Thats a very bad sign. If you are dealing with a sellers agent who suggests a seller submit multiple offers to the lender, RUN! The fact that she is not going to process one offer at a time says she doesn't know much about the short sale process.

Wow, wow, wow...I'm blow away by this thread. This is outrageous! Okay, I'm about to drop some short sale knowledge. First, I must concur that there have been several 'bang-on' answers to the question at hand and some rock-solid advice from agents and other buyers. Kudos to all of you who have the courage to enter the short-sale front line. Anyway, what I want to add, is, in the most rudamentary sense of real estate conveyances, a short-sale purchase between a buyer an seller is essentially, quintessentially that. A buyer, represented by the selling agent who present an offer to a seller's listing agent, and that listing agent has a fiduciary duty to the homeowner-seller to present all offers and provide the utmost care, just like any other sale. An offer is selected and for all intensive purposes, once accepted and/or countered then accepted by the seller, those parties are in contract. Now, lets talk about "notice". When you are in contract is when, you as the buyer, receive constructive notice, in writing. Your question encourages me to believe that you or your agent have not receive that notice, and therefore, your offer has NOT been accepted. And, likewise, the listing is NOT pending. If you do receive that notice, after the expiration of the offer, you MAY opt to go forward with an addendum to state your intended agreement should you choose to do so, at which time, it should be put into one of the forms of the pending statuson the MLS that we have available as agents.

Now, what happens when the bank becomes part of the picture. In the Short Sale Addendum, the document that creates an additional contingency, the bank must issue a written agreement within the timefram specified to reduce balances on existing loans so as to make possible a consummation of the sale. The seller must prove to their lender that they cannot afford to pay the loan given the existing terms and they must sell. The submission of this information is "formatted" according to how the LENDER wants it. If part of the instructions on getting that hardship documentation submitted states that (A) the property must be listed with an agent for a period of no less than 30 days, and (B) the listing agent must submit all offers to the lender for the lender to decide, then, yes, those are lender mandates. The key is that the Listing Agent needs to ethically market the property, both on the MLS and verbally to agents; that is part of their fiduciary duty to the seller to ensure that the hardship isn't flat-out disapproved from 'jump' at the fault of the listing agent for not following directions.

Regarding "Approved Short Sale". We all can speculate for days on end what the listing agent meant by that. That could have meant they had submitted a short sale packet (hardship documentation) to the lender or that could have meant that their seller received a letter from the bank suggesting a short sale because the borrower was so far in default. Now, it really is a mute point.

Finally, I want to address what hasn't been mentioned yet. That is the role of the buyer's agent. Going back to my first paragraph, a ratified real estate purchase contract is an agreement. If you write on a short sale and sign a Short Sale Addendum (all buyers in California do this), then your agent should investigate and get to know up front whether there is any inkling that the seller is going to try to go with another offer, then part of your offer needs to include your terms that the seller will not actively market the property. If this contradicts the lender short sale instruction mandates, then the seller needs to counter your terms, then put the property in Pending Show for Back Up status and make any other offerors that come in after you, include a Purchase Agreement Addendum to state that they are in back up position because 'you' wrote an offer first and submit all offers at one time after giving you a chance to up your ante to retain that spotlight in the lenders review.

In summary, you are lacking (A) notice, and (B) agreement. Aside from the fact that there is a communication breakdown at hand, technically, you are most likely free to find a better property as was mentioned in on of the earlier threads.

Maxim: Key ingredients to a successfull short sale are willing buyers and sellers, paired with experienced agents.

Cheers.

Arturo Shivers
Keller Williams Realty
760 Camino Ramon, Suite 200
Danville, CA 94526
Email: arturo.shivers@kw.com
Office: (925) 855-8333 Ext. 272

Short Sale Buyer

1. Unless the seller accepts your offer, you have no leg to stand on
2. If the seller did accept your offer, it will still need to be accepted and approved by the lender.
3. And if/when the seller accepts your offer, that's the time to change the MLS status to "pending subject to lender approval"


Unfortunately, most short sale lenders will only start looking at the file when there is an offer (accepted by the seller). In this case, by the seller not accepting or even counteroffering your offer, the short sale package is incomplete, and the short sale lender may not process the application for short sale approval. The seller (and his agent) should at least reject or counter your offer if they don't think your offer is good enough.

