Layth gave some good advice when he said to find out as many details about the circumstances of the property you are interested in. An experienced agent can give you valuable advice about the chances of the short sale being approved at all and in a reasonable time.
The success rate of short sales has much improved due to improved procedure on the side of many lenders and better knowledge about short sales on the side of many agents. (btw, not all lenders or agents have improved).
I do list short sales and have partnered with an entity that is handling the short sale for the seller on the lender's side. Her experience with lenders and different short sale situations has helped my buyers tremendously in making a decision if they want to pursue a particular short sale. I also make as much information available to prospective buyers as I want a buyer to actually 'hang in there and go to closing'. I'm also not upset if a sincere buyer has to move on after giving reasonable time to fulfill the terms of the agreement.
I'm sure if you get the information for the properties you are interested in it will cut your list down to a few properties that have an excellent chance to be approved in a reasonable time.
I support your approach in making multiple offers assuming you have done your due diligent and we are talking 2 or 3 properties. I would not recommend to make offers on 20 properties.
Good luck to you and remember knowledge is the key to success.
Happy 4th of July
Oliver von Gundlach
As far as fairness, I believe it is extremely unfair for a short sell listing agent to expect a buyer to stop his search for the right home and rely 100% on the short sale ever getting approved or closed. IT IS ABSOLUTELY UNFAIR for a buyer not to be able to continue looking for a property--UNLESS the property has already been previously approved at the offer price and the seller provides a written copy as proof of same.
So, I have buyers who will write multiple offers on non-approved short sales and NEVER put up an earnest deposit because unfortunately some less than ethical listing Realtors and their Sellers will attempt to keep all or part of the earnest deposit when the buyer is within their legal right to cancel.
Without an offer, the servicer will not even evaluate the seller to see if they are capable of getting a short sale.
I've seen idiotic Realtors who will make only one offer and wait and wait and wait... only to find out the Seller is required to agree to repay part of the Private Mortage Insurers loss by signing a large promissory note at closing. That Seller may just decide to keep the house and rent it out rather than pay $60k to the lender!
Also there is a lot of incompetent advise being dispensed to Short Sellers and when the seller realizes the $100k the lender forgives him on a short sale will be reported to the IRS as ordinary income and he has a $25k tax liability, he may then ask the lender for a loan modification.
Meanwhile the honorable buyer will have already missed out on 10 other genuine bank owned bargains!
This is especially important in Florida because we are a "recourse" State. What that means is if the lender(s) do not specifically forgive the Seller of their loss, they can go after the Seller on a Short Sale after it closes.
Oftentimes a Seller that has not been adequately informed by his Realtor about the liability and possible tax consequences of a Short Sale, that Seller will refuse to close. If a Buyer who is represented by an inexperience Realtor actually puts up a "good faith" (earnest) deposit and that Seller decides he wants to coerce the Buyer into giving him part of that buyer's deposit, well he can. Most EMDs are held at a Title Company and when there is a dispute (even when it is black and white that the buyer is entitled to full refund of her deposit), if the Seller will not release the deposit, the Buyer may have to file a lawsuit!
So, it is EXTREMELY unethical for a short sale Listing Agent to "require" an earnest deposit BEFORE the SELLER has been approved for a Short Sale and also the PRICE has been approved at the contract price.
If we would have ALL of the Short Sales off of the market, pending sale until/if they are approved, it would only make matters better for all Buyers and Realtors.
So... once a short sale is approved and that buyer backs out, well it should be quick to find another buyer because 90% of the doubt has been removed. The listing agent may not care how FAIR it is to a Buyer to put up an escrow deposit--they just want to close and get paid asap!
So.... Short Sale Buyers need to beware and make sure they work with a Realtor that not only knows the FAR/BAR AS IS contract inside and out and also will not tie them up on properties that may not ever close!
Good luck Busy Mom... hope your Realtor sees the light!! lol...
All the best,
i totally agree with the thinking and approach of Alma Rose and Jack Liebsch below, if only because the Banks have hi-jacked the approval process with untimely, protracted and unorthodox responses that often disregard the 'Time Is Of The Essence' needs of the buyer.
Charles Balducci 215.531.2000
Coldwell Baker Preferred (Avenue Arts) Philadelphia
The California contracts have a portion called the short sale addendum, which you cal also place another "I want out" clause giving a deadline for bank approval.
Your agent has a duty to you to defend, and make sure your best interests are performed.
Back in the mid-eighties and early ninties my office had a few clients who put in ovr 10 offers a day ( this prompted us to computerize our system way before it was the trend).
Make a few judicious offers on the properties you deeply desire.
Now, I can understand your agent's hesitation, sometimes you have buyers who want to put in a million offers, but are not invested in any singular home so when ever any offers return they spend their short amount of allotted time worrying "well, I want to wait for xyz property before I accept abc property" and end up entering a paradox of choice situation.
Write the homes down in priority, give that priority list to your agent, and show your commitment with an agency agreement stating that if you choose not to perform, the agent still gets paid.
