Two offers on a short sale property. One is 20K higher price with 3.5% down FHA loan buyer will pay their own closing costs. Second offer is

Asked by Team Real EstateSINY, STATEN ISLAND, NY Tue Oct 13, 2009

20K lower with 20% downpayment. What would you do?

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18
Howtema, Home Buyer, Los Angeles, CA
Wed Oct 14, 2009
Eunmi ,

Aren't you supposed to deliver both offers to the seller? Isn't that what you are taught in RE school?

Is an agent given the power to decide which offer to present and which to slip under the rug?
4 votes
Richard Prid…, Agent, Bloomfield Hills, MI
Tue Oct 27, 2009
Irena,
There is a lot of misinformation here. The lender is NOT the seller in a short sale. They are merely a lien holder. The homeowner is the seller. The homeowner, in their sole discretion, decides which offer to accept and send to the lender. The lender then "approves" the short payoff on the mortgage. It's a confusing point, but very important to remember. The homeowner is the seller and retains all rights as to whom and for how much the home is sold. The lender is the lien holder and retains rights as to what payoff amount they will accept on the mortgage note. Most loss mitigators will tell you privately that sending in multiple offers only clouds the issue and delays approval on a short sale. Pick the one that you and the seller (the homeowner) feel is the strongest. Which buyer is willing to hang in for 3-6 months without walking? Which has the strongest financing? Which seems the least demanding and will be flexible with closing dates? Which buyer understands that no repairs will be done by the seller after the inspection, and the home is "as-is?" All of these points make up a strong short sale offer.
3 votes
Sheryl Lynn…, Agent, Clearwater, FL
Tue Oct 27, 2009
Wow... a lot of you are pushing for 20% down at a lower price. If I were the seller I would try for more money if the FHA buyer is qualified and can show they have the down payment + closing costs to close. FHA loans are going through very easy right now as long as the property qualifies. As a broker that sells loads of FHA financed homes a month and knows what to look for... it can be the stronger offer. I have a 90% success rate. Don't be scared of FHA buyers these days. Just know what is expected... seasoning of title, possible repairs, ect... They are nothing like they were 2 years ago. Explain the options to the buyer and let them pick one. Send that one to the bank the sellers SIGN and take the 2nd as a back up. Sending more than one offer to the bank to review can slow the short sale process in my professional opinion. I know everyone has different thoughts on this but I get them approved in writing within 30 to 60 days on average doing this and I do not lose buyers in the process! Good Luck :-)
2 votes
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Richard Prid…, Agent, Bloomfield Hills, MI
Wed Oct 28, 2009
I hate to quibble with Bill's answer but it is incorrect. As the homeowner, you are not obligated to send anything to the lender, and they cannot "accept" an offer since they do not own the home. Only the seller can accept an offer. The lender must "approve" the sale, but they have no legal standing to be a party to the purchase agreement or accept an offer.
1 vote
Glen Henders…, Agent, San Diego, CA
Tue Oct 27, 2009
Richard's post is exactly right. The seller makes the decision of which offer to accept and it's us as the real estate professional that assists them by making sure they fully understand each offer. Sending multiple offers to the bank is one of the worst things you can do if you want to get your file through the system and approved. If the property is in good condition you have verified that buyer's financing the FHA seems to make allot more sense. Plus, if the offer is $20k higher, that's going to increase your chances of getting 6% from the lender. With all of our files we open up escrow upon acceptance between buyer & seller and require that the buyer puts their deposit into escrow, contingent on the lien holder’s approval. It lets us know which buyer is truly serious about the property and lets them know that they’re in the first position and don’t need to worry about losing the property to another offer. If one’s willing to put it in and the other isn’t, that makes the decision very simple.
1 vote
Joseph Runfo…, Agent, Staten Island, NY
Tue Oct 27, 2009
Present ALL offers to the Seller ! Both offers should be presented to the bank for review. You should have a short sale disclosure signed by both buyers and have them acknowledge the multiple offer situation.
Web Reference:  http://www.clovelake.com
1 vote
Scott Godzyk, Agent, Manchester, NH
Tue Oct 27, 2009
Both offers should be presented to the bank for review. You should have a short sale disclosure signed by both buyers that they acknowledge a multiple offer situation as well as any offer is subject to acceptance by the lender. In most cases the lender will not accept any short sale offer that has any contingincies except for final committment on financing, the buyers should have their home inspection before submitting an offer to teh lender. If the property is in good condition, it will strentghen the fha offer if no repairs are anticiapted. The rule of thumb i follow is anything seen with the naked eye a fha appraiser would see, will need to be completed such as hand rails, no leaks in the roof or plumbing, functioning heating system, no visible termite damage, no peeling paint, no broken windows and safety items. If the property needs these things and the seller or the buyer are not willing to fix them, then your 20% down will be the strongest offer. I always like to see a letter that accompanies each offer , whether 1,2 or 5 offers that list to the bank the pro or cons of the offer. Imagine someone 1000+ miles away deciding the fate of the seller, the potential buyers and you. Pictures showing any work are always a plus when trying to get the bank to consider a lower price. Good Luck with yoru short sale.
Web Reference:  http://www.ScottSellsNH.com
1 vote
Janine Kowal…, Agent, Jensen Beach, FL
Wed Oct 14, 2009
Present all offers to the Seller
disclose multiple offer situation
and then send them to the bank for their decision.
1 vote
Robert Green…, Agent, Cherry Hill, NJ
Tue Oct 13, 2009
Present both offers to the bank. The 20% down buyer is stronger...but you never know! If the house is in good condition, FHA may not be a concern.

