Home Buying in 98117>Question Details

Heaven123, Home Buyer in 98117

If my offer is one of 8 offers being submitted to the Bank in a short sale, does that mean that the Seller accepted all 8 offers?

Asked by Heaven123, 98117 Thu Oct 8, 2009

I thought that the Seller selects and signs the strongest offer in a short sale which is then submitted to the Bank for approval. However, this wasn't the case and I have now learned that my offer is one of 8 offers that is pending review by the Bank. Unfortunately, my agent didn't tell me this and so we made an offer $20K below asking. Seller accepted but I don't think its going to hold up against 7 other offers once the Bank's negotiator gets a hold of them. We've been looking for a house for 2 years! Please offer any advice you may have.

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I would ask your agent if there is still time to change your offer. I would put your highest and best offer on the table. You could always add an escalation clause to your current offer as well. An escalation clause basically says that you would be willing to pay "x amount" more than the other offers with a cap of "x amount." If they accepted your offer based on the escalation clause they would have to show you the other offer so you know it was legit. But, all in all, when you are competing with 7 other offers, you will want at least a full price offer on the table with an escalation clause and the best terms you can give (quick closing, less contingencies, etc). GOOD LUCK! Call your agent immediately and see if there is still time. Two years is a long time to look...don't let it get away.
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3 votes Thank Flag Link Thu Oct 8, 2009
Yes, the worst is the self-proclaimed short sale "expert." The last time I ran into one of those the agent even went so far as to lie to me, claiming she's selling 3 a month. She's only sold six properties in her entire career (didn't check on how many of those are short sales), and 4 in the last six months. Did she really think I wouldn't be able to check out her record?

I actually had two clients interested in one of her listings, but I advised my clients not to make an offer because her policy was to not take the listing off of active status--just submit it to the bank without client acceptance. That type of policy would at best put my clients into the type of situation Heaven is complaining of--multiple offers.
2 votes Thank Flag Link Fri Oct 9, 2009
I should have added that I would not in a million years use an escalation clause in a short sale situation. The bank is not a party to the contract, and you are merely telling them the most you are willing to pay. They're likely to just come back and say: "Okay, pay the highest amount you indicated you would pay!"

In normal sale situations the seller needs a competing offer for the escalation clause to kick in. The bank doesn't need that to require more money to approve the sale. They can literally do whatever they want, and they don't care.
2 votes Thank Flag Link Fri Oct 9, 2009
There is no one way to do a short sale and the bank can do whatever it wants, not subject to most RE "rules" and not "a party" to the contract. Anything that gets them the highest price is fair game for them. Though I have been able, through the listing agent, to get first consideration if our offer is first in and accepted, it depends how strong the relationship is between the bank and the listing agent.. Easier done on a bank owned than a short sale.

I know of one SS now with 4 full price offers that the bank is looking at. Why at least one of them didn't go over full price, makes no sense to me. I agree with Ashley (Hi Ashley!)...give it your best shot. That's all you can do. I wouldn't do an escalator though, as banks don't always know what to do with those. Give it your highest and best offer, given what you've said in the question.
2 votes Thank Flag Link Thu Oct 8, 2009
Ashley's right here. In a short sale it doesn't really matter what the seller does--It's the lienholder that makes a decision of whether or not to accept an offer. The seller's acceptance of your offer (and any others they accepted) means very little. Evidence of this can be found in the fact that if your agent included form 22SS, the timelines such as inspection and feasiblity (as well as earnest money deposit) may not even start until the lienholder accepts your offer.

So to answer your question--It sure looks like it.
2 votes Thank Flag Link Thu Oct 8, 2009
I wanted to comment on your comment regarding my comments. You said that you were "feeling better" about your offer of $20k under asking because of what I said. Not to worry you, but my comments were general comments and can't really be applied to your situation because I don't know anything about it. Specifically, I don't know much the house you're buying is listed at, so don't know if $20k is a lot or a little. But in most cases if you are competing with 7 other offers, I'd say you'd most likely NOT prevail by going in well under the asking price. Talk to your agent--That's really your best bet for strategizing the best way to go here!!!
1 vote Thank Flag Link Sat Oct 10, 2009
I was running Seattle stats this weekend. North Seattle (North of Downtown) had fewer short sales and foreclosures ( about 1/3 less than South of Downtown), and both short sales and bank owned properties actually sold higher on a median price per square foot than non-distressed property sales.

