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Please Help, Home Buyer in Herndon, VA

In a short sale sit. I am the back up contract. If sellers like my offer better can they refuse to sign the contingency extention and take our offer?

Asked by Please Help, Herndon, VA Wed Nov 10, 2010

The contact in play as been signed by both seller and buyer. Now they are waiting to hear fro BOA. The listing agent said we could submit a back up offer but no one see it. Does she legally have to present it to the sellers? If our contract I'd better (60 percent cash down plus almost at original list price before it went into short sale) and the sellers like ours better, can they refuse to sign the contingency extent ion on the original contract and take ours instead? (The buyer contingency expires Jan 11,2011. If there has been response fro BOA yet and the buyers want to extend their contingency but the sellers do not sign, do we have a chance of them accepting our offer then?) We asked the listing agent about the contingency exp on Jan 11th and she said all parties will just sign an extent ion. She will not present our offer to the bank. Can the sellers ask her to submit it if they wanted? This is our dream home and we are willing to try anything! Chantilly, va Loudoun Count

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Dear home buyer,

I believe my colleagues have given some sensible and informative conclusions and alternatives to your situation. One thing no one on this forum most likely knows...is HOW the contract was written. If the verbiage is standard and without change or imagination and creativity then your scenario is one way. If the verbiage is a little creative and outside the box then you may or may not have another scenario.

With that said, be CERTAIN the other agent knows of your offer and the details and keep it in the back-up position. In doing so..you may also need to add some teeth to your offer by perhaps adjusting or modifying any or all of your contingencies.

If this truly is your dream house..you and your agent should be able to find a creative way to make it work. One way...is to buy out the previous offer and make them go away. This could be less expensive than escalating your offer...There is of course some inherent risk.. As always, it all depends on how much you want the home.

Best of luck!

Kind Regards,

Erik J. Weisskopf ABR,CDPE,CRS,GRI
Erik@AskMeAboutHomes.com
2 votes Thank Flag Link Thu Nov 11, 2010
If January 11th comes and there's no response, the sellers do not have to agree to an extension and the contract becomes void. If you submit a back uo offer to the listing agent, he/she must present it to the sellers. If he/she refuses to do that then your agent needs to get in touch with the listing agent's broker ASAP!
1 vote Thank Flag Link Thu Nov 11, 2010
IF your contract is higher than say the short sale contract..AND the sellers can afford to sell the house to you without it being a short sale then your case seems relatively easy. A. Make sure you have QUALITY representation for yourself and B. MAKE SURE you can get your offer in front of the sellers. If it's acceptable the bank will surely want to pull the other off the table thus not giving "3rd party approval". Obviously this is a condensed version. You may of course need to waive your appraisal contingency since you feel your offer would be for more than the house is worth! Seems if you don't have A. you will continue to visit this forum for the questions you have...but think what it may cost you for the questions you don't know to ask!


Furthermore, if there is indeed some shenanigans going on..DROP THE HAMMER! You can go to the broker..but don't expect them to really discipline the agent..

I also agree with my colleagues in that you should continue to search as this could go on for months and you could still have nothing.

Best of luck,

Erik J. Weisskopf, ABR,CDPE,CRS,GRI
Erik@AskMeAboutHomes.com
703.216.1222
0 votes Thank Flag Link Fri Nov 12, 2010
I would most certainly want to be working with a buyer agent signed up for me at this point. A buyer agent, working with his broker, would be in a good position to ask questions.

I am more than a bit worried about what the listing agent told you. I wonder if you understood the listing agent correctly. If so, what you say sounds as though there may be serious ethical questions regarding the listing of the home from Reatlor ethics, Virginia regulations, and multiple listing company regulations and points of view.

Please, please, make sure that, first of all, you protect yourself. Hire a buyer agent with some experience, read, and have your agent read, all documents that you are asked to sign, and do not hesitate not only to ask questions of your agent but also, if you are in the least doube after doing this, to ask to meet with your agent's broker.
0 votes Thank Flag Link Thu Nov 11, 2010
Is it possible to find out what the bank is accepting or what they are expecting?
0 votes Thank Flag Link Thu Nov 11, 2010
Thank you all so much for all of your responses. It sounds to me like e certainly have a shot at this!!! I know our contract is strong and higher. (We are offering more than the worth to get it...) If our offer is high enough, is it possible it may pull the sellers out of "Short Sale" if they accept? I don't know if that is possible, or if once the bank approves to turn it into a short sale, it must stay that way. (Remember that when we were about to put our offer in, it was not listed as short sale or potential short sale.) When they received the offer in play now, the listing agent then turned it into a short sale...leading me to believe the offer was not that high and the sellers were desperate. The lisitng agent states that it was not a potential short sale because the sellers wanted to try and get the most they could.
0 votes Thank Flag Link Thu Nov 11, 2010
There are a lot of good answers to this question already.
If you are not working with a buyer agent, you need to be. This buyer agent should be familiar with the short sale process in general.

