Home Buying in 33913>Question Details

Karen, Other/Just Looking in 33913

Does a realtor have a legal obligation to submit a second offer on a short sale?

Asked by Karen, 33913 Tue Mar 30, 2010

A condo in Florida we are interested in purchasing has been in a short sale for 7 months. We just recently put in a cash offer, higher than the first offer. The seller agreed to our offer, however, the listing agent will not submit the cash offer unless the first offer does not go through. If the seller signed the cash offer contract, doesn't that indicate he wants to have the bank consider this second offer? Does the listing agent have to submit our offer?

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No, once a Seller has entered into a contract they cannot sign a second contract to sell the same place to another buyer.

Your Realtor can submit a "backup" offer to the Seller . Then if the original buyer backs out (or once the lender comes back with the higher "approved" price) then you may get a chance to buy the condo. The "list" price may not be in the realm of possibility of getting approved so don't assume you can actually buy a short sale at the listing price. The lenders will do an appraisal to determine value so they will not let a property sell for half price, ever...

Keep looking...

Alma
3 votes Thank Flag Link Tue Mar 30, 2010
Kathy......in the Short Sale addendum there is a clause for multiple offers. It states that a seller is allowed to accept multiple offers on their sale. the original offerer may have crossed the clause out therefore allowing only one. Also.....when you are dealing with some of these banks they do not want more than one offer. they want a clean and well put together package. submitting multiple offers can muddle up the process. Bottom line.......if you want no headache or frustration then DO NOT pursue a short sale. There are still 100 different ways it can blow up even after acceptance by bank let alone the seller. I run into the problem of explaining this until I am blue in the face to some buyers whom instead of believing me would rather assume I have a hidden agenda and am lying to them. Do your dilligence when selecting your Realtor. Other than that......Be as patient as possible.
2 votes Thank Flag Link Tue Mar 30, 2010
Kathy,

If the first party has a written signed offer, then that party in essence has the property locked up until the sale is complete or until the terms of the contract are broken for example, the buyer can't get financing by the agreed date, etc. However, the Realtor listing the property does have an obligation to present all offers to the seller.
2 votes Thank Flag Link Tue Mar 30, 2010
Hi Kathy,
Just a little more info...No, on a short sale property, it is still owned by the 'seller'. The listing agent may present multiple offers to the seller (if multiples have occured at the time of presentation), but the obligation lies with the best contract that is signed by the seller which can be rejected, countered or accepted. All others are considered backups should the initial contract fall through.

The problem is the short sale addendum (paragraph 5) states "Unless otherwise agreed by buyer and seller, seller may continue to market the property for sale and accept other offers and submit those accepted offers to the Lender". The addendum also states that the Lender is NOT A PARTY to the contract. The short sale addendum is contingent upon the lender approving a price that they will accept for the short sale which is a contingency ONLY.

Many lenders tell agents to send all offers they receive, this adds much confusion to the lender and creates additional time delays. It is not really the lenders position to say this, once again it is only a contingency and they are not a party. I honestly believe the short sale addendum should be changed to take away the confusion it has created. This addendum is also contradictive to the Code of Ethics.

Yes, agents have a fudciary duty to obtain the highest and best price for their seller, but only to the point a contract is signed. If that contract falls through, then the process starts over. We have no way of minimizing defiency debt for a seller other than to present the highest & best contract at that time. There may be underlying debt that could be added (ie.credit cards, liens etc). The lender will state what their needs are. Even is the initial offer is lower then any of the backups, it still may be sufficeint for the lender to close. We have no way of knowing, unless the lender discloses ahead of time.

Please see 2009 Code of Ethics below:

Standard of Practice 1-8

REALTORS® , acting as agents or brokers of buyers/tenants, shall submit to buyers/tenants all offers and counter-offers until acceptance but have no obligation to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing. REALTORS®, acting as agents or brokers of buyers/tenants, shall recommend that buyers/tenants obtain the advice of legal counsel if there is a question as to whether a pre-existing contract has been terminated. (Adopted 1/93, Amended 1/99)

When I submit an offer on a short sale, I delete paragraph 5 to lock in the buyer and eliminate confusin. Good Luck to you.
1 vote Thank Flag Link Thu May 13, 2010
Hi Karen,

The answer is...it all depends.

It depends on how the listing agreement short sale addendum is written. It is possible that it is written so that multiple offers are excepted. It is possible that it is written to only take a back up contract. If you are taking a back-up contract, the bank will not see it unless the first contract falls.

So, depending on how the short sale addendum is written is what the agent will do with it. They should let you know what they are doing with it. In our area of Florida, it is in the MLS. Our MLS on the house shows if the hardship package is complete to the lender, as well as if multiple offers are being excepted.

Debbie Albert, PA
Keller Williams of the Treasure Coast
Web Reference: http://www.ronanddebbie.net
0 votes Thank Flag Link Sat Jan 1, 2011
Best advice is to contact an attorney or, go on to the next property
0 votes Thank Flag Link Fri Dec 31, 2010
Foreclosure auctions in Lee County are online and you must register an account and fund it with a minumum of 5% of your highest bid by 4:00 PM the day prior to the auction. Bidding is live and in real time online. Auctions are often delayed or cancelled for a myriad of reasons so check the online calendar. Make sure you have a real estate attorney or a title company check for all liens and encumberances prior to bidding. Decide your highest offer, place that proxy bid and good luck.

