Hi Folks. Here's an email I received yesterday from one our members at www.ShortSaleSuperStars.com. It shows the common misunderstanding that lenders handle short sales like they do REOs (foreclosures).
Hi Broker Bryant,
I read some of your comments on Short Sales Superstar.
I am a potential buyer. We have bought several properties in the past but are very inexperienced with short sales. We have been looking for a home for a long time and have not been able to find what we are looking for until now, except that the property is a short sale and an offer has already been submitted to the lender. So, instead of just walking away, I am hoping to learn a little more about how short sales work in the hope that we may have a chance at purchasing this house if we approach it in the right way.
The seller's agent has submitted an offer to the lender but the lender has not accepted it yet (I have a feeling that the seller agent is not very experienced with short sales either and just sent it to a department and has not had much communication with the lender). We are strong buyers with 60% down, a three figure salary, and pre-approved loan, but I don't know if this is even considered in a short sale. We want to make a competing offer and would have done so via the seller's agent, but the seller's agent will not submit our offer to the bank because she already has an offer she submitted and says it may sit at someone's desk for months before she hears back from them. The lender still has not accepted/approved this offer, but the seller agent will only accept our offer as a backup offer and will not submit it to the lender unless the first offer made is declined. She tells me that you cannot submit two offers to a lender. Is this so?
Prior to this conversation with the seller's agent it was my understanding that until the offer is accepted by the lender, multiple offers can be made and presented to the lender. I would imagine that lenders actually like and prefer receiving competing offers, is this not so? If so, I am wondering why this agent will not submit our full price offer to the lender. Is she right to do this? Is there anything we can do about it?
My response:
The agent has more than likely submitted a contract to the lender. NOT an offer. In a short sale the lender is being asked to accept less (short) on the amount owed. They are not deciding on whether or not to accept an offer. The lender is not a party to the contract. That's between the buyer and the seller.
At this time, you can submit an offer to the seller, through their agent, and see if you can negotiate a deal and have your contract accepted as a back up. This way if something should happen to the first deal your contract would move up to the first position and then be submitted to the lender.
Submitting more than one offer or contract to the lender creates confusion. Lenders want ONE fully signed and accepted contract to work with. You have to remember they do not own the property. It's a different situation than a REO (foreclosure). END
So remember, a Short Sale contract is still a contract. We submit contracts to the lenders NOT offers. Got it?
Are you facing foreclosure in Florida?
Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.
Want to find out more? www.CentralFloridaShortSales.com
***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.
Copyright © 2010 http://www.brokerbryant.com/ | All Rights Reserved
Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.
Want to find out more? www.CentralFloridaShortSales.com
***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.
Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales, Orlando Florida Short Sales, Celebration Florida Short Sales, Winderemere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.
Copyright © 2011 http://www.brokerbryant.com/ | All Rights Reserved
Nice post and the way you have drawn the distinction between offer and contract is really key to the blog. Buyers sometimes do not understand why an offer is not submitted. You really explained this well
Bryant,
I wrote just yesterday about vocabulary problems in real estate this is another great example.
All to many have substituded jargon for simple English.
Bill
Very well put. The public sometimes doesn't understand (and I've met realtors who don't understand either). But, this is a great post. Thanks. I am bookmarking it for sending to clients.
Bryant...I had a buyer call me yesterday and say we are ready to close on the offer we made last week...great hold that thought...and keep holding it until we can tell you they are ready....or NOT!
I really think that agents who don't know how to do short sales should either learn or refer.
Bryant - Interestingly, "offer" and "contract" are used (incorrectly) interchangeably.
I think it was fantastic that the client wanted to better education himself. However, why didn't the Sellers' agent explain all this to him and take the back-up offer for his file? With so many people bailing shortly before closing out of frustration, that agent would have a ready, willing and able Buyer to finish out the process..
Bryant,
been reading your posts for the past several months since joining AR. Your explanations and approaches are excellent. well done.
Bryant, that's a wonderful answer. Perceptions by buyers of what's happening in a short sale are often very wrong and confused.
BB,
I've known inexperienced agents who actually submit offers to the bank. Seller hasn't signed them. Eventually the bank will just kick it back because it isn't a fully-executed contract. Time wasted but it happens!
In California on our MLS in our county, they just added a few new categories that are mandatory for short sales and one actually says 'offer submitted and awaiting approval'. Now, I am thinking that they did not read this blog post before changing the stuff on the MLS.
It's true that it's a contract and not an offer. But banks still refer to them as offers, LOL. Sometimes I do submit the back-up offer, even though an existing offer is at the bank, providing the back-up is stronger, more committed; although, I do generally ask the first buyer to cancel the contract.
B -
This is a welcome post. I am writing an offer on a short sale even as we speak and this will be useful reading for my buyers.
MB
My people parish because of a lack of knowledge. Knowledge is KING!
Great post. All of of people get frustrated with this process, because they don't understand it.
I remember in the early times of short sales correcting an agent on this. . she made her client accept 4 offers and they were all sent to the lender!
I can certainly understand the buyer's frustration with the short sale process. Part of this can be resolved with education; a good buyer's agent will be sure that their clients clearly understand the process and have realistic expectations.
All our short sale buyers sign a contract and make a good faith deposit. Most banks require it.
I like John Novaks comment, as well as this post BB! Many buyers, especially those with a lot of cash in hand, have a hard time understanding why their really great offer cannot be submitted to the lender ever if a "signed offer" has been submitted. Banks really are not sitting around waiting for better offers to come along, they are working through all the other files on their desk. A good buyers agent will help their buyers better understand the entire short sale process.
In Nevada, sending a second contract (or offer :) to the bank when the first contract is still valid can get you in big trouble - you would be interfering with the first buyer's contract, and violating his rights. The seller, seller's agent and 2nd buyer's agent can be sued by the first buyer for interference of contract.
I'm amused that the distinction between "offer" and "contract" must be made clear, but when we still have real estate agents confusing "buyer" and "seller" - is it any wonder????
Creates confusion? You mean creates more confusion. Most of the personnel you deal with usually lose or ask for the same paperwork on and on. We even had a case where we submitted everything through Equator. they still claimed they needed the same documents which I thought was odd since Equator is supposed to be this flawless software that doesnt make mistakes and also they claimed to have contacted us about something but it was not documented in the notes. I agree..only as a back up if you've submitted a fully executed contract...seller and buyer already have agreed...lender just haven't gotten to it yet.
Great blog. I get calls from agents/brokers with similar questions.
I'm in total agreement with you! We are STILL having to educate agents here in our area. However, I recently received approval documents from a lender that requires the agent and the seller to confirm that ALL offers have been submitted to the bank. Ugh! At that point, I submitted a backup offer we had received, and the bank stated they would accept the second offer instead of the first. I explained that contractually, the first buyer had the contract. I went back to the first buyer, and they agreed to match the offer.
How would you have handled that situation?
WOW!! I would NOT have submited any other offers to the lender no matter what they asked for. Now your seller certainly has an issue. Who was the lender?
There was a first and second with Fifth Third. Both approval documents had that verbage in it. They claim that it is a requirement of Freddie Mac now. Me, my client and my broker went and met with an attorney, who claims that the first wasn't technically under contract without the bank's approval, and that the bank has the right to see all offers, so we complied. Could make future deals really, really sticky if this is true across the board.