussion on the topic as it will vary from place to place.

You're right, you don't have to use the standard contracts and addenda.  Heck, you can write a contract on a napkin if you so choose.  Well, the seller/buyer can.  As a NC RE agent, I can't write ANYTHING, contract-wise.  Only the buyer, seller, or their attorneys can do that.  Since the seller probably isn't going to pay for a custom-made contract, and I'm sure not going to get one done up and recommend it to sellers, I guess we're stuck with those board contracts.  Me, I'll stick with contracts that have been made to protect all parties, including me, vs. custom made one that I may have to defend in court.

Add to that that many companies require that their agents use state-approved, or board approved contracts, and the whole conversation on the subject becomes a moot point, regardless of your feelings for or against.

Even without our addenda, I would argue (if I were buyer's agent) that there is no valid contract between the parties UNTIL such time that a formal written approval of the short sale by the seller's lender is given because the seller simply cannot deliver on the contract until it is given.  If a contract is not valid, then it becomes a voidable contract, which of course, can be voided at ANY time.

Some of the comments here want it both ways.  As a seller's agent, they want a valid contract with the buyer tying up earnest money BUT they also want to be able to market the home as "for sale;" not pending or under contract.  Whatever your laws, or board rules, I don't think that it should be a double-edged sword for the buyer, tying up their earnest money and still allowing others to make offers.

Posted by Roger Johnson, Realtor - Hickory NC Real Estate (CENTURY 21 American Homes) almost 5 years ago

Jenny, I keep pointing it out because my opinion is that our boards are harming the public by putting out addenda that defeat the purpose of having a binding real estate contract. It just shows their lack of understanding of the short sale process. And....there are many agent that confuse an addendum with law. Just read through these comments and you'll see what I'm referring to.

I completely understand that you may not have a choice in the matter and have to do as instructed by your Broker.

Roger, We just have to disagree about the validity of a short sale contract. By your train of thought a buyer's financing contingency also keeps a contract from being valid since they can't close either unless their lender approves the transaction. if this is the case then why do we even waste our time writing contracts? There seems to be no point since either party can just walk away anytime they chose with no recourse.

What would happen if your buyer spent time and mloney on a transaction in anticipation of closing and all of a sudden the seller just changed their mind and deciced to sell to another Buyer? Would you be OK with that? It's no different than when buyers just walk for no reason.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Wow, what a great response!  What I am seeing is the listing agents are not sending out counter offers after the short sale lender approves the final HUD with the final, approved costs they will pay for. 

As you said, a contract is a contract, so unless the buyer agrees to pay for the "hoa transfer fee" or the "Termite Inspection" then you no longer have a meeting of the minds.  The buyer agreed to a certain set of costs and if the lender refuses, the seller/listing agent need to put those changes in writing and get the buyer to agree, or allow that buyer to cut loose and go to another buyer.

Many times I think it is the uneducated short sale listing agent that is the cause of problems!

Posted by Richard Daskam, Your Real Estate Consultant (Keller Williams Realty) almost 5 years ago

As with anything else, many of the differences are specific to the local state. In RI, we now have a pending to Short Sale status, meaning that an offer has been accepted by the seller and is pending the banks approval. 

As for the rest..There are many views complicating the short sale process, some of which are simply misinformation. 

I have a buyer in a pending short sale right now.  I have a signed p&S by the buyer only (all else is verbal, which to me means we can keep searching)

Also, if the Seller were to sign it would still be contingent on the Banks acceptance.

We now have a short sale rider in RI that allows us to put dates on the contingencies. Everyone involved has a clear written story of what should be done and when.

Buyer gets their deposit back if any of these conditions are not met.

 

Posted by Karen Hurst, Rhode Island Waterfront! (STONEHURSTREALTY.COM) almost 5 years ago

Buyers need the ability to walk away...

The buyer wants to buy a property. How long should they be expected to wait, indefinitley? Our short sale addendum allows the buyer (or seller) to terminate the contract simply by providing notice to the other part after the contingency period expires. It's 30 days by default and I write in 45 days and have had two recent buyers wait three months to hear nothing.

