Home Buying in 90043>Question Details

Olympia, Home Buyer in Los Angeles, CA

Help! Strange Short Sale Scenario

Asked by Olympia, Los Angeles, CA Sun Apr 1, 2012

We put in an offer on a short sale on 3/19 and received a signed acceptance on 3/20. However, we found out this week that an offer was submitted to the bank previous to our offer. How or why was a signed contract returned to us? Is this possible/legal?

This scenario is complicated by the fact that we've got a dual agency situation. The agent appears to either be incompetent or possibly worse. He claims that when then bank counters the first offer he must counter all the standing offers (there have been five and two have been signed). To the very best of our knowledge the bank only works with one offer at a time, not multiple offers.

Some more background information: the buyer is in the process of applying for the HAFA program; we think they've applied using the ARASS form with an offer in hand. They have not received an answer yet but a negotiator has been assigned. A BPO has been ordered but to our knowledge they don't have a figure for the house yet.

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Every agent works differently. Being a short sale listing agent I ONLY submit 1 offer to the bank at a time. However the short sale addendum does state (if this is not countered) that all other offers CAN be submitted to the lien holder on top of other offers.

Of course the bank wants to see all offers submitted, but my opinion is that the bank will take longer to approve, if they think the agent is going to keep submitting offers rather than working with the offer amount of 1 buyer & getting the bank to approve an acceptable net.

The seller CAN technically accept 100 offers that are ALL "Subject To short Sale approval by the lien holder(s)".

The bank doesn't care if an offer is for Cash, VA $1 down, FHA low down, Conventional or otherwise, they ONLY CARE ABOUT WHAT THEY NET & that the buyer can close.

The 1 loan the seller has with BofA could have been a Cashed Out Refinanced 1st, there doesn't have to be a 2nd for their to be an equity line.

Regarding this, YOU need to find out how much equity was cashed out over & above the original loan amount & what the purchase price is going to be approx., because if the owner can't contribute towards a requested cash contribution from BofA, you may have to. Knowing this fact would help you to understand why the listing agent might favor a buyer with cash or a larger down payment.

Whether the short sale is in the HAFA process or traditional short sale, auctions are not automatically postponed, the listing agent needs to keep in contact with the bank & ensure that no sale dates (auction dates) are being posted & that all of that sort of nonsense is PostPoned or on HOLD.

Shoot me an email if you want to talk about this some more.I don't look back on this same Trulia thread for answers posted after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors -
1 vote Thank Flag Link Sun Apr 1, 2012
Technically you should have entered escrow on this short sale. In a traditional sale you would definatly enter escrow. There are strong problems in the short sale market. Short sale numbers in most states and in my California is very high. Usually outnumbering standard listings. There are many new agent's controlling listings. Many work with financing co(s) some with banks, others agent/brokers with deep connections with the lender of his/her listing. There are many agent's who especially on confirmed price listings who will try very hard to use another's agent's buyers offer to help push a higher offer or for them to obtain their own buyer. This happen's often. Many times the agent not having close relations with bank or communications with them where they are responsive or knowledgable of what the agent is doing. This is by tradition not fair practice. You can report the agent but it is difficult to get a positive result out of it as rules and punishment has not been established or enforced strongly for agen'ts who mis manage their shortsale/foreclosure listing at this point.
0 votes Thank Flag Link Sun Apr 1, 2012
Hello Olympia...I am a short sale agent and yes its the seller that makes the aceptance of an offer and if you have an executed purchase contract you havean aceptance. The agent should have dne a multi counter for highest and best and then had the seller sign the best offer. I would contact that agent and let them know you are going to contact a real estate attorney for advise and ifthere are any problems the lawyer will be contacting them and their broker..agents that are not doing their fiduciary duty ned to be called on the carpet...it is not rocket science and they know th law...good luck.

Katherine johnson
Dre 01205852
0 votes Thank Flag Link Sun Apr 1, 2012
It is not the agents decision whether or not to submit more than one offer to the bank for short sale approval - it's the seller. The seller is still the owner. Some banks only address on offer at a time but I've had banks look at more than one offer at once. Each situation is different and each shortsale with even the same lender is different. There are so many factors to the sale and there is no one answer to what the seller and/or the bank they are seeking third party approval with can and will do. The key is for you to have your agent find out what the prodedure is and have it disclosed to you so YOU can make the decision as to whether or not you want to play ball. You say you have a dual agency situation but I've heard a lot of people say that and find out that they are not truly represented. It could be that the agent is telling you the entire truth. The bank may have told them to counter all offers. If the seller agreed to send them up and the bank agreed to review, that may be the case. There are so many 'what ifs' You can read up on the net about the way different people's short sales where conducted but each situation is different.
0 votes Thank Flag Link Sun Apr 1, 2012
Legally, the bank is not the owner of said property. In short sale, bank deals one offer at the time. And listing agent is providing that offer. Since this is a dual agency, you are relying on the listing agent to represent you. If you have a binding contract, enforce it. Or seek legal advice for interpretation.