More important than anything said here up until now is "what is the property worth?". North Seattle buyers have a tendency to overbid in the "bargain" frenzy.

1) How much is it worth
2) How much do you want it?

I recently evaluated a "soon to be" bank owned for a client, and we set our max price now without regard to what the bank will be asking for it and/or what other buyers may be willing to pay.

3rd quarter North Seattle short sales sold for $2 more per square foot than "regular" property sales, and bank-owned property sold for $5 more. South Seattle bank-owned properties sold for almost $50 less per square foot...to give you a point of reference. I haven't posted all the graphs yet...but will by Monday.
1 vote Thank Flag Link Sat Oct 10, 2009
Based on the information that there were 8 offers all together...I am going to bet that the home is either really great or is priced really great. In that case, 20K below asking might not get you where you want to be. When there is that much competition full price is the least I would go. I would strongly consider going over asking if you really want this house. Even then, it is never a sure thing. I had a client sit around for 2 months waiting for bank approval (the seller accepted our offer)...but in the meantime another offer came in higher and they dumped us. It was a real heartache for my client. Lesson is...short sales can be difficult. If you are willing to take the risk...then you might as well go for it and GO BIG. Good luck.
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1 vote Thank Flag Link Sat Oct 10, 2009
Reading the sh*tstorm of answers here made me want to add an observation about short sales. Actually a few of them.
1. Short sales are not the big bargain they were even 6 months ago. Lienholders are trying to get near or ABOVE retail for these things.
2. Partially due to the tax credit deadline, many of my buyers (I can't speak for everyone of course) are AVOIDING short sales. There's so much inventory they don't really need to deal with the hassle in order to get a good price on something.
3. Kary and Jennifer both mentioned bank-owned. I agree with their comments and see REO as the next generation of "value" properties. Short sales are just not worth it in many cases.
4. Banks are shooting themselves in the foot by following outdated procedures for processing short sales and/or having unrealistic expectations of market value. Two examples (of many) (1) I have a short sale listed that I've sold 10 times in the last year and a half. Each time, the buyer gets tired of waiting for the lienholder and walks. Each successive offer is lower than the last. Had the bank accepted the first offer we got over a year ago, they'd have had $1.25M. Now they'll be lucky to get $800k. (2) I've got another one in which the lender's appraiser inflated the value to $200k more than the house could possibly sell at. The market value offers i have in hand have all been rejected, meaning the house is going to sit there decomposing for 6 months until it becomes a REO, and then it will end up selling for less than any of the offers we have right now. Where is the regulatory oversight on this?

BONUS QUESTION FOR AGENTS: You have 3 seconds to think of your answer. Ok, here goes: "Which is the WORST lienholder to deal with?" (Hint--It starts with a "C" and was recently bought out by a bank which starts with a "B.") Actually--This is a great litmus test for people who want to know if their agent has short sale experience. Anyone who's done a short sale will probably know this.
1 vote Thank Flag Link Sat Oct 10, 2009
I have the best luck as the buyer's agent when the listing agent doesn't know much about short sales, because then they listen to me :) The worst is when the listing agent calls themselves a short sale expert...and they don't have a clue, but don't want help either.

But this case is much like any property with 8 offers...short sale or not. So the advice here is much the same as it would be if this were not a short sale.
1 vote Thank Flag Link Fri Oct 9, 2009
You definately want a SS specialist but short sales and banks in general are tricky these days even for specialists. Always bring your highest and best offer with them no matter what because most of the time you only get one shot. And in the months of waiting that it may take to get an approval, you can almost count on there being other competing offers submitted. To be dealing with foreclosures and short sales, you have to have the patience of a saint!

Not only do different banks have different protocols in regrads to reviewing and accepting offers, but EVERYTHING, even your signed agreement with the sellers, is subject to leinholder approval. Short sales and foreclosures can be the way to go if you're willing to wait it out, but you may want your agent to try searching for homes that are "approved short sales" or "bank/corporate owned" or just simply a regular old fashioned sale between buyer and seller. Nothing gets me more than when a client tells me they want a foreclosure or SS because they have heard its the best way to get a deal. That can be true, but not neccessarily. And the truth is, it sounds like you're tired of looking and just want a GOOD DEAL, no matter what it is, right?