Depending on who the short sale lender is, it could take 4 months or longer to get the short sale lender to grant approval and for the escrow to be processed. Bank of America/Countrywide, for example, is notorious for taking so long and for being so difficult to deal with. I just had my short sale listing accepted/approved FOUR months after we turned in the offer (accepted by the seller).

Therefore, if your deadline is to close by December 1, you may want to move on and find something else that isn't a short sale. It is highly unlikely that even if you get an acceptance today, that you can close escrow by that date.

I am wondering if the listing agent is even experienced in handling short sales. What does your realtor say about that agent?

And...it is not unusual to find a short sale opt for a bankruptcy, unbeknownst to even their own listing agent. It's happening everywhere. So that's another thing to check out, to see if there is a bankruptcy filed by the property owner.

Is the seller serious about selling, or is he "gaming the system". RED FLAGS to look for:
http://www.trulia.com/blog/pacita_dimacali/2009/10/red_flags…


Good luck!

Wow! You need to have a signed contract from the seller number 1. Secondly, in my MLS the rule states that when the seller has accepted the offer it must go to pending in the MLS. Pending continue to show. Check your MLS rules. Bottom line the selling agent needs to give you a signed contract from the seller. Best of luck...
Lori Jakubowski
Carmel, Ca

Shortsalebuy,
I hate this, the agent is doing a disservice to his client. It's a short sale, the client isn't making no money off of this. And, the agent is going to squeeze an additional 200 bucks or more by accepting another offer. Stupidity. The listing agent did a comp, priced the house, the owner agrees, lists the property and the agent comes up with this bull. Come on!

Once the owner accepts your offer, the listing agent is suppose to change the status to Backup or Pending depending on the owners decision.

I wouldn't deal with this agent, have your agent report him to the Realtors® Board, I have reported listing agents. Why. because I'm also tired of these little games. They know me by my first name at my local board and I also pick up my personal mail there too. Just kidding, LOL.

My 2 cents,

Jes Sierra, B.Sc.
Realtor®
Chino Hills, Ca

Hello Sdbuyer. Thank you so much for your post. What you describe is fortunately not the norm, but if it happens to you, it's a 100%. Your experience exemplies how difficult real estate has become. There are so many things that can go wrong and it's either impossible or not practical to include contract terms that will protect the buyer from everything that could happen. Even if you have a contract that has the right verbiage, enforcing such rights is a whole different story. While I have encountered a seller who accepted my buyer's short sale offer and then decided to pursue a loan modification instead which essentially stopped the short sale and was not in the spirit of the contract, I have never encountered a seller who filed a bankruptcy at the last minute. It's not common to include express terms in the contract about the seller returning all escrow papers to the escrow company as that would normally be considered redundant since there is an implied covenant of good faith and fair dealing that requires the seller to do what is necessary to close escrow. With short sales you have usually only 30 days to close and there is not a whole lot of time to wait for the seller to do what needs to be done to close escrow. It's not unusual for the seller to return escrow papers after the buyer has already done inspections and obtained an appraisal. We don't even know when the seller received the documents from the escrow company. It is also possible that the seller finally went to see an attorney to ask about the short sale consequences and was advised to file for bankruptcy instead. Ideally, sellers seek the advice of an attorney and tax professional before they list their property or accept an offer, but the reality is that most sellers do not seek such advice in a timely fashion. Many, never seek the recommended advice and the buyer's agent does not know what the seller has done or not done. I am not trying to make excuses for this seller. Just trying to come up with reasons why the seller may not have filed for a BK sooner. For you, it does not make a difference financially because you lost $1,000.

Again, thank you so much for sharing your experience here as I think buyers should understand what can happen. Given the current real estate market, it's difficult to avoid short sales and luckily your experience is not what commonly happens, but it can happen. Even buying a bank owned property carries the risk that the bank cancels the contract at the last minute (many bank addenda give the banks such a cancellation right). Life is full of risks, some are known and others are less predictable. The good news is that this will most likely not happen to you again. I hope you will find a new home that is at least equally if not better suited for your needs and that you'll be able to get it for a lower price and make up the loss that way.