There is an ethical question in my mind with respect to both the Realtor code of ethics and Virginia real estate regulations as to whether or not a seller client of an agent ( in an agency relationship) may sign away his rights as a client to be presented with all offers, up to the time of closing. This is yet another good reason to have retained a buyer agent in writion, so that, if nothing else, you have access to a broker who can answer these questions.

Please also bear in mind that the controlling party is a short sale situation is the third party lender, and the lender required addendums ( which differ from lender to lender ) should be read with great care.
0 votes Thank Flag Link Thu Nov 11, 2010
First thing you should note that a short sale is still a sale between the seller and the buyer, all offers HAVE to be presented to the seller. The seller can only sign one offer at a time though agreeing to send it for short sale approval. If your offer is better, than when the other expires, they could refuse to sign any extension and accept your offer. In some cases an addendum is used telling buyers that ALL offer are submitted to the bank for review as they come in, some banks encourage multiple offers if they are better than what has been submitted while other banks only want 1 offer at a time. The person negotiating on behalf of teh seller should have asked this up front so they know how to proceed with working with the seller and the banks negotiatior.

Please see my blog on buying short sales tha has some advice and tips
0 votes Thank Flag Link Thu Nov 11, 2010
Please,

You might think you are the back up contract - you are NOT!
The SELLER must SIGN and ratify the back up contract for the contract to be ENFORCEABLE in the court.

What you have is an agreement (via e-mail, not verbal, I hope) with the listing agent who is either very ignorant or very nonchalant about the contract law.

Right now your "contract" is a waste of perfectly good paper and ink - and a lot of false hope.

Your agent should know better to demand from the listing agent that the contract is signed by the seller.
What makes you think that the listing agent does not have 2-3 "back up contracts" that he/she will pick and choose when the time comes?

Demand that your back up contract is ratified as such by the seller - with full understanding that there is already a primary contract that both sides hope will result in the settlement.

Better yet, move on to the next home where YOU are the primary contract.

And do that listing agent a favor and report him/her to the broker - or the local association and DPOR - that listing agent creates a very poor image for the entire real estate industry.
0 votes Thank Flag Link Thu Nov 11, 2010
yes.

As McCowan stated the listing agent is ethically required to submit all offers to the seller. This can give the seller perspective on whether they want to sign an extension of their first contract or allow the contract to expire and send a new and improved contract to the bank.

If listing agent is unwilling to fulfill his/her fiduciary duties to seller of informing them of all offers, then your broker needs to contact the listing agent's broker.
0 votes Thank Flag Link Thu Nov 11, 2010
Hi - excellent answers from previous agents and right on the mark. If the seller were to refuse the ratified contract, they would be breaching the contract and would put themselves in a position of liability for lawsuits. The seller must be presented with all offers, but they only have to send one offer to the bank - usually the first decent one so they can get the short sale process under way. The bank then bases their approval on that offer.

I would just offer some alternative ideas - a similar home is likely to come on the market in the future (depending on your timeframe), or you could ask your agent to reverse market to similar homes to see if anyone else is considering selling.

I can only guess that maybe this is your dream home not only because of the house itself but because of the price. If that is the case, please keep in mind that many short sales are listed for low prices to encourage a quick offer so the short sale process can get under way. If it was priced low, the approval is likely to be higher than contract/list price. A lot of buyers back out at this point and if you are willing to pay more, you will get an opportunity.

Thanks,
Sonal
0 votes Thank Flag Link Thu Nov 11, 2010
The sellers are not the bank...keep that in mind. The agent must present your offer to the sellers, and for any reason at all they can choose not to send it to the bank. If I have a ratified contract I would work that until I couldn't work it anymore. As Betty said, a HIGH percentage of Short Sale contracts fall out and we often sell to the back up buyer... so just do it and be patient and trust that whatever happens does so for a reason.

BTW, in the standard short sale agreement forms, the seller can not push the buyer out of the contract after the expirarion of the short sale approval deadline, only the buyer can kick out at that point.
0 votes Thank Flag Link Thu Nov 11, 2010
Short sales are tough, and I'm happy to hear this is a home you really want, but unfortunately all you and your agent can do is wait for one of the parties to drop out.

They have a ratified contract - both buyer and seller have signed the contract and agreed to exclusively work to make that deal go through. You can hope that the bank will come back asking for a higher sale price and that the first contract will be withdrawn. You can hope the buyer loses interest and uses one of their options to withdraw their offer. That happens often, and that's why the seller's agent took your back-up contract.

A very high percentage of short sale contracts fall through because of changes in what the bank will accept or because the buyer gets cold feet or finds another home they would prefer. So there's still hope for you, but it requires much patience. Your agent should keep in touch with the listing agent to stay aware of how things are going with the process, and continue to show you other properties.

Good luck, and hope you get your dream home, whether it's this one or another one.

- Betty
0 votes Thank Flag Link Thu Nov 11, 2010
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