Hope this helps,
Jennifer Nilssen
1 vote Thank Flag Link Fri Oct 9, 2009
Heaven, I agree with most of the comments of Steve, Ardell and Grace. I would not switch agents on this property, and I would submit a higher offer if you do really want the property. Going through the listing agent would only leave you unrepresented. It would not leave you in a dual agency situation--at least in Washington state.

I would disagree with Keith in that the seller can effectively accept multiple offers, subject to the bank's final say. But I am a bit surprised that they're doing that. The most common practice from what I can tell tends to be to only submit one offer, as noted by Grace. I had one agent tell me once that she submitted three offers and nothing was happening because the bank wanted to first know which offer to review first!

I think you may have missed one comment though. Short sales are low probability transactions. Even if your offer was the only offer, there's nothing to say that the bank would accept it. In King County alone there are over 1,100 SFR short sale properties with an accepted offer, but only about 120 short sale properties closed in September (numbers from NWMLS sources, but not compiled or guaranteed by the NWMLS.) That isn't because the banks are ramping up. It's because a lot simply never close.

If you're primarily looking for a bargain, I would suggest bank owned properties, where the bank has already foreclosed and put the house on the market. Most of those are at least cosmetic fixers, but if you can handle that, you might get an even better buy than a short sale. You will, however, have more need to have an attorney review the bank documents. Some bank's documents are so poorly drawn I've even advised a client to walk from the property rather than to deal with them. The link is something I wrote back in August about short sales--it's entitled: "Are You Feeling Lucky?"
1 vote Thank Flag Link Fri Oct 9, 2009
Hopefully your agent included a short sale addendum that allows you to rescind the offer at any time before final bank approval. If they did I would rescind your current offer and resubmit the strongest offer you feel comfortable with. If the bank has requested to have all offers sent to them, it should be forwarded along with the rest.

I think a lot of people don't realize how competitive a short sale can be. A lot of buyers are getting beat up trying to chase a bargain. It's reminiscent of the competition we had several years ago where good homes were getting multiple offers. I have seen many of my clients give up on chasing short sales for this very reason.

Best of luck.
1 vote Thank Flag Link Fri Oct 9, 2009
Heaven
the truth is that the seller cannot accept all 8 offers. The seller can only accept one offer. There can be back up offers...if the accepted offer backs out.

So if you really want this property, you need to have your Realtor work for you. They need to call the listing agent and do the best they can to find out what the seller needs. Some Realtors just fax in offers, never contact the listing side to see what the seller wants, needs, or is looking for in an offer.

Here are a few ideas:
1. If it's a short sale seller is in trouble financially. The seller's role, as owner, is to select the best offer because if they pick an offer that eventually backs out, that could lead to foreclosure. Is the seller concerned about foreclosure?
2. A short sale is a process. The first step is to submit a short sale package, including financial information, a hardship letter explaining why the owner can no longer make the mortgage payments. Usually approval of a short sale requires weeks or months because the case manager is working with perhaps 200-300 cases, so they just work on the first case that comes up. Until the lender approves the short sale in writing there is no sale.
3. In most cases there are two lienholders, the first, or primary mortgage, and the second, which could be a Home Equity Line of Credit. BOTH need to approve of the short sale, which is a loss to their investors. We are seeing cases where the first mortgage agrees, but the second, which is smaller, wants more money than they are being offered.

This means that if this short sale is just starting:
1. it may take months to get an approval
2. The actual sale price might be different, if in fact the second demands more money.
3. You need to know the status, if it's approved, etc. That is your REaltors' job

Lastly, because short sales are due to financial problems.you might want to find out where and when the sellers are moving. Depending upon the situation they might be totally broke and need first and last month's rent to get an apartment., The lender will not let the seller have any money from the sale show on the HUD 1.

You'll need to be very careful about how you ask, but it might be that if you were willing to make sure that they had enough money for first and last month's rent (that means cash paid outside of the transaction), they would accept your offer. Make sure to adhere to all local laws, talk with your Realtor.

It may also be that they would like to rent back from the new owner after escrow closes so they can have a smooth transition to their new home, so talk with your Realtor about possession and occupancy.
1 vote Thank Flag Link Fri Oct 9, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
Hello Heaven123,

After reading throught the posts I have a few comments. First of all, if you really want this house and "can" be more competetive in your offer, take Ardell and Ashley's advice and contact your agent. While you may be unhappy with his effort, he is still in the best position right now to help you. Your agent is your voice and he should be able to communicate with the other agent in regards to strength of offer if nothing else.