Best regards,
Ute Ferdig
Broker-Attorney
DRE # 1326917
Ferdig Real Estate Solutions

Just a word of caution. Late summer of 2009 we put in an offer in on a short sale (San Diego, CA). Within 45 days we had lender approval. We then went into escrow. A closing date was set for 30 days. We paid for one inspection and one appraisal (approx $1000.00). A few days before we were set to close escrow and get the keys, we began to purchase small things to repair the home, ie: toilets, faucets, etc. We were not investors and were going to be living in this house. We also had our downpayment in escrow.

Day of closing. We are sitting in the escrow officers office ready to sign all final documents. We were there with our agent. The escrow officer announced that there was a problem with the sellers. They had not returned any of the required documents or the Deed of Trust. I did not know exactly what that meant, I only saw the reaction on our agents face. It went stark white.

Our agent finally got a hold of the sellers agent and she was just as shocked as we were. She was told by the sellers to never contact them again and was then given the name of their new bankruptcy attorney.

WOW. devestating does not begin to describe the emotions. Since short sales are becoming more commonplace, we are realizing that a lot of agents do not know how the process works. The most important thing that we and our agent learned is that as soon as escrow is opened, make certain that the sellers submitt and sign all necessary documents and most importantly hand over the deed of trust. Hound the sellers agent every day if necessary in order to avoid such a catastrophe.

As a result the seller claimed bankruptcy at the 11th hour. We all believe this was planned from the very beginning. They now get to live in this house for an undetermined amount of time.....for free. I might also note that they had already been in default for 18 months.

We would never recoup nearly One Thousand Dollars for the inpection or the appraisal and it was several agonizing days before we would get our downpayment back because legally the escrow company's hands were tied. They needed to get the sellers to sign a Cancellation of Escrow before they could release the funds back to us. That took several tense days.

To this day I am not certain why the escrow officer never contacted our agent of this looming problem. The only thing I can think of is that they are overwhelmed with foreclosures and short sales and it was simply an oversight. Our agent and the escrow officer who had both been in their fields a number of years, had never encountered such a situation.

Short sales are a slippery slope. It is best to consult with an expert on short sales.

I have to correct what was just said. I NEVER said the bank is the agent's client. THE client of the agent is the SELLER of a short sale (the homeowner) NOT the bank.

I hope this buyer was able to resolve this as this question goes back to October, but each board has rules, and even though we can continue to take a back up offer, our board rules say we MUST mark pending subject to lender approval. THe seller must ratify a contract before sending to bank. If they don't understand that, they should not be doing short sales.

Barb said: "If you signed a "Short Sale Addendum" you will notice that the listing agent has the obligation to keep marketing the property and to present any offers that come in to the bank. It is the agent's fiduciary duty to get the highest possible price for the bank ..."

Barb, if you read Short SaleAddendum, there is absolutely no mention of any agent "obligation" to keep marketing the property and to present any offers that come in to the bank. What it says in paragraph E of the Short Sale Addendum is:

"Unless otherwise agreed to in writing, Seller may continue to market the property despite acceptance of Buyer's offer, and to present to Short Sale Lender(s) any additional offers received on the property."

Notice that it says both "UNLESS otherwise agreed to in writing" and "MAY continue to market ... and to present ..." That hardly connotes an obligation to do anything in particular, much less a fiduciary duty to the bank. As Catherine aptly points out, the only fidcuiary duty of the agent is to the agent's client (seller), and the bank is the agent's client. In fact, case law has held creditors to be adversaries to debtors. In other words, the Short Sale Lender(s) is/are adversaries to your client, and it is impossible to have a fiduciary duty to two parties that are adversaries of one another.

The "unless otherwise agreed to in writing" means that a seller could agree with a particular buyer to not market the property any further after accepting the buyer's offer or to not submit any other offers to the bank.