Do that, and watch your agent write every offer in the world.
Even if you got 10 acceptances, your contract should be written so that you have the absolute, unconditional right to cancel within 7 days AFTER approval so you can cancel 9 of the contracts and continue to buy the one you really want.
It's a little scary that even experienced Realtors don't understand the basic FAR/BAR As Is contract that normally allows a buyer to cancel at the buyer's sole discretion.
Let us know if you are able to educate your Realtor.
All the best,
While I agree with some of your observations, it sounds like you have a lot of misplaced anger.
100% of my business since 2005 has been short sales and yes, many sellers are renting their properties, collecting the rent, and not paying the mortgage.
Is it Illegal? NO;
Unethical? maybe / maybe not.
The Tenant is receiving exactly what they are paying for - HOUSING. Tenant pays their rent, they get a place to live - it does not matter whether the landlord is paying their mortgage or not.
Do I agree with this practice - absolutely not - but that's NONE of MY business.
Each State is a little different. In CA, where I am, there is NO requirement to collect an EMD to open escrow on a short sale - our forms handle it. I DO have the EMD deposited into escrow and if the Short Sale is declined - the Buyer gets every penny of their money returned.
Having said that, I personally will not represent a Buyer who's submitting multiple offers with no intention of closing them. It is a waste of everyone's time and it is misleading to the public (sellers).
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. IN MY OPINION, there is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
Also on a Rental property, the seller cannot qualify for a HAFA Short Sale and cannot get the tax exemption on primary residences on the amount forgiven by the lenders.
Plus a tenant can be destructive so that property you made the offer on six months prior may be in seriously decayed condition with pet smells, chewed up woodwork, missing appliances (because tenant didn't get their deposit back and sell gave the appliances to them!) the list goes on and on...
Also don't forget that the Seller on a Short Sale may intentionally delay the closing by not submitting his financial info in a timely manner so he can continue to live for "free" and not pay rent!
So, it's truly unreasonable (and unethical) for a Short Sale listing agent to advise his Seller NOT to accept an offer without an earnest deposit. Prudent Buyers and their ethical Realtor will not limit their choices to a property that may not ever close and also not risk an earnest money deposit on a Seller who may not be in a good state of mind because of their financial distress!
Also we still have a lot of Short Sale Fraud going on and that is yet another reason not to put up any money until/if the Seller and price are approved by ALL lienholders and the Seller acknowledges that he accepts the terms of his Short Sale demand letter. That letter will describe if he will be forgiven the loss, have to bring cash to closing, sign a promissory note to repay part of the loss and the possibility that he may have significant tax consequences.
Let us know how your Realtor responds!
All the best,
It looks like you have a lot of answers! I didn't read all of them but let me ask how you would feel if you were the SELLER and received an offer which you accepted thinking you were going to move forward with your life THEN suddenly you find out that buyer made 19 other offers and decided not to buy your house?
As a broker, I made a decision not to represent buyers who operate the way you're planning. In MY opinion your behaviour is unethical. You are making offers on properties you have no intention of buying.
Best of luck in your endeavors....
Newport Beach CA
Taking Short Sale properties off the market, without the intention of buying the proeprty is unfortunately common practice in our area. This is why inexperienced Realtors are not able to close Short Sales (becuase they are taking their listings off the market for a buyer that does not intend to buy) -- This is what separates the Amature Agents in our profession to those with Experience. Since I mostly represent sellers facing foreclosure, I can share with your that if you had a deposit to buy one of our Short Sale listings and withdrew because you found another house, you would lose your deposit and the expense of the home inspection (which we requrie the buyer to pay for up front) or the seller could deside to sue you for damages.
In short -- stick with your agent and don't do something you would not want done to you.
Please elaborate further by pointing out any federal, state, or county statute or case law which may support such a statement that would apply to the short sale purchasing strategy discussed here.
there is nothing illegal with this, at least not in NJ. you are not breaching a contract. Also, i respectfully disagree with whoever thinks it is unethical... how can it be unethical? your a buyer who needs to find a home that best fits your needs, you need to cast as wide a net as possible to make sure that you actually close on something. or else you will still be looking a year or two down the line. If the seller of the property is cooperating and the sellers agent presents your offer in a timely fashion and keeps you posted on the status DAILY, then i would say to stick with the one if your gut tells you to. In most cases, presenting multiple offers is the way to go with short sales, and as your buyers agent, the fiduciary responsibility is to you and only you, no matter what the seller thinks.
As you can see, depending on who you ask, you are going to get a wide array of answers on this question. However, what really matters is; 1) although making several offers on several properties may be legal, is it ethical and fair to the seller? and 2) Are you treating the seller the way you would want to be treated? and last 3) At the end of the process when you've closed on your new property, after withdrawing several other offers (which may have had a strong negative impact on the seller(s), how are you going to feel about your choice? Best of luck to you.
