Home Buying in 92883>Question Details

Tom, Home Buyer in Corona, CA

Is it normal practice for an agent seling a short sale to not accept an offer at list price?

Asked by Tom, Corona, CA Tue Jun 22, 2010

We recently placed an offer on a short sale at list price. After just one day the selling agent notified our buyer agent that they accepted another offer, but refused to disclose or make a counter offer. In my opinion, this sounds like potential fraud, especially if the seller is protecting a related party making an offer. I'm sure the bank would be interested in this practice. Any ideas on how to address this issue? What can a buyer's agent do in this situation?

Help the community by answering this question:

Answers

11
BEST ANSWER
It is up to the property owner to select which offer to send to the bank, possibly with the advice of their Realtor. It would behoove them to select the best offer. Keep in mind a couple things though: The highest offer is not necessarily always considered the "best offer". The terms may be important too, along with how much cash is being put down (or all cash) vs. loan. Another point, there is a lot of competition now. So just because you offered at list price, does not mean that there weren't others who offered at list or higher, even in the first day. I have seen this many times. The listing agent is required to show the seller/owner all offers (unless they have made other written agreements). You can follow up with your agent, and be sure that they are following up frequently with the listing agent. Often times short sales buyers may back out in the time it takes for a short sale to get approved. So don't give up hope yet. Follow up and persistence may be key (and this is the job of a great Realtor).

Good luck and let me know if you have any other questions.

Richard Schulman
Keller Williams Realty
#1 Buyers Agent KW Los Angeles Region
(310) 482-0173
schulmanrd@yahoo.com
0 votes Thank Flag Link Tue Jun 22, 2010
Inventory of homes for sale in Corona is dropping. Currently, we have less than one month of inventory. I believe we've set a record. What that means is that if no more homes were put up for sale, our current inventory would be sold in less than a month. A neutral or normal market has 6-9 months of inventory.

In addition, interest rates are at an all time low. Subsequently, due to the laws of supply and demand, homes are getting multiple offers and prices are being bid up. Your full price offer may not have been their best offer.

Agents have a fduciary duty to their clients. They can only disclose the details of other offers if authorized by their clients to do so. Disclosing that information is not always in their clients' best interest. Unfortunately, getting your offer turned down doesn't entitle you to know the details of the accepted offer. There are also no rules as to what offer to accept. It is the decision of the sellers.

When evaluating offers, there are many things to take into consideration. Much of them hinge on the likelihood the buyer sucessfully getting the loan and closing the sale. Most people don't realize that the main reason sales fail to close is that the buyer doesn't get the loan. Unlike virtually every other kind of loan, in Real Estate a buyer can have loan "pre-approval' and still fail to get "final approval" for a variety of reasons.

For this reason, cash offers often "win" the property because they are a "sure thing". Second, conventional loans are often preferred because the requirements are a little less stringent than FHA and VA regarding the properties condition and underwriters guidelines.

Other things that elevate one offer over another (besides offer amount) are how much money is initially put into escrow (earnest money deposit),amount of down payment (signifying strength),whether or not buyer is asking seller to pay their costs and several others.

Unfortunately, there is nothing you can do in this situation but keep searching and watching to see if this home comes back on the market.
Web Reference: http://coronasbesthomes.com
0 votes Thank Flag Link Fri Aug 3, 2012
Hi Tom,

There are many reasons that your offer may not have been accepted. A lot of agents price short sales below market value in order to receive offers quickly to get the short sale process started. The asking price may not end up to be the sales price that the bank will insist on. Someone could have offered the same as you only they had money to cover incase the bank's appraisal is higher. There are lots of conditions on a purchase agreement that make one offer stronger than another besides the purchase price.

In regards to your other worry about the seller accepting an offer from a relative, there are very strict rules regarding 'arms length' selling on a short sale. These are put into place to protect the banks from having people sell to their familys at low prices or so that they can buy it back from them.

When you submit an offer on a short sale, if your agent does his/her homework, your offer should be at market value and one that the bank will most likely accept and approve.

Don't fret too much over a rejected offer... just move on and keep on trying.
Your home will show up sooner or later!

Hope that helps!

Trudy Carter
homes@trudycarter.com
951 415 9002
0 votes Thank Flag Link Wed Jul 11, 2012
I get you Tom. That is a fraudulant practice and can be reported to the Dept of Real Estate in the state of Ca.
The Listing agent has a fudicuary duty to represent the seller first and foremost.
SOOOOOOOOOO many buyers walk away after submitting many offers in hopes to get an offer accepted. Listing Agents don't want to convince you to hold on since they know you may have to hold on and be waiting 3,6,9 months to close escrow. I hope this answer helps. :)
Web Reference: http://www.LydiaKray.com
0 votes Thank Flag Link Fri Jul 30, 2010
Tom: As long as the offer was presented the Listing Agent does not have to divulge what other offers have been submitted. Listing Agents and Sellers are under no obligation to state what other offers and it in fact should not give out other information regarding the accepted offer. Obviously, the offer that was accepted was higher than yours or had more attractive terms.
0 votes Thank Flag Link Wed Jun 23, 2010
Have you discussed your concerns with your agent? What do they say? They likely have had some conversations with the listing agent (or should have!) so might have a better feel for what is going on, and some further insights and advice to offer, knowing the specifics of your situation.

