All the contracts are different around us. Some have a buyer request written persmission, some don't. It seems so clear to us when we look at the specific contract.

I wonder what ever happened??

Hi Lori - that is a good point. I did speak with Confused Buyer on the phone about this situation and the advice I have been providing is based on the NVAR regional contract with no special write-ins in paragraph 34 regarding the buyer's financing. The NVAR regional contract does not specify the name of the bank that the buyer is using and it does specifically state that the buyer is allowed to change financing in paragraph 13.

Thanks,
Sonal

Sonal,

Was your attorney looking at a copy of the contract this buyer signed? Some contracts specifically have the buyer list the lender(s) they intend on using and clearly state that the buyer must have written persmission from the seller to change. Who knows what this buyers contract stipulated? I don't know if he's every replied with what his actual contract says.. Confused should not be taking any advice from anyone who has not actually read the contract he signed. Our line of work is already made harder by clients and customers who say 'I heard from a co-worker', ' my cousin in California says', and 'I read on the internet'. Nothing we say is going to matter if he signed a contract and does not perform.

Hi All - I just checked with a real estate attorney at Provident Title. She said that change of bank by the buyer would not be considered a change to the contract. She has buyers that change financing two days before closing and no one knows except for the buyer.

This is pretty simple and should not be causing a headache for this buyer. The buyer has every right to change who they are getting their financing from as long as it does not impact the closing date or seller's proceeds. Since the closing date or approval on the short sale have not been reached - I don't see any problem to change financing for this buyer.

I can provide anyone who's interested with contact information for the real estate attorney that I spoke with if you want more assurance - just contact me from my profile or call me.

Thanks,
Sonal
703-863-0031

Any changes to the contract requires addendums or notices, even though a lot of times parties excuse it.

This discussion seems to have veered off in quite a different direction than the buyer's concerns.

I believe what Ramesh was referring to is that some short sale agents submit unratified contracts to the bank - greatly slowing the short sale process. The way to expedite the short sale process is for the seller to choose the best offer, ratify it, and send that ONE offer to the bank.

Regarding Vivianne's earlier comment - the seller's bank may have a big impact on the transaction - just like the home inspection or appraisal may have a big impact on the transaction. Contingencies, by their very nature, can result in the contract being voided - that has no bearing on the basic fact that the contract is between the buyer and the seller only.

The buyer in this case is simply wanting to change banks but keep the terms of the loan the same - downpayment, type of loan, etc. will not change. The buyer is getting a better interest rate at her own bank, rather than the bank recommended by her agent. I think we are all making this much too complicated for the Confused Buyer. Change of financing is specifically addressed in paragraph 13 of the NVAR contract - it is allowed as long as particular criteria are met (settlement is not delayed and seller does not have higher costs, etc. as a result of the change of financing).

The name of the bank is not mentioned in the contract - it is not something that the buyer and seller agreed to. Therefore, I am not convinced that this would be a counter offer or an issue requiring an addendum. It is my understanding that the buyer can change banks as long as the terms of the loan are the same and the conditions in paragraph 13 are met. I would think that the purchaser could simply supply a courtesy notice to inform the seller that the purchaser is pursuing alternate financing.

I will check with my real estate attorney on Monday on this issue.

Ramesh, Listing Agents have legal responsibility to submit to the Seller all offers and counter-offers until closing UNLESS the Seller has waived this obligation in writing - Code of Ethics, Standard of Practice 1-7.

Agents who do not submit ALL offers need to be reported to their Associations - it's a big violation.

Vivianne,
1. It is imp. that the ratified contract term is clearly understood as between seller and buyer.
2. Changing the finance co. depends upon 3 diff. stage:
B4 current mortgage co. review.
During their review.
and once the bank accepted the terms.

It is hard for us to give exact answers to the posting buyer, as each instance can differ.
His buyer agent needs to get deep into this, take his/her broker's help and take the right action for them.

A lot of short sales are taking time because listing agents donot go to the bank with ratified contract, thus jeopardizing everybody. I hope our association's legal departments take some action on this.
rgds,
Ramesh

Ramesh,

YES, in a traditional sale, contract is between Buyer and the Seller and once it is signed it is considered ratified.

In the short sale, in theory the same is true, but in practice the lender does not necessarily have to agree to the short sale, especially if the offer is low. So much for the ratified contract between the Seller and the Buyer.....

Less than 20% of short sales were approved by lenders in 2008. Due to The Obama program it is slightly higher this year.

The lender is instrumental in short sale because at the end of the day it is the lender who makes the decision to approve the sale.

Confused Buyer's question was how switching the financing will effect his offer.....
The answer is: it all depends on the Seller's lender and the criteria that lender uses for processing short sales - those criteria differ from lender to lender.

In a traditional sale, addendum would be sufficient - Seller probably will not mind as long as the Buyer meets the agreed on closing date, does not inconvenience the Seller, and does not cause the Seller to suffer a financial loss.

Confused Buyer needs to submit an adendum to the Seller's lender - and see if his revised offer is approved. If the alternate financing makes the Buyer's offer stronger, it should not matter to the Seller's lender, however if the opposite is true, they may not be pleased as much - ratified offer or not.