Secondly, you "can" get out of this contract but contacting the listing agent and trying to resubmit an offer would not be a wise thing to do for multiple reasons. (most have been mentioned)

If you pull out of this deal or just don't get it you definitely should have your own agent for future offers on other properties. (It sounds like that is the direction you are heading but I just wanted to make sure you were not planning to contact listing agents on short sales directly). While it can be done it is not advisable and as was said earlier, the banks may not pay a full commission to a dual agent which could ultimately hurt your chance of getting the home.

Working with friends and family can be hard. Recently my brother in law (in California) had been searching for a home for about 7 months. He had written over 40 offers on bank owned and short sales with his friend who was basically part time and inexperienced. He finally got accepted on a property but then it turned out he couldn't afford it because the taxes were way too high. (melaruse for our California contributors). I was down there in August, gave him some tough advice but ultimately he got a new agent and picked up his keys on Monday!! And his wife had my neice yesterday!

This is a great time to buy but you need an agent who is experienced and motivated especially if you are going after short sales. Maybe you can be honest with your friend and get him working harder for you? If not, move on.

I would be happy to discuss my experience with you if you are interested as I am sure plenty of contributors on here would. Just make sure you feel comfortable with whomever you choose, this is more than likely the biggest financial decision of your life up to this point. It needs to be treated that way.
1 vote Thank Flag Link Fri Oct 9, 2009
Hello Heaven and thanks for your post.

In the early days of short sales here in California (and we are currently the "home" of short sales), listing agents would submit multiple offers to the banks for review, but we all quickly learned was that sending more than one (1) or the strongest offer to a bank negotiator was complete and utter folly. The negotiation process with some banks is so stringent that submitting 8 offers (as may be the case this time) is likely to create unnecessary delays since the negotiators are not interested in looking at 3 equal offers and 5 weak offers. In fact, what normally happens is that the weaker offers are ignored immediately and the strongest offer is the only one reviewed. Several negotiators with whom I've talked have actually told me that they expect the seller or listing agent to be responsible and NOT send a whole handful of offers for review. It's certainly okay to keep several offers "in the wings" in the event the first and highest offer drops out, but sending a bunch is unnecessary paperwork at least to the lenders here in California.

Unfortunately, as to your question about resubmitting your offer through the listing agent, it would not be acceptable. Your current Realtor is the "procuring cause" in this transaction and even if you were to submit an offer through the listing agent, your current agent would be entitled to the commission on the sale, so there is no advantage to the listing agent to work with you now that you have made it known that you have an agent.

While I can certainly understand your frustration in trying to find a home, I am certain that the perfect home is out there waiting for you and you'll find it soon. Work closely with your agent to gauge the market for the home and to offer the highest and best price for the property next time. Good luck!!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
1 vote Thank Flag Link Thu Oct 8, 2009
You really don't need to do that and it's unlikely that you can. You have already told us and the world that you submitted an offer lower than you would have had you known what you know now. Have you told your agent that? Have you asked to have your agent resubmit a higher offer? Do that ASAP.

An agent is really now allowed to favor an offer on his listing over other agent's offers. In fact many will bend over backward to make sure that their offer is not treated better. Also, often in a short sale the bank won't pay one agent for both sides, so that could hurt you.

You know what you need to do ASAP. Cal your agent.

I would not say that if I didn't think it was the best advice (others may disagree). In fact I just helped a young man get a short sale who posed a question on Trulia. But in his case his agent refused to show the property or write the offer...3 times. That is not the case here. You just need to get your agent to make a better offer, because you are feeling like you did not give it your best shot.'

http://raincityguide.com/2009/10/07/truliaboy-gets-his-house…

If 7 other people want this house, and are more qualified or can offer higher than you, there is really nothing any of the agents can do about that. You can get a new agent if this doesn't work out. But I'm 99% sure that you can't rescind this offer and bring in a different agent, and the result will not likely be different if you do.

I'll be interested to see the other opinions on your latest question.
1 vote Thank Flag Link Thu Oct 8, 2009
Heaven123,
You must be a patient person if you're going after a short-sale. In some ways you also need to be lucky. The bank is the true decision maker unlike a sale where the seller's lein liabilities are less than the agreed sale price. And like you've heard from my associates, the normal rules really don't apply since the bank can do just about anything it wants. More than just how many and how much the other offers are, just the type of offer (i.e., cash vs financed) makes a big difference. In the end the lender wants to reduce its loss while finding a solid buyer. Than can sometimes mean that the highest bid doesn't necessarily prevail. As long as you're not a first time homebuyer counting on the $8K tax credit you must remain patient. Statistically, short-sales can take upwards of 16 weeks to complete.
Good luck,
Steve
1 vote Thank Flag Link Thu Oct 8, 2009
When I receive an offer on a short sale I have listed, we evaluate where the offer is in comparison to market value and what are the chances that offer is reasonable enough to be accepted by the sellers bank. However it is often difficult to tell what they will and won't take.

Once we are in mutual acceptance however, we change the listing to "Pending Backup Requested" and will allow unsigned backup offers, but do not execute them or send to the sellers lender unless the first buyer falls out. This is assuring to any potential buyer that if their offer is mutally accepted, that they will have a real shot at getting the home, versus a blind auction when an agent shotguns a bunch of offers to the bank.

Having a short sale specialist who works with sellers can be very valuable to have as your buyers agent when you are considering purchasing a short sale. This agent will know which questions to ask the listing agent to ensure you are not entering a blind auction and if the deal is viable to get to a closing table.
0 votes Thank Flag Link Fri Feb 26, 2010
Based on Patrick's comments, I'm feeling better with our current offer ($20K under asking) because the other offers may grow tired of waiting and drop out. Though the Bank may continue to field other offers, the subsequent offers may not be as competitive as I initially thought. But then again, we are competing with 7 other offers as of right now and I may just be rationalizing :)

Basically, we're still debating whether to revise our current offer and submit a full price offer. What do you guys think?
0 votes Thank Flag Link Sat Oct 10, 2009
On the bank owned front, some of the Fannie Mae Homepath homes you can find out there are actually really fixed up nicely. New carpet, paint, etc. They aren't necessarily dirt cheap, however. See link.

In the BPOs the banks come up with, I had an experience earlier this year where the bank's BPO was incredibly inflated compared to very recent sales of nearly identical houses in the same development. My sale price was actually higher than all those comps. Fortunately though the bank was working off of some sort of a percentage. Reasonably close to the BPO was good enough.
0 votes Thank Flag Link Sat Oct 10, 2009
Again I would agree with Ardell. On the buyer's side there isn't that much an agent can do, especially when you have competing offers. It's sellers who need short sale "experts." About all the buyer's agent can do is recognize when they are not dealing with one, but where there are competing offers the options there are limited.
0 votes Thank Flag Link Fri Oct 9, 2009
No he will have eight to choose from,good luck!
Web Reference: http://barbara.swavely.com
0 votes Thank Flag Link Fri Oct 9, 2009
In most short sale negotiations the BANK always reserves the right to accept another higher offer.
Web Reference: http://www.shopprop.com
0 votes Thank Flag Link Fri Oct 9, 2009
Thanks everyone for your kind replies.

Looks like we're stuck with our agent if we wish to continue pursuing this house. :(

I guess the positive side of not having our offer approved by the bank is that we can move on to other listings with a NEW agent. In case we need a new agent, are there any short sale specialists reading this forum?
0 votes Thank Flag Link Thu Oct 8, 2009
Thanks to Ashley, Patrick, Ardell and Steve for your thoughtful replies.

Part of the reason why we've been looking for 2 years is that our agent is a friend of ours. I don't want to say that he's lazy but he pretty much expects us to do our own research--we find the listings we like to see on Redfin and then he just unlocks the doors for us.

Anyhow, I'm wondering if it's possible to part ways with our agent and withdraw our current offer on this short sale. We would then contact the listing agent of the short sale to see if she'd be willing to serve as a dual agent and help us submit a higher offer that will hopefully be strong enough to win out. Given that she would be in contact with the negotiator during this process, she would certainly serve as a strong advocate on our behalf right? Of course, this would all depend on her not already representing another buyer and also having the Seller's consent.

Given that we've waited for 2 years for this house, we really hate to let it slip away and I can't think of a better alternative to our current situation :(
0 votes Thank Flag Link Thu Oct 8, 2009
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