The addendum allowed me to write a termination notification and we moved on to other properties.

Posted by Bob Pisa Downing-Frye Realty, Commitment, Service, Satisfaction... (Downing-Frye Realty, Inc. Naples, FL) almost 5 years ago

Is this the same group of realtors that were drinking the kool-aid back in 03',04',and 05' telling me (buyer) I had better buy now or be priced out forever?

You can't seriously be worried about your reputation being damaged when it comes to short sales can you? WAKE UP it's already damaged by your disgusting GREED you displayed during the boom. 

Us buyers are supposed to sit and wait for 4 months? Sorry I don't think so.. the problem isn't the buyers. The problem is banks take WAY TOO LONG to respond! Want proof?

there is a condo I am interested in, it was on the MLS at $176,000. I called up a realtor and made a CASH OFFER of $170,000.

That's right.. CASH OFFER.. guess what? 2 months later STILL NO WORD.. 

Byrant- You just seem all to worried about the bottom line (what goes in your pocket) than anything else.

 

Posted by buyer almost 5 years ago

Buyer, Short sales take time. That's a fact and there is nothing the agent can do about it.

I'm not worried about my reputation or the buyer. I'm worried about keeping my seller out of foreclosure. That's my job. Nothing else really matters.

If you want to buy a short sale then you have to wait. If yoyu don't want to wait or can't wait then you need to be looking at foreclosures or regular listings. Your impatience will not get the desal done sooner. That's a fact too.

In my market I make about $1,500 when a short sale closes.  That's after 6-7 months or hard work. I'd hardly say that is worrying about what goes in my pocket.

Was your offer in writing? Did you provide proof of funds? Are you working with an agent? Let me know if there's anything I can do to assist you.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 5 years ago

Well said.  You would not believe how many agents, Brokers, Brokers in Charge, Association Board Presidents, I have had to explain this too! Even the SC Board of Realtors has it wrong!  

 

 

Posted by Kevin almost 5 years ago

Bryant, this is great information and I am going to reblog it for my followers too.  Thanks for sharing.

Posted by June Piper-Brandon, Piecing Dreams One Home at a Time (Century 21 New Millenium) almost 5 years ago

This short sale addendum is a dream for buyers and agents however a nightmare for everyone else involved.  Unfortunaely for me I did not even realize the consequences of the addendum until the buyer walked.  They just changed their minds.  They had nothing to lose and will get thier deposit back as well.  My agent and I do not agree on this issue as he justifies the fact that all short sales are done with this addendum.  I propose that this is utter nonsense.  Just because everyone does it doesn't make it right.  An addendum that virtually cancells out the most pertinent parts of the contract that it is an addendum to.  What? 

One of the options on the short sale addendum states that "all time periods for inspections, contingencies, deposits, and all other obligations under the Contract shall commence from the date Seller delivers written notice to Buyer that the contract has been approved by the lender". So in my case, the buyers have decided that they do not like one of the neighbors, although the buyer resides in Canada, so they will use the inspections to get out of the sale, and the effective date to get thier money back.  What they intend to do is get the inspector to say that the couple of tiles at the front door are cracked, which I am certain was very apparent before they respectably entered into a legal and binding contract.  I don't think that an inspector is warranted in this case.  Additionally the property is new, in the Country Club, on the golf course, 8 months occupied however vacant now.  Obviously this buyer was not serious about the property and agents are just promising everyone that is on the prowl for a bargain that they have nothing to lose.  Toss as many of these contracts as possible and see what sticks.