Robert Greenblatt
Keller Williams
1 vote
Bill Treible, Agent, Wilmington, DE
Tue Oct 27, 2009
It is not your choice, you are obligated to send both offers to the bank. If the mortgage consultants have properly pre approved both buyers then this should not be an issue. Bottom line is that the Bank will decide which offer to accept and they will normally accept the offer that affords them to recoup their loses.
0 votes
Donna Wisnie…, Agent, Annapolis, MD
Tue Oct 27, 2009
Irena,
All offers must be presented to the seller. However, if is is a short sale the property is still in the sellers name therefore the seller can accept one or the other. As his representative, you should present to him the good and bad points regarding each type of loan. Yes, an FHA loan is more difficult than a conventional loan. Generally with a conventional loan ,there are no conditions on an appraisal. With an FHA loan, however the buyer cannot get their loan if there are conditions on the appraisal unless seller or buyer takes care of those conditions/repairs.In most situations, the conventional 20% down loan would be the best bet. However, if the homeowner is not in default and ready to go to foreclosure,house is in good condition and there is time,he could go with the FHA contract,that would net the seller more money.The reason I say this is because the bank could hold the homeowner liable for the monetary difference as to what is owed hence reason for the name "short sale".If this is the case, then the seller might want to get as much as he can for the house but this is his decision not yours as his agent.
Good Luck!
Donna Wisniewski
0 votes
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Donald Angel…, Agent, Toms River, NJ
Tue Oct 27, 2009
There is, in my opinion more of a chance of getting to close on this property w/20% down...
0 votes
Steven Angel…, Agent, Pembroke Pines, FL
Tue Oct 27, 2009
I agree 100% with the minority of the answers here that say the current homeowner is the Seller, not the bank. Since you're the expert and not the seller's I would go over the pros and cons of each offer and try to find out which of the 2 buyers has staying power. Since the sellers by definition do not receive any proceeds from the sale they should be looking to YOU as the expert Irene as to which offer to accept. Then submit that one executory contract to both the selling agent and the lender. Then put the property on Backup status. As to your original ? I think you have to get a rapport w/ both selling agents to find out which of the 2 buyers is in a position to be able to wait to close. Hope this helps!
0 votes
David Thomas, Agent, Petaluma, CA
Tue Oct 27, 2009
Duty is to seller who still owns property, not to the bank. What does your seller want to do and need to accomplish with the short sale?

What condition is property in? Will it fly FHA? If any doubt, 20% down may be the better offer, and it elliminates mortgage insurance requirement [less risk in shorter time] than the FHA.

Good luck!
0 votes
Purnima Talw…, Agent, Morganville, NJ
Tue Oct 27, 2009
Irena, I know how you feel. I all depends on the appraisal and which bank it is, if the property can appraise for close to the lower offer then The safer bet is a lower offer, but banks are being a little rediculousI have an offer on my own short sale listing, the property apraised for 290K and the bank wants full price our offer is at 270K. they want the seller to Hold a note for 20K. And this is a cash buyer, so you cannot just go with the with the lower offer just because you have a better down payment.
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Matt HomeBuy…, Other Pro, Colton, CA
Tue Oct 27, 2009
It would depend on your particular market and where you listed it compared to what it's actually worth. I would go with the offer that is most likely to result in a closing which, statistically speaking lately has been 20% down conventional offers. Just try to get the buyer locked into the deal asap
0 votes
Cathy Catale…, Agent, staten island, NY
Wed Oct 14, 2009
You disclose all offers and explain the importance of who would be more apt go have less issues.
Good for you Irena!
0 votes
Eunmi Lee, Agent, Malden, MA
Tue Oct 13, 2009
Hi Irena
I would take the one with 20% down because the likelihood of getting that financed is greater. FHA loans are nice but it gets denied for many buyers. Especially with a shortsale, I would like to see a strong buyer. Good luck to you.

Eunmi Lee
Real Estate Broker
Malden, MA
Web Reference:  http://www.housenetwork.info
0 votes
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