It's not an easy task for an agent to work in a dual agency. Conflicts arises. The question is who is getting a fair representation?
0 votes Thank Flag Link Sun Apr 1, 2012
Hi Olympia,

In the world of short sales, nothing (or, everything) is out of the ordinary.

One key element to understand in a short sale transaction is that the Seller, yes the Seller, not the lender decides who's offer to accept. This is important to understand because it's the seller who decides which offer will drive negotiations with the bank.

In other words, a seller may decide that they want to choose one offer, which gives them the best chance of settling their debt with the bank, They may decide to accept all offers, subject to lender approval, and let the bank decide which is best. Or, if they want to ride it out to the end, they may decide not to choose any offer and let the home go to foreclosure.

It makes no difference if this is a HAFA or a standard (using that term loosely...) short sale. Also, the fact that the previous sale was for less than the current listing amount is unfortunately a common scenario. Many people took out, as you suggested HELOC's; more common however were cash out refinances, as prices rose, available cash to owners grew, loans got larger, then the music stopped.

The fact that the agent is telling you a full price offer is not likely to be accepted, tells me that the problem is the listing price. If a seller and their agent set the marketing price of a property below the expectations of the shorting lender, then the bank will reject the proposed settlement price and the offer in hand will be rejected; even if it's for full listing price.

FHA, VA and low down payment offers only impact the chance of acceptance in relation to the actual settlement of the transaction. I'll give you two examples:

1) If there is a junior (2nd TD) loan which is asking to settle for $10,000 but the 1st lender will only allow the junior loan to be paid $5,000 from the sale proceeds. The most common way to settle this is for the buyer to pay the balance of money desired by the junior lien on the buyer's side of the HUD. If a buyer has limited funds available for their down payment, this could create problems at closing.

2) Some customary closing costs typically paid by a seller, are not allowed or create problems with FHA lenders when the fees are placed upon an FHA buyer. The shorting lender, does not care. If you reach an approval and for some reason a shorting lender does not allow one of these fees to be paid from the seller's proceeds, again the burden will be placed on the buyer. If the buyer has very little money for down payments and closing costs then a deal could fall apart.

It sounds unfortunately, like you are in the middle of situation where neither the seller nor the lender have committed to a buyer or a price. To make matters more unnerving, the listing agent is doing his/her best to make sure the seller has many options open to them. This means you will likely continue to be one of many potential buyers of the home, and in my experience part of a more lengthy short sale process as the lender wades through documentation from multiple potential buyers.

My suggestion, temper your expectations, raise your offer (if in your interests) to eliminate other buyers from the equation, and/or continue looking for alternatives.

Best of luck,
Allan S. Glass
President
ASG Real Estate Inc. ®
149 S. Barrington Ave, Suite #660
Los Angeles . CA 90049
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0 votes Thank Flag Link Sun Apr 1, 2012
The seller is accepting all offers since, effectively, being subject to bank approval, the bank choooses the buyer. And the bank may want to see all offers. It is not unusual for all offers to be equally countered.
0 votes Thank Flag Link Sun Apr 1, 2012
HI MarilyIn,
Thanks for taking the time to answer. This is basically what our agent/the listing agent is saying. I'm so confused because the HAFA information on the BOA site is so contrary to this. Is this just a protocol that no one is following? It says specifically that the bank will only work with one offer at a time.

Thanks again, I'm very confused and definitely want this house so I'm particularly concerned.
Flag Sun Apr 1, 2012
You should have a realtor representing you. If you want this house he/she can help you decide what you are willing to pay for it. With multiple offers it is unlikely to go to foreclosure but if it does it could be months or a year before ti comes to market.

Have a realtor represent your interests in any case and certainly when you aren't confident in the Listing Agent. .
0 votes Thank Flag Link Sun Apr 1, 2012
Janey, what kind of position are we in if we've already made the offer with him as a dual agent? I think if there's any chance of us getting this house it'll be due to the agent being motivated by a double commission.

I have heard from BOA that there's a conflict of interest with a dual agent and we might have to get another agent anyway. The listing agent said he'd just put on someone in his office but I'm not sure that's what we'd choose now that we've learned more about him.
Flag Sun Apr 1, 2012
Another detail is that the initial offer is FHA for full asking price with 3.5% down. The agent seems to think that the offer will be countered or rejected.

Is there that much of a difference between a conventional and FHA loan?

Finally, the first loan is through BOA and the agent claims that there's only one loan but the previous purchase price is less than the asking price now so I'm assuming there's a HELOC or something else otherwise I'm not sure why they'd be short selling it.

Also, I know that the owner has missed at least two mortgage payments. My understanding is that they will not move forward on a foreclosure while in the HAFA process.

I wonder if my greatest hope to get this home would actually be foreclosure...
0 votes Thank Flag Link Sun Apr 1, 2012
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