I have no idea. Maybe the listing agent isn't sure of what she is doing. I could see her/them accepting it, then submitting it with the documentation needed to get a new approval at a new price, but it doesn't sound like they've even submitted it (could be wrong though). Just a lot of questions I can't answer without being in the transaction . But like I said, something doesn't seem right and I'm glad your agent is taking it up with the listing agent's broker. Maybe they just need some training.

Catherine, if that's the case, why would an agent and the sellers accept the offer? And why would the agent then be advertising the property at a lower price than the MLS on their website and our neighborhood?

Thanks!

The problem is that you said it was an "approved" short sale. That probably means it was approved at the price they're listed at. You said you came in 6% under that. That means it would have to go thru the approval process again. It takes a VERY strong listing agent to go against what the bank has approved. It takes comps to support the new price, it takes much persistence and an expertise of the process and market. Its easy for the bank to close the file. Its harder for the listing agent to convince them that this is a deal they simply can't turn down.

I think they are in a subtle way.

The house looks pretty clean, we're not asking for anything and we can close within a couple of weeks and if need be, our lender can close within a week if we ask as long as we have an appraisal and inspections done.

Both the list price and our offer are on the lower end of the comps in the area. Again, if our offer is too low, tell us. Don't waste anyone's time.

Thanks!

Scott there is no such mandate in California. Maybe the way the addendums are written in New Hampshire "mandate" that you continue to look for more offers, even in New Hampshire, I'm sure the lender is NOT your client.

The lender mandates that the broker market the property and submit all offeres until the time the lender signs one of them accepting it. a short sale can take 3 to 6 months and teh lenders goal is to get the highest price possible. the only way to help your cause is to submit the highest and best offer with the best terms, dont ask them to fix anything, make sure you can close in 30 days from acceptance and include a pre approval letter with your offer. good luck

Well, in real estate, verbal is worth the paper its written on. How does your offer stack up to market value and where other comps are closing. December 1st is cutting it awfully close unless it is approved by the bank like this week. Many banks take a couple days to a week to issue the "letter" after an approval , and most buyers don't want to start inspections or pay for appraisals until that approval is in hand. (I wouldn't) I'm glad your agent is talking to the broker. Something is not right here and your agent needs to aggressively pursue this.

Bernard, I don't have a copy of the contract signed by the sellers and my agent has asked from day one to get a copy. We've just been given a verbal by the listing agent. The listing agent refuses to give us a copy. Again, a concern of mine. My agent is now taking it up with her broker to see what we can do.

Another concern, my lender just called me this morning saying that the new loan limits that are in place until the end of the year, the loans have to close by December 1st. Plenty of time if we hear back in the next week or so but if not, then we either need to find another place or put another $100k down. With where the stock market is, another $100k is not an option.

Thanks!

I think your biggest problem is that you don't have a contract. Sure, the listing agent says the sellers have signed off but how do you know that? Where is your copy? Without a signed copy, you have no contract. Something smells fishy here.

What does your agent say?

Bernard Gibbons

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Bernard Gibbons, Realtor, e-PRO Certified Internet Specialist
J. Rockcliff Realtors, 15 Railroad Avenue, Danville, CA 94526
Phone (925) 997-1585
bernard@bernardgibbons.com

Well until the Bank approves the offer, the agent is protecting the seller, and acting in the sellers best interest to keep it out there and available, many of these deals don't fly, I for one have had a home on the market for 2.5 years now, and 8 deals fall out do to contingencies, so I would not want it off the market until I knew it was going to go for sure, it's a tough situation I know, and I am a Licensed Realtor in Idaho & Washington. Hang in there, it's a long wait on these things, and it's not fun for any of us really. Theresa

Barb, there are no blanket guidelines between banks. That is true. But that should not effect how we do business. I've done dozens of short sale deals and have 2 dozen in process now, I fully understand each is different. It does not change how I handle the offers and how I handle marking the property PSLA. We have to take the high road and do the right thing always. Our fiduciary is to our seller only, not the bank.

First off, thank you all for your responses. It has helped quite a bit. I do have some follow up questions and wanted to answer some of the questions raised by you and also give you some more information.

Lowball offer: Our offer was 6% below the MLS aksing price. The property has been on the market for a year and I would think that 6% would not really be a low ball offer. I've seen agents and their sellers drop more than that after just a month on the market. The agent has said that this is an approved short sale, making me think that the lender has given them a number they would accept. If our offer is low, and they feel that the lender is not going to counter or accept, then why waste my time, their time and the sellers time? Have the sellers counter me or tell me to come in with a better offer. This is one thing that frustrates me. The listing agent is not a newbie either, has been in the biz for over 15 years. (side note: we're not first time buyers. We have over 740 FICOs, we're putting money down and have underwriting approval from a reputable local lender. We're solid buyers and would be able to close within a couple of weeks of their acceptance if need be. We just need to do an appraisal and inspection and that is it. I'm not going to do that until we have the lender sign off)
Bernard, the listing agent has informed us that the sellers have signed off on our offer so why would I not receive a copy of the contract? Secondly, because the sellers have signed off, I would expect that the status to be changed. Would you not change the status on one of your listings if your sellers signed off on a purchase contract? Again, i don't have an issue with them marketing the property for back up offers, I just feel that if they have accepted my good faith offer, they should show good faith on their end.
Barb, I couldn't disagree with you more regarding the contract and this being the wild west. It's the wild west because some agents want to make it that way. I've heard agents say we are going to list this property for two weeks and submit all offers at once. I disagree with this tactic because it forces the lenders to look at multiple offers and when that happens, we have long delays in hearing back from them. I've heard agents say we are only going to submit the best offer and all other offers will be held for back up because they believe that the bank will approve it. Again, they don't want to overwhelm the banks. That's one main issue with short sales right now, the banks are receiving offers at all times and they have to go back to step one and start offer, hence a 2 to 8 week wait time (if you're lucky). I do agree with you that if they are going to market the property for a higher price, that I should have the first right of refusal, but why drop the price on your website and local neighborhood marketing?!?!?
Catherine, the reason for my post was because I was thinking the same thing you have said but have been getting the run around. A contract is a contract. if the seller or listing agent does not agree with it, don't accept it!!!
Can I have my agent send them an addendum saying that we are asking them to change the status? i would be willing to increase my earnest money to do so. Also, we're up against the gun in that the new loan limits expire at the end of the year. We're actively looking at other properties but this would be our #1 and would like to stick with it.

Thanks again for all your helpful insights!!

Well, in the short sale addendum, it very clearly states that the property may continue to be marketed and offers continue to be presented to the bank. According to the board, the property is supposed to be marked pending lender approval, but the selling agent must take the complaint to the listing agent, or, if no help is given, to the broker or to the board.

But you still have the issue of other agents writing offers on the property. In my experience, offers continue to come in until the day I get an answer from the bank. By then, 15 other offers have fallen by the wayside, due to the length of time it generally takes to get responses.

And it is the wild west in my experience with short sales - every bank is different, every transaction is different, each lender has different ways of processing the firsts and seconds, some are using collection agencies, some have the same negotiator for both the first and second - there are few "rules" that are being followed. Some banks will only take the highest and best, some negotiators want all offers. Maybe you haven't worked on as many as I have, but as I said, each one has been different from the one before, and my term "the wild west" is just ot refer to the no rules, guidelines, or common practices among the banks and how they are managing the short sale process.

Barb, it is not the wild west. You have no fiduciary duty to the bank. A signed contract is not meaningless... as I said in my other email the property is SOLD to that buyer subject to lender approval. Just as good a any other contingency or subject to. You do not have an obligation to continue to market. You "may" continue to market but our MLS rules clearly state you have to market the status "pending subject to lender approval." You may submit higher offers, but what is fair? Fair would be to go back to that first buyer and see if they can do that first and give them a first shot before submitting it. People don't like writing offers on short sales because agents are submitting multiple offers instead of one good , highest and best offer. If another better comes in, then the right thing is to inform buyer 1 so they have a chance. You don't just keep submitting more offers to the bank - no bank wants to wade thru the offers. That is our job.