Loan approval:
1. You probably had a pre-approval.
2. You need a committement letter from the lender. They might give you a committement letter with one of the conditions being the contingency lifted. The committement letter may be good only for 30 days. Most of don't realize the burden we put on the loan officers. In this complicated financial word, long committements can be suicidal for them.

In summary, don't be anxious. Short sales take patience. If u can't wait , get out of the contract. If you can just relax until u hear from your agent. But do keep checking the status timeto time.
Ur agent should be able to provide all these answers to you.

As I am reading your qs. further down the line, I want to answer One qs. at a time:
1. Ratified Contract: It should be considered ratified, when both parties signed and initialled wherever the contract requires, a ratified date is put on page 10. I donot consider cashing the EMD check by buyer broker constitute retified.
2. Once it is ratified as above, third party consent is only a contingency , which can be removed when both seller and buyer agree.
3. Some agents tell u it is ratified but act as if it is not ratified. This is a practise , we as agents need to take some action on. Does the listing on this property show as ratified?

In short ratification is between buyer and seller. All other parties may be involved in contingencies and no authority otherwise(other than lien clearance etc.).

The short answer: Changing lenders requires an addendum.
Contact ur agent to put together one.

sorry, but your definition of what 'ratified' is, is not what drives the terms. If the EMD was deposited, I would think that you have your self a ratified contract with contingencies...just like a home sale, an inspection or other contingencies. The bank may be a part of the contract, it depends on what his CONTRACT says! If the contracts says that he will get a specific loan from a specific lender and he has a ratified contract, then he needs to make sure he can change. Some contracts have you list the lenders you are considering and specifically say 'buyer to get sellers written permission should they wish to change lenders'.

if you are ratified, then there are specific trigger dates that you should be paying attention to. When I write on a short sale or third party approval home, we put in there that, although the contract may be ratified and accepted by the seller, the buyer's 'trigger dates' for the loan application, appraisal, home inspection, termite, etc., will begin once the third party approval is finished. this prevents the buyers from spending money before the banks accept the terms.

Once again...it's your contract. What did you allow to be put in there and what does it tell you to do??? If you aer not sure, ask to get, in writing, what is allowed.

The name of the bank is not part of the contract - only the terms of your financing. As long as the change in financing does not delay settlement or result in an additional cost to the seller (according to the NVAR contract, paragraph 13), the buyer may choose alternate financing.

The contract is between the buyer and the seller - so once seller and buyer have signed, the contract is ratified. The bank is a 3rd party that provides approval as part of a contingency - but the bank is not going to sign (ratify) the contract because the bank is not a party to the contract.

Buyer,

Unfortunately, these are the pains of purchasing a short sale.

Only the Seller's bank can answer your question - banks have different criteria for accepting offers.
If your offer is strong, they probably will not mind your changing the bank as much - but again, it's up to the bank.

Well, the contract was signed by the seller and I have a copy of the contract. We are both waiting for the approval of the bank now. We are both waiting for the 3rd party ratified contract. My definition of a ratified contract is all parties agree with the contract. If this is a ratified contract then my current bank should have processed my loan but as of this date, I don't have one that hase been signed by all parties. The contract that I have was signed by the seller and the EMD was deposited by my realtor. So does this mean I have a ratfied contract but the contract is not ratified by the third party/bank.

The only change that I have would be where I will get my financing. The terms of the offer is the same and the type of loan will be the same, so would that be an issue. Can I ask the seller and inform her of this change? I can't seem to talk to my realtor now since she was upset when I told her about this. What would be the effect to my offer if I did switch my financing.

check your contract. You could have a ratified contract with the seller with a third party approval contingency. If you have agreed to terms with the seller, don't assume that you can make any changes you want just because the third party contingency has not been met. First, find out if you are ratified. Has your emd check been deposited? Has the seller signed off the contract and the contract has been processed? Since no one here has your contract in front of them, it would not be a good idea to listen to advice telling you that you can do anything you want. Find out what your status is. It should be very clear to you whether or not you are 'under contract' or not.

Buyer,

You are not in default - as long as you meet the terms of the contract you are fine, provided that your offer is ratifed.

However, the seller/bank may choose not to accept your offer based on the type of financing you qualified for. Banks nearly always prefer cash offers and conventional financing from well established institutions before other types of financing. This is why the seller's bank will want to know the source of your financing.

Hi - if you don't have a ratified contract, you cannot be in default. You can always inform the seller of the change even if it's early in the process - but I don't think the seller would mind the change of bank.

If you want to speak about this issue, you can call me at 703-863-0031 at no obligation. I am just offering because I see that you have received many good answers but there is still some confusion so it may be easier to work out the remaining confusion in a phone call.

Thanks,
Sonal

How will i be on default when the seller's bank has not accepted my offer yet?

Can I inform the seller that I will be using another bank? The Bank of the seller has not accepted the offer yet so isn't it early enough to inform them of this change?

Buyer,

You can change financing, but it cannot cause inconvenience or financial loss to the seller - if the seller objects, you can find yourself in default.

As long as your change of financing does not change all the other terms of the offer, you should be fine. However do disclose it when your offer is accepted and make sure you are ready by the settlement day.

Hi - if you are changing the type of financing - conv to FHA or VA, lowering the amount of downpayment, changing from an adjustable rate to a fixed rate - these are things that the seller or bank may care about. If you are changing the bank or loan officer but still have the same type of financing, it will not affect your offer.