Perhaps you can back out stating the length of escrow...did you mark down 30 days, 45, or perhaps 60 days....it takes the banks months to get short sales thru...you may want to look into backing out because the agreed upon closing date did not happen, therefore the sellers couldn't perform in the agreed upon time frame?

I just want to clarify something since Nick stated "As far as the lender not accepting other offers is not exactly true." I am not sure whether Nick's statement was in response to any of the prior posts. I just wanted make it clear that I did not suggest that a listing agent or seller should turn away subsequent offers and not even let the lender know about them. What I was saying is that the seller can only accept other offers as backup offers once the seller has accepted one offer. This does not mean that the lender could not say that they will not approve the first offer that the seller accepted and would rather approve one of the backup offers. Discussing backup offers will usually only make sense if the backup offer is more favorable (that does not always mean a higher price). If the offers are lower or have other less favorable terms, it may also help letting the lender know about them because it will hopefully strengthen the first offer. How to handle backup offers can become tricky because the listing agent's duties are to the seller and sometimes a backup offer, even one that's higher, can jeopardize the success of the short sale as there's no guarantee that the transaction with the higher offer will close. Whether a seller wants to accept a higher backup offer six weeks into the short sale process will depend on the circumstances surrounding the short sale. In the end, the seller wants to close the escrow and the bank wants to get the most money and it's impossible to predict with absolute certainty which of the buyers will actually close escrow.

Nick also stated: "I have seen the bank accept more than one offer recently." I think it's important to understand that banks do not accept offers in short sales and that's why it's not possiible for a bank to accept more than one offer in a short sale . Banks approve or reject offers that have been accepted by the seller. I think it's important to distinguish between acceptance and approval. The bank is not in a position to accept an offer as the bank is not the owner of the short sale property. While the bank can approve an offer that the seller has not yet signed, the approval is meaningless until the seller accepts the offer. Making this distinction is important because the buyer's rights depend on whether there's an accepted offer.

I practice RE in Hawaii, so your situation may be different. Our short sale addendum clearly states that the buyer is free to keep looking for other properties and may cancel at any time. You also have home inspection, association docs, title, etc contingencies that have to be cleared.
If your offer was contingent on financing and subject to a specific cap for your interest rate and rates are now much higher, your lender can write you a letter stating that you no longer qualify for the original loan that was quoted to you.
Good luck! Short sale are very attractive, but they take forever to be approved. I do many here in Hawaii.
Ken Gines RA ABR J Samuels Signature Homes LLC (808)389-0489

Its a tricky situation, but you may have a lawsuit on your hands and lose this client. Technicaly you have a legal contract. I would never or let one of my agents write an offer for a shortsale without it stating that its contingent on Lender Approval let alone removing contigencies. I wish you the best of luck. If i states that its not binding until lender approval then your good and they can cancel. You should contact yor broker and the C.A.R. lawyer as stated already.

As far as the lender not accepting other offers is not exactly true. Lenders prefer when the offers keep coming in, they want the smallest loss. In the case were the listing agent makes it pending and is not acepting offers then that a sure way that the bank will not approve it. I have seen the bank accept more than one offer recently. They want to make sure the home sells.

To Liang. I know you meant well, but it is not true that there is no contract until the lender approves the short sale. If the seller signs the buyer's offer and the accepted offer is delivered to the buyer, there is a legally binding contract, but the contract is contingent upon lender approval if there is a short sale addendum. The lender approval is not a condition precedent. This means that the seller can accept later offers only as backup offers. If there were no legally binding contract, the seller could sign as many offers as he/she wants and just let the bank decide which buyer will ultimately get the house. While some sellers will let the bank pick the best offer, the seller will not have signed any of the offers in those cases and then there are no contracts and the removal of contingencies would be meaningless as there is no contract.

Hello Matt. I have never heard of a buyer removing all contingencies in a short sale prior to receiving lender approval. This is a tricky situation as it would mean that the buyer would be locked into a contract that the seller may not be able to perform. The short sale addendum does not only protect the buyer, but also protects the seller. If there's no short sale addendum and the buyer removes all contingencies, the buyer would theoretically have to wait until the close of escrow date specified in the contract to see if the seller can perform. If the seller can't close because the bank did not approve the short sale and the seller does not have the money to close escrow, the seller would be in breach of contract unless there was a short sale addendum that made the contract contingent upon receiving lender approval.

If the buyer truly removed all contingencies, I think cancelling the escrow prior to the contemplated close of escrow date could result in a forfeiture of the deposit if the liquidated damages clause became part of the contract. I would definitely check with an attorney on that. Have you spoken to one of the C.A.R. attorneys about that? If not, I would highly recommend it especially if you are the buyer's agent as there is potential liability there if you let the buyers remove all contingencies.
Good luck to you.

Hi Matt:

Did your contract include a Short Sale Addendum? This is what truly protect you from the event like this. For my clients who are making offers on Short Sales, they will sign the Short Sale Addendum which specifically say (depending on which option you pick) that the time does not start, the escrow does not open, the deposit will not go anywhere, the inspecition will not be performed UNTIL after we received a written approval from the lenders.

I never ask my clients to conduct inspections until there is a lender's written approval.

Without this addendum, you might be at risk.

You want to check with your realtor, the realtor's broker and a realt estate attorney if you don't have that.

Sylvia

Yes. Before you receive the lender approval, you may back out any time. There is no acceptanced until lender approves the deal. Therefore, there is no contract. It is stated in the short sale addendum that you should have signed with the purchase agreement.