It is sort of the "wild west" out there right now. If you signed a "Short Sale Addendum" you will notice that the listing agent has the obligation to keep marketing the property and to present any offers that come in to the bank. It is the agent's fiduciary duty to get the highest possible price for the bank, and that means that yes, someone can come in with a higher offer than yours and potentially get the house. I always ask the listing agent to give me, the buyer's agent, a call when that happens to see if my buyer just wants to hang out, or to raise their offer to match. Remember, lots of offers get written on short sales, and about 3/4 or more of them withdraw their offers before we even hear from the bank. So even if your offer isn't the highest, the higher offers may drop off.

Regarding not getting a signed copy of the contract from the sellers, it really is meaningless, because the seller doesn't really have the right to sell the property without the approval of the bank, (explained in the short sale addendum). The short sale addendum explains all this, your rights and risks. YOur agent should have explained all this to you, the pros and cons of short sales (as you are finding out) and made sure you utilized the short sale addendum.

It doesn't really seem ethical to market the property at a lower price than it is is listed for, but I don't think there are any laws against it. You would think that the seller would have an issue though - they are the ones who approve or refuse a price change.

Good luck. Barb Wilson

You say that you have an Offer, not an accepted offer. Why would you expect the agent to change the status unless the seller accepted your offer?

Bernard Gibbons

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Bernard Gibbons, Realtor, e-PRO Certified Internet Specialist
J. Rockcliff Realtors, 15 Railroad Avenue, Danville, CA 94526
Phone (925) 997-1585
bernard@bernardgibbons.com

I would call the local MLS and see what their policy is. They may be able to make the change themselves with adequate proof.

Shortsalebuyer
There are a couple of things you can do:
Banks in the US have been trying for years to elbow their way into the residential real estate market, and have lobbysts in Washington trying to get Congress to pass legislation to let them do just that.

The fact is that in short sales some lenders think they are above state and federal law and do some pretty strange things, like insisting that the listing agent continue to market the home even though they have an accepted offer and the buyer has removed all contingencies. They want to be able to accept a higher offer up to the close of escrow.

I find this to be absolutely unbelievable, however there does not appear to be a lot we can do about it, as Realtors, right now.

But you can do something about it. You can complain to your member of congress that what they are doing is not fair. Once you have an accepted offer with contingencies removed, it should be PENDING status, no more new offers.

Also, if the listing agent is marketing the home at a lower price than your offer, you should know that just because you offer is accepted your loan still needs to be approved by your lender, and the appraised value of the home needs to come in at the purchase price. It is not uncommon for homes to lose value during the short sale process because it takes so long, and sometimes the lender does not agree to reduce the price, then you are stuck with having to come up with cash to make up the difference, or just walk away.

You might also complain to your local association of Realtors if you think the listing agent is violating the Realtor code of ethics. MArketing a property at less than the listed price might fall into that category.

Of course, if they reduced the price after they accepted your offer, then you have another issue.

Good luck!

Actually you don't wait on the bank to have a ratified offer. The listing agent doesn't appear to know what they are doing, clear and simple. The seller CAN ACCEPT an offer. You have a ratified contract at that time "subject to" approval of the sellers lender. ITS still a contract , a ratified contract. Its no different than if you were buying a home and got into a contract "subject to" or "contingent upon" you selling a house . Your agent should counsel this agent, and / go to their broker, or report them to our MLS.

The thoroughly answer your question though requires even more explanation. Please read your short sale addendum and you'll see that though you have a ratified contract and an accepted offer when the seller signs, they can still market and submit other offers to the lender. Ultimately it will be up to the lender. But the success of a short sale has MUCH to do with the listing agent and how they handle it, how they handle multiple offers, and how they handle submissions of those to the bank.

Since I'm not your agent and this requires so much more explanation, I guess I'll end here and hope I gave you some food for thought and discussion with your agent.

Yes, they can do that. In fact, they can tell any prospective buyer or agent what your offer is. Submitting an offer does not mean you have a deal. You will have to wait on the bank and if its a nice place and priced right, you can count on multiple offers to compete. I dont want to cast a bad light, but it should cast light on your options to look at other inventory while you wait.

More inventory is coming....So if you miss out, one is surely right around the corner. Who knows.. if your agents knocks on a neighbors door or two he could dig up a better buy for you...