Marc St Martin, Realtor®
Century 21 Sunbelt Realty
888-447-0102
0 votes Thank Flag Link Wed Aug 4, 2010
Hi Karen,

It's possible the foreclosure auction will get delayed to a later date if there is a viable offer (as based on the appraisal/BPO done by the lender) on the table. Also if there is a 2nd mortgage or PMI it may not even be possible to get everyone's approval and/or it may have to foreclose. Get ready to bid at the courthouse since you mentioned you have all cash. You will buy it without an inspection and also with any liens (including IRS liens if any) attached so you do not want to overpay. IRS liens will expire after several months if the IRS doesn't take ownership within that time frame. Back taxes and Condo Association assessments can be substantial so you need to do a lot of homework to prepare.

Keep looking, though...a better investment opportunity may become available while you're waiting.

Also if the listing agent says there is a "counteroffer" at a higher price than you offered, ask your agent to ask them for a copy of the email that shows the counteroffer. Otherwise it may be a way for a middleman investor to attempt to get more money from you on their flip. Hopefully there isn't a middleman investor.

Good luck and it's not too late until the foreclosure auction and the foreclosing entity takes ownership.

Alma
0 votes Thank Flag Link Mon Aug 2, 2010
"It's possible the current contract holder is an 'insider' who will flip it to you on the same day. These fraudulent flippers (FBI calls them floppers) looks for ALL CASH buyers because there is less scrutiny by the buyer's lender."

Although these kinds of games do exist, please don't mistake a LEGAL assignment of contract transaction, that has been properly disclosed and approved by all parties (which IS the key issue determining whether a particular transaction is a valid flip or a flop). If you have any questions or doubts, then it's best to have a real-estate attorney to review the transaction to bless/reject it.
0 votes Thank Flag Link Fri Jul 30, 2010
It does have an auction date set for late August. That is all we know for now.
0 votes Thank Flag Link Fri Jul 30, 2010
hi Kathy,

What do you mean "in foreclosure"? Has a court auction date been set or did the lender already do the auction at the courthouse and now own it? The lender's attorney can halt the sale. Or is the Condo Association foreclosing? Hopefully your condo attorneys are not so foolish to foreclose on a negative equity condo but I've seen it happen on more than one occasion by opportunistic HOA and Condo Assn attorneys.

It's possible the current contract holder is an "insider" who will flip it to you on the same day. These fraudulent flippers (FBI calls them floppers) looks for ALL CASH buyers because there is less scrutiny by the buyer's lender.

Make sure you have an attorney review your Title Commitment and all of your closing paperwork since you will not have a lender's underwriter at your side.

Hope this helps.

Alma
0 votes Thank Flag Link Fri Jul 30, 2010
Use EXTREME caution when bidding on a foreclosure at auction. If you do not understand the entire process what seems like a good deal can turn into a major financial mistake as you may be liable for any existing liens on the property. Feel free to contact me if you would like more information on how the auctions work.

Terry McCarley, CDPE
Re/Max Realty Team
email: leecountyrealtor@earthlink.net
cell: 239-707-4575
0 votes Thank Flag Link Fri Jul 30, 2010
Well, here it is July 30th and the condo is now in "foreclosure" and we don't know what happened.
So we will be bidding on the auction soon.
Next, we just have to read up on the on-line process for bidding on foreclosures.

Wish us luck, we might get this condo after all.
0 votes Thank Flag Link Fri Jul 30, 2010
The listing agreement SSA (short sale addendum) spells out how offers are handled. In our short sale listings, we have the SSA state that the property will NOT continue to be marketed. We will take a back up offer. The back up offer is not presented to the bank unless the first one falls thru. Not all short sale addenda are written this way BUT it is the document that spells out how offers will be handled.

Debbie Albert, PA
Coldwell Banker Residential
Web Reference: http://www.ronanddebbie.net
0 votes Thank Flag Link Sun Jun 20, 2010
I handle a large number of short sales and have only had one that took 7 months to get approved. The lender was Bank of America and they are known to operate extremely slow when it comes to processing short sales. They have recently changed their system which is supposed to speed up the process but time will tell.

I have had bank approval from some lenders in as little as 3 weeks so how long the process takes has an enormous amount to do with who is the lender and it also has to do with the sellers cooperation in submitting the necessary paperwork.

You can get a really great buy on a short sale so I wouldn't give up - you just need to find a Realtor to work with that is very experienced in handling them.

Please feel free to contact me if I can be of assistance.

Terry McCarley, Realtor, CDPE, CPV
Remax Realty Team
email: leecountyrealtor@earthlink.net
cell: 239-707-4575
0 votes Thank Flag Link Sun Jun 20, 2010
Hi Kathy,
From my personal experience this is not to long for a short sale. I have seen them take a year. I have short sales pending from October that previously had bank approval. They are probably still showing it because you never know if the original buyer and back up will be there when and if they do get approval. I wish you the best and try to be patient, but they can take a long time.

Have a wonderful day,
Nancy

Nancy Doyle
239-209-2237
nancy.doyle1@comcast.net
http://www.nancyd.listingbook.com
0 votes Thank Flag Link Fri May 14, 2010
Well, we only know, as of today, the original buyer is still in and the banks are still in disagreement. This is what the realtor told us. The seller lives below us and this condo would be for us to rent out . The seller told us if he does not sell by April 30th he wants out. This short sale has been in the works since October.
Don't you all think that is way to long for a short sale. Our realtor thinks so and I agree there is something strange about this short sale. We have had a backup contract for three months now and the unit is still being shown.
0 votes Thank Flag Link Fri May 14, 2010
Kathy,
The answer to the question would be in the listing paperwork. When we list a short sale, we do not present multiple offers. Once the first offer goes in however, we can take a back up offer. The back up offer is presented to the lender if and when the first one falls for any reason. Often the first buyer finds another property and wants out. The back up goes in and closes. That is how the listing agreement is written in the short sale addendum to the listing contract. If this is the way the listing agreement of the property is written the agent can not present your offer. It is a back up. Now, this is important as well, your offer needs to have a back up addendum. Do you have one?

Debbie Albert, PA
Coldwell Banker Residential
Web Reference: http://www.ronanddebbie.net
0 votes Thank Flag Link Fri May 14, 2010
Hi Kathy,

The Seller should not have signed your offer unless they also signed the Short Sale Addendum that allows the Seller to continue to accept offers

You need to keep looking because another "better" offer may come after yours.

Also hopefully there is not a middleman investor who is attempting to defraud the lender as that could delay the process considerably.

Good luck!
Alma
0 votes Thank Flag Link Fri May 14, 2010
It appears that the agent has a back up offer clause in the short sale addendum and is following the contract. It all depends on how the addendum is written. The above description is how we work. The thought is, if you keep submitting offers to the bank, they won't make a decision. You can have a back up offer that is only submitted if the first offer falls through. The agent is correct.

Debbie Albert, PA
Coldwell Banker Residential
0 votes Thank Flag Link Wed Mar 31, 2010
The first offer cannot close unless the bank approves it. That is a contingency The second offer can be accepted on a backup basis. If the second offer is submitted to the bank, I suspect the bank will be more inclined to issue an approval for the short sale at the higher amount. The approval will be offered to the buyer who is in contract now. If that buyer accepts the bank’s terms the house will be sold. If not, the second buyer may have the opportunity to buy the house.

Should the agent submit the second offer to the lender? I think so. The agent is supposed to get the best price for the seller…even in a short sale. The agent has a fiduciary duty to attempt to minimize the impact of a potential deficiency action against the seller and/or the effect of taxations on debt forgiveness.

Sitting on a better offer may not be in the best interests of the seller. If the agent is dual agent on the first offer…beware!
0 votes Thank Flag Link Tue Mar 30, 2010
Thank you everyone for your expertise in this matter. We will wait to see what happens with the first offer.
0 votes Thank Flag Link Tue Mar 30, 2010
The listing agent does not have to submit your offer to the bank. They have no fiduciary responsibility to the bank. The bank is not their client. They do have to submit the offer to the homeowner who is the seller and their client.

Not sure how the seller signed a second offer, and there could be more to the story that we don't know. In Michigan, I can't imagine having my seller sign a second offer until I have a mutual release on the first offer. There could be verbiage in your offer stating it is a backup, or something. Not being a lawyer or an expert on Florida real estate, it is hard to guess what is going on there.
0 votes Thank Flag Link Tue Mar 30, 2010
Maureen Fran…, Real Estate Pro in Birmingham, MI
MVP'08
Contact
Kathy there is nothing legal or illegal but it does get into the ethical and duty the agent has to get the best price and terms for their seller. Most banks encourage while some mandate the property be marketed untilone is signed by the bank and all offers submitted as they come in. This is not always reality as it is alot of work for an agent to submit a new offer, they have to get a preliminary hud from a title company and submit a net sheet that shows what the bank will receive. Some agents think the process will start all over if the submit a new offer which will cause more time or ruin the chance of getting any offer accepted. The seller has to be careful when signing offers, each offer has to have the short sale clause, a contingincy and hopfully a short sale addendum. Without it they can be on the hook to sell the house to more than 1 buyer . In the short sale process the basic things that happen is the sellers finacnials are review with teh hardship letter to see if they even quailify to completre a short sale, the processor puts everything together, once an offer is submitted, a negotiator is assigned, this is usually 2-4 weeks. The negotiator will order an appraisal, usually 1 week to order, 2 more weeks for appraiser to complete and get back. Now if everything is complete, the negotiator will give an answer within 30 days of the file being comoplete. So there is time for other offers to come in and not hold up the process. I hope this helps, short sales are not fun, not easy and a headache for most.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Tue Mar 30, 2010
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