Home Buying in West Lawn>Question Details

Vic, Home Buyer in Wheaton, IL

As a short sale buyer, what are the implications of no signed contract with the owner?

Asked by Vic, Wheaton, IL Thu Jun 4, 2009

We have made an offer on a short sale and the home owner has verbally approved it but does not want to sign a contract with us. We are uncomfortable with this because it seems like the could accept other offers while we are negotiating with the bank. What are the implications for the buyer if there is no signed contract with the home owner?

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Vic,

I agree with Geoff's answer below and want to elaborate somewhat on what I have seen as a Real Estate Attorney here in Illinois. There are some realtors who represent short sale listings who like to use what I call the "que" method. Now remember that everyone operates differently and so this is a rough idea of what I mean, but since there is no real standard out there for this, and no rules from the MLS (multiple listing service - where the realtors list properties for sell) or ethics rules preventing this right now, this is what is happening. I personally DO NOT represent short sale sellers that use this type of system.

The listing realtor will take your offer, not have the Seller sign it, but submit the offer to the bank. They will tell you that you are in first position. Now, as has been mentioned, some mortgage companies will not take an unsigned contract by the Seller to negotiate with. How are the realtors/attorneys representing the Seller getting around this to negotiate??? I am unsure. I do know this though, every mortgage company is different, some take unsigned contracts, some don't, some probably don't even notice.

As mentioned below this allows the realtor to keep the property as "Active" in the MLS instead of "Contingent". A property marked "Contingent" can still have offers placed on it (backup offers), but most realtors will tell you that a contingent property will have far less showings than a property marked active. So what happens next is the agent takes other offers and puts the next offer in second position, and the next in third, etc, etc.

In theory what is suppose to happen is that if the bank accepts the first offer... great!! If they come back saying they need $20,000 more or whatever the amount is, then the seller goes to the first position and asks if they want to go up to that amount, if not they go to the second and ask, if not the third and so on.

Now not every listing works this way, in your question above you are right they could accept another contract and just offer that up to the bank at a higher price. In this area of Illinois though, even if there is an accepted contract, it is usually with a "Shortsale Rider". That rider says that the Seller can continue to offer the property for sale (although marked Contingent in the MLS), but if an offer comes in "more favorable" to the Seller, then they can ask you to match the terms of that offer and if you decline they can "kick out" or terminate the contract with you and return your earnest money.

Legally if they have not signed your contract, remember at that point it is just an offer. So the Seller can reject that offer with no consequence and you can rescind your offer and not be committed to purchase the property.

It is a complicated matter, remember the Seller can still be potentially 1099'ed for whatever forgiveness amount the bank forgives and may have to pay tax on that amount like income, so on one hand, trying to get the highest price for the Seller as their agent is an admirable thing. On the other hand, the Buyers are typically waiting 2 - 7 months to close on the property, and to get kicked out or out bid in month 6 isn't fair either.

Here in the Chicagoland area (of which Wheaton is a part for you readers other than Vic), attorneys are used in practically every residential real estate purchase. In my opinion, this is never as important as with a Short Sale, and it is important that you have an attorney that is well versed in the subject.

If I can be of any assistance, please feel free to contact me at 630-789-6833.

Sincerely,

Paul Garver
Web Reference: http://www.hg-legal.com
1 vote Thank Flag Link Thu Jun 4, 2009
Are you represented by a Realtor? If so , what did they say?
Is the owner represented by a Realtor?

In business there is no contract unless it is in writing. If this is your first question, then I would be on the lookout for more problems. Particularly if Trulia is your only source of information...meaning that neither party has professional representation.
1 vote Thank Flag Link Thu Jun 4, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
All good answers! In my experience short sales are getting increasingly tough to get approved since the market has started to recover. If I were your agent, I would suggest moving on to a serious seller that will commit to you and work your deal hard. If they want you to commit to them, they should see the value in committing back to you so you (and the other line of buyers behind you) don't all feel uncomfortable and walk.
0 votes Thank Flag Link Tue Oct 29, 2013
a short sale is a long shot from start to finish.. probably will take you 9 months to close if you close.do exactly what your agents says..
0 votes Thank Flag Link Mon Oct 28, 2013
If the seller won't sign, there is nothing to send to the bank for approval. Since bank approval may take a while, you need to get a contract to them quickly. If you really like the home, don't make threats just try to figure out what the seller's reservations are and address them. It may just be a simple miscommunication, after all they did verbally agree.

Good luck!
Web Reference: http://www.1sthomegroup.com
0 votes Thank Flag Link Thu Jun 4, 2009
Either the seller signs or you walk away.....To many properites for sale to be playing around with an emotional seller.
0 votes Thank Flag Link Thu Jun 4, 2009
Hi Vic,

I totally agree with Geoff he is absolutely correct. You can give the seller a date in which to sign or you will pull your offer. Good luck!
0 votes Thank Flag Link Thu Jun 4, 2009
When an owner signs the contract, the listing has to be posted as pending on the MLS. (in our system in FL)So by not signing, the listing stays active and other offers may be taken. Most banks are requiring the owner sign the contract before they will start negotiations.

It's just a game. Short sales are becoming more difficult with outcomes usually resulting in foreclosure and then being relisted as a bank owned. There are better deals out there then short sales with less headache.

Geoff Rossman
RE/MAX Tropical Sands
(941) 544-3232
http://www.SiestaKeyTropicalCondos.com
0 votes Thank Flag Link Thu Jun 4, 2009
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