I understand your concerns but want to also re-emphasize that you may not want to jump to the conclusion that your offer was never considered or presented fairly. The cases I've seen recently where an offer is beat out is more often than not related to investor cash offers, concerns of sellers with loan financing falling through, and even just buyers knowing the competitive market (with the help of their agents) and offering over list price to be more competitive in the first place.

And a final note, often times I see short sales priced very low. Note that these can be rather arbitrarily priced by agents (to generate interest), but won't be approved by the bank if they're priced too low. Those who know the comps may offer higher so that they have a better chance of getting their offer accepted (and will realize the competition the low price will generate) and getting it actually approved by the bank. I don't know the specifics of the property you were offering on, so I don't know how it was priced, but just throwing this out there as a thought to consider too.

Richard
0 votes Thank Flag Link Tue Jun 22, 2010
I understand everyone's point, but I think you all might be missing the point. I believe the listing agent will not consider our offer because I am represented by a buyer's agent. I'm sure you all agree that is the best route for a buyer, correct? I anonymously sent an email a day after our offer was rejected to the listing agent, and she was ready to talk and accept additional offers. Thoughts?
0 votes Thank Flag Link Tue Jun 22, 2010
The listing agent doesn't need to disclose at what price an offer was accepted by the seller, even if you offered at list or above. It could have been that the terms of the other offer was better i.e. higher down payment or all cash. If another offer was accepted, there is no reason to send your agent a counter offer.

The bank does take interest in what the property sells for, the bank will send out their own appraisers before approving the short sale, if the offer the listing agent submits is too low, the bank will counter. The buyer's agent can't really do anything in this situation, what they & you can do is keep you offer on the table & held as a back up should the 1st buyer back out.

The listing agent should only be submitting 1 offer to the bank at a time, in fact most banks will only work with 1 offer at a time.

EmilyKnell1@yahoo.com
562-430-3053 cell
0 votes Thank Flag Link Tue Jun 22, 2010
This is what happens when agents do not take the time or courtesy to communicate. In a normal transaction you would never tell a buyers agent what the offer was the seller accepted. Why? What happens if it falls out of escrow, and you have to put it back on the market, now your seller is at a disadvantage because you have told another agent exactly what the seller will settle for. In a short sale transaction the Bank only will accept one offer, so you have to make sure it is the strongest and most likely to close. For Example your offer is at full asking price and you have appraisal and inspection contingencies, another offer is a little less but is all cash and all contingencies have been waived. The bank is going to be more apt to accept the latter offer so that is the one you send in.
0 votes Thank Flag Link Tue Jun 22, 2010
So there's more to this story. We were represented by a buyer's agent, which I think is the right thing to do. I contacted the selling agent by email directly and they said they are still accepting offers. My agent told me they were not accepting any further offers per selling agent. Seems a bit unethical to me (not illegal). This selling agent is likely taking an offer where they do not have to split the commission with a buyer's agent. I also find that the offer is less than list. We are pre-approved and are not a risk of falling out of escrow. Unbelievable.
0 votes Thank Flag Link Tue Jun 22, 2010
You ask: "Is it normal practice for an agent seling a short sale to not accept an offer at list price?"
ANSWER: No, but it can happen. More precisely, the sellers can choose not to accept a list price offer. The agent has no role in that; it's up to the sellers. It could be, for instance, that the list price was set deliberately low in order to encourage multiple offers above the listing price.

You ask: "After just one day the selling agent notified our buyer agent that they accepted another offer, but refused to disclose or make a counter offer."
ANSWER: A seller can accept (or reject) any offer he/she feels like. And it's entirely legitimate for the seller and the listing agent not to disclose the accepted offer. That can remain private until the sale is recorded. As for not making a counter offer, there's no obligation for the seller to counter. Suppose, for example, that the short sale was listed at $100,000. You offer $100,000. Someone else offers $120,000. There's no reason for the seller to counter back to you, especially if it would imperil the $120,000 offer.

You ask: "In my opinion, this sounds like potential fraud, especially if the seller is protecting a related party making an offer."
ANSWER: Where's the fraud? You're suggesting that the sellers sold to someone else for less than you offered. But I doubt that's the case. Maybe they did sell to someone else for less than your offer. But perhaps their offer was stronger--all cash, for example, versus an offer from you for 20% down, or even FHA at only 3.5% down. They can sell to whomever they want. Can you prove that an inferior offer was accepted?

You ask: "I'm sure the bank would be interested in this practice."
ANSWER: Sure they would. They'll be involved in the entire short sale process anyway. So by definition they're interested in this practice. But, again, you're assuming that because your full price offer wasn't accepted, that something illegal was going on. That's probably not the case.

You ask: "What can a buyer's agent do in this situation?"
ANSWER: Not much. Your agent can call the listing agent and say, "Hey. I know the specific terms of the transaction don't have to be revealed until after closing, but can you give me some idea of what the accepted offer looked like?" Sometimes the listing agent (with the permission of the sellers) will actually reveal what the accepted offer was. Sometimes the listing agent will say something like: "All I can say was that the offer was substantially above the listing price." Or--as happened to me once when my buyers didn't realize that they had to offer more (despite my repeated requests): "We received 8 offers, 5 above the listing price. And your clients' offer was the lowest of the 8."

Hope that helps.
0 votes Thank Flag Link Tue Jun 22, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer