Home Buying in Murfreesboro>Question Details

Jori, Home Buyer in Murfreesboro, TN

Short Sale Laws

Asked by Jori, Murfreesboro, TN Sun May 10, 2009

We have accepted a counter offer from a seller on a short sale property, signed a binding agreement with them, and now are just awaiting acceptance from the sellers lender. Can the seller still sign the same binding agreement with other buyers to send in with our contract to the lender? I don't mean just holding on to other offers as back up but actually signing binding agreements like the seller did with us. Also what laws are in place regarding the time frame that a realtor has to move a short sale home from active to pending status?

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I'm not a professional but I've had my own experience with a short sale. In our situation, the homeowner accepted our offer and of course we had to wait on the bank to accept as well. Within 3 days of the homeowners acceptance the listing agent took the home off the market. I was worried about the same thing(signing with someone else as well as us) and my realtor told me that our contract was binding and they could not sign with anyone else. They didn't and looking back now that should've been the last of our worries. It took the bank 3(and might I add LONG) months to even respond to us and when they did they said they accepted our offer but only gave us 2 weeks to close because the house had not paid property taxes in 3 years and the house was about to go back for that. I was already pre-approved through Country Wide but they said they could not get it closed in time due to their underwriters being months behind. So at the last minute I had to switch lenders. The listing agent recommended Mac-Clair Mortgage(just a local company here in Flint, MI). They actually got it done, we closed 1 day before the deadline.

So anyway, I'm not quite sure how they are in Murfreesboro, TN but around here they don't accept multiple offers in a short sale after the homeowner accepted. But the moral to my story is.....make sure your financing is all in order and ready to go because when the bank accepts the offer you don't have much time for whatever reason, in my situation was property taxes. If I wouldn't have found the wonderful people at Mac-Claire Mortgage I would have lost my dream house.

I hope I helped even a little bit, I do know how frustrating and confusing this(short sale process) all could be for you.
If you have any questions don't hesitate to ask, I'm no professional, I can only go by personal experience.

Good luck,
Tiphanie
1 vote Thank Flag Link Sun May 10, 2009
If I understand your question you want to know if a seller can present multiple SIGNED contracts at the same time to the lender. The answer is no. When the seller and buyer come to an agreement and sign the contract, the agent should include that the agreement is binding upon acceptance by the seller's third party lender. The contract is then forwarded to the bank with all required paperwork. While contract #1 is at the bank waiting for approval, Buyer #2 comes in and wants to put in an offer. The seller's agent can accept the offer, but only as a back up. Even in a short sale, the same rules apply - - if contract #1 does not go through, then the buyer's agents can begin to present offers again. I just went through this exact scenario with a property I have listed in LaVergene. Got 3 offers on a short sale property. I present all three offers to the Seller (they came in at the same time) The seller chose the offer that best represented their interest, signed it and then rejected the two other offers. All paperwork and copy of contract was sent to the bank and is now in the waiting game portion of this sale. Inthe meantime, there are three other offers waiting to be presented as back up offers in the event the bank rejects the first offer outright and does not counter. Then I can submit the back up offers to seller and the process starts over again.
I hope this helps. If you need more information, let me know, I'd be happy to help.
Tina Evans, Broker
Tina@tinaevans.net
LUAN REALTY GROUP
Web Reference: http://www.tinaevans.net
1 vote Thank Flag Link Tue May 12, 2009
Lets make this simple and clear. To answer your question in short: The seller can only accept one offer (there is only one property to be had). The property must be pended when there is a binding agreement (an agreement is not binding in TN until both banks have signed off on it. This is the purpose of active-contingencies, which tell buyers there's an accepted offer pending approval by the bank or buyer upon inspection etc.) and must be closed when the deal is closed (i.e. officially changes hands).

The not so short asnwer is this...and I speak from experience with this issue in Murfreesboro, the listing agent of the short sale has the option on whether to continue taking offers after one has been accepted. Here at John Jones Real Estate, our policy is to present all offers until one is accepted at which point we discontinue accepting them. However, some agents keep on taking offers in a short sale situation, but only one can be accepted at a time, the others must be backups.

The seller can accept only one offer, while the buyer can make offers all around town if they wish. Consider it like this. The seller only has one property while the buyer, in essence, can purchase as many properties as they wish. The trouble comes when they have more binding agreements than they can afford.

I also know from experience a buyer can withdraw an accepted offer prior to it becoming "binding" (which is only at the banks' approval) in Tennessee. We sometimes see this with buyers who don't have agents to steer them away from this inappropriate approach. It works much like a contingency that gives the buyer an out.
0 votes Thank Flag Link Tue May 12, 2009
Really have a hard time agreeing with Johns opinion that a buyer in a contract that has been accepted by the seller with a contingency subject to third party approval can walk at any time. I guess it depends on how mutually and contractually you both consider what is to be 'ratification' and whether you treat the third party approval as a contingency just like any other or as approval that must be met prior to declaring the contract ratified. Better make it clear. If a buyer of a short sale listing of mine was under contract contingent on third party approval and decided to walk prior to contractually agreed 'dead date' then I would be calling our attorney.
0 votes Thank Flag Link Tue May 12, 2009
The seller can make offers on as many properties as they like. In a short sale situation the agreement doesn't become "binding" until the banks have signed off on it as well. The buyer could find another property they like better and sign an agreement on it as well. The key is if they withdraw the offer on your home before the banks sign off on it. If not they could be in a situation where they have binding agreements on multiple properties in which case they have to buy them all, if the banks approve them before the offer is withdrawn. Of course there are always ways they can get out of them legally, but it won't be cheap.

The property diesn't have to moved to pending status until there is a binding agreement on the property. Having been signed of on by all parties.
0 votes Thank Flag Link Mon May 11, 2009
An offer on a short sale lisitng of mine would be 'contingent on third party approval' which means that there is a contingency and it is not pending. The bank is the one that has to approve the sale and they may be directing the seller/agent to forward all offers. The sellers need to sell - the bank wants an acceptable offer.
0 votes Thank Flag Link Sun May 10, 2009
Welcome to the wonderful world of short sales! The lender is the decision maker in short sales. Normally, from my experience, a seller doesn't sign a contract until the lender accepts it because it isn't binding until the lender does accept it. The property isn't "pending" until the lender accepts the offer. I hope you know the stage you are in now can take months. Have patience. You can't rush a short sale.
0 votes Thank Flag Link Sun May 10, 2009
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