I'm not an Attorney but I don't think it's illegal. However, it's very unethical and I applaude your Realtor for not wanting to do it. I wouldn't either. There are several reasons for NOT doing it. 1) Just plain wrong - how would you feel if you were one of the sellers receiving one of your multiple offers? 2) What happens if you get 2 (or more) accepted offers at the same time? It's happened. Then legally, you are in contract to purchase more than one house. Can you afford that?
I agree with your Realtor - only submit one offer at a time. And, have your Realtor let the Listing Agent know you are only submitting one offer at a time. This sometimes gives you a little advantage with the seller if they don't think you're out there submitting offers on several properties - which to the seller means you don't really want their house, you'll take any house you can get. If the seller thinks you're committed to purchasing their house, it's a plus to them.
Ethical: No. (Good for your agent!)
Good strategy: Probably not.
Let's examine those issues briefly. Legal? Yes. You're making an offer. It isn't a ratified contract until all the conditions are met, and that includes the lender's approval.
Ethical: That can be debated either way. But, in the specific situation you're describing--a short sale--you're misrepresenting your intentions to the seller. As noted by others, short sales are incredibly stressful for the seller. You come in an make an offer. What's a seller to assume? Probably that you're seriously interested in buying the house. (You might say you are.) But not serious enough to focus on that one house. And perfectly willing to withdraw your offer at any point. That's misrepresentation. And--in my mind--that's unethical.
Good strategy: Probably not. I see and understand your point. But look at some of the downsides. First, you could get caught in a situation where you've got two ratified offers. Suppose two banks--for two of your different offers--both approve their respective short sales Monday morning. You don't have time to cancel one. OK, then as Alma suggests, there are other contingencies that you can invoke, such as an inspection contingency. But the situation is getting stickier. And Alma cautions against putting up any earnest money. That's good advice for what you're considering doing, but your offer will be very weak with no earnest money deposit, or just a token amount (such as $100). And your strategy may lead to you making offers on some not-so-good deals. It'd be pretty easy to say, "Well, it's not the best deal out there, but we do want a short sale." You could well end up making offers on properties you really don't like all that much, just to have some deals in the pipeline. I can tell you, from an investor standpoint that's a poor strategy.
Just my two cents worth.
The Seller loses nothing by submitting your offer because at least he will know whether or not he can get approved for a short sale and if the sale price is acceptable.
Now if you're suggesting submitting lowball offers, then most competent realtors wouldn't waste their Seller's time.
You really need to consider genuine bargains, Bank Owned listings. Many will be filthy dirty with missing appliances and worn out carpets and odd colored paint and may even need a new roof or Air Conditioner. You can add all of those things plus granite counters, stainless steel appliances, crown moldings, hardwood floors, etc. into your mortgage and still be able to put as little as 3% down with a Fannie Mae HomePath Renovation or 3.5% down with an FHA 203K mortgage.
Hope this helps.
Good luck to you,
Unwavering Commitment to Service
But is it moral????
Suppose you were one of the owners stuck in this desperate situation and waiting to move on.
How would you feel if you received an offer knowing that the buyer is playing eenie-meeny-minee-moe.???
You would not be breaking any law by placing multiple short sale offers but in the event you have multiple acceptances there could be serious implications in trying to get out of a binding agreement.
If this is your plan, we strongly recommend making sure the wording in your offers protects your interests and allows you to back out at any time, for any reason, without jeopardizing your escrow money. It would be helpful to process this with an attorney to be sure you are on solid ground.
I agree with my colleagues and your agent. Part of the contract is an element of Good Faith. By essentially reserving multiple homes with the intent to only buy one I think doesn't match that requirement. It can also have disastrous consequences to the seller.
While you have their home off the market they will miss out on other buyers who may be operating in the advised process. If the bank grows weary and decides to foreclose once you release the house you have done damage to the already hurting sellers.
I don't believe you have ill intent, but the consequences of proceeding with this strategy could be harmful to the sellers you don't select, the buyers who never see it and the agents who never get paid.
I'd recommend you start by finding the house you are willing to wait for. Have your agent research the listing agentâ€™s track record of success with short sales. If the listing agent doesn't have a successful track record, consider selecting another house. You can get a good house for a great price without hurting others in the process.
Now by putting the deposit into escrow, the listing agent can mark the property " contingent / no show" meaning no other offers will be submitted.
Million dollar question!
I agree with your agent. I do not recommend that strategy for my buyer's. And actually
will NOT do it.........
When you submit an Offer to Purchase, it's a "legal" contract. One that should not be
taken lightly. Although many do not actually pursue legal recourse if the buyer backs out,
you CAN still be liable for signing a contract and not following through with the purchase.
When that strategy is used, it also affects the seller's and listing agent. If the seller accepts your
offer & submits it to the bank with the short sale package, the home is pretty much off the market, or
put into a "back up" position.
These seller's are already in a stressful financial situation and trying to avoid foreclosure. If the buyer
backs out because they decide on another property, it jeopardizes the whole transaction & may cause
harm to the seller.
My advice is to find the "one" home you want and stay with it. Your agent will know if and when it's a good time to pull out of the transaction if it's not going to work out.