This is a contributing factor as to why the majority of these short sales are not successful.  I have since learned that many times they are approved by the lender only to have had the buyer walk away anyway.  Why?  Because they can.  I have refused to sign off on the cancellation of contract at this time choosing to force the buyer to follow thru on what they started, to get an inspector to do their dirty work.  Oh, and as an added bonus the contract used was an "As Is" contract although the property is new and contains the following clause.  "If Buyer determines, in Buyer's sole discretion, that the Property is not acceptable to Buyer, Buyer may cancel this Contract by delivering facsimile or written notice of such electin toSeller pryor to the expiration of the Inspection Period.  If Buyer timely cancels this Contract, the deposit(s) paid shall be immediately returned to Buyer."  Swell.  

Bryant can you tell me why my agent has asked me to sign off on the cancellation?  It appears to me that no one needs my signature.  All I know is that my property has been tied up as my agent stopped marketing my property once we got the offer from the buyer's agent because he couldn't market it as active........ My agent feels that I no longer trust him and that I feel that he was negligent in not looking out for my interest, although his sentiments are that it is not the case.  I have assured him that I take full responsibility for putting blind faith in someone, anyone else, to do my thinking for me.  In the future, should I be lucky enough to recieve another offer it will be submitted to my attorney for review. 

My agent assures me that if "we" come up with another buyer, the same addendum, with the same clauses will be in the contract.  I have assured him that my signature will not be affixed to the contract. I suppose I will heading for foreclosure.

 

 

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Posted by Seller over 4 years ago

Seller, I completely agree with you on all counts. REALTORS(R) feel obligated to use contracts and Addenda that are prepared by our associations because we are not allowed by law to write contracts we can only fill in blanks. Also, Brokers force them to use the board generated contracts to cover their butts. These contracts are not looking out for you.

Personally I use a Short Sale addendum that was written by an Attorney. We require the deposit at time of contract. We also use another disclosure letting buyers know that of they walk for no reason the seller is claiming their deposit.

Even though agents can't write contracts and most will use board contracts YOU can use whatever contract and addenda you like as long as the buyer agrees to it.

Now even our Florida board generated short sale addendum does give the option of making all time lines start when the contrcat is signed by buyer and seller. I would certainly recommend this. That way the buyer will need to do the inspection right away and remove that contingency.

Protect yourself as much as possible. Buyers still walk. But you at least need to have a fighting chance.

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) over 4 years ago

Can you tell me why I am being asked to sign a cancellation of contract when the buyer can cancel at his own discretion?

Also, can a FAR/BAR Contract For Sale And Purchase be used in short sales as well or does it have to the the "As Is" Contract?  Do you know the verbage for the addendum requesting the lender to satisfy the mortgage as well as the note?

Thanks.

Posted by Seller over 4 years ago

Buyer, perhaps the reason you are still waiting for your short sale answer is because your lender is working on the 500 files that came in before yours.  Oh and by the way, 400 of those are a complete waste of everyone's time because the buyer's going to walk away anyway.  Why?  Because each of those buyers had multiple offers submitted waiting for the best deal to emerge.  Why would they do that you ask?  Because they had nothing to lose when they signed off on all of the contracts that have been manipulated by rediculous clauses making them not worth the paper their written on.  Now look again, can you see the whole picture?

Posted by Seller over 4 years ago

Seller. Any time a contract is canceled a cancellation should be signed. It basically just protects all parities. including the brokers. from someone coming back in the future stating they have a contract. In Florida it also instructs the escrow agent how to release the deposit.

Most lenders want the purchase contract ot be As Is. If a regular Far/bar is used they'll want an As Is addendum added. The reason being is that of the seller has money for repairs the lenders wants it. There may be exceptions to this nut I have not seen one.

I agree completely about the Contracts, that aren't worth squat, clogging up the system. Hopefully as agents get more and more experience this wil change. And of course it will help when lenders start approving short sales faster.

Lenders MUST release the mortgage in order for a short sale to close. Releasing the note is up for negotiating.

 

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) over 4 years ago

Well sometimes i dont know what to think of short sales. They are getting better and then they are not!

Posted by Paul Gapski, 619-504-8999,#1 Resource SD Relo (Berkshire Hathaway / Prudential Ca Realty) almost 3 years ago

Paul. That sounds about right!!

Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) almost 3 years ago

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