Being the buyer we put an offer in on a short sale the seller came back with a counter offer doesnt it go straight to the bank?

Asked by Kbella7780, 92833 Tue Nov 8, 2011

With my knowledge maybe i am wrong but if its a short sale its up to the bank not the listing agent or the seller. The listing agent who is very rude stated he wanted a certain offer on this property well its not up to him am i wrong? I was under the impression the seller just has to sign the contract and its in the banks hands.

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Bob Phillips’ answer
Bob Phillips, Agent, Rancho Santa Margarita, CA
Tue Nov 8, 2011
I'll try to be quick with this, as you've already received far too many different opinions. I haven't seen any of them clearly spell out this fact, however.

The listing agent MAY be under pressure to get an "acceptable" offer to the lender, because he's already been through the process - a time or two - and KNOWS what figure the lender is going to accept. Frankly, some lender are unreasonable, and may have to learn their lesson by foreclosing on the property.

THEN, and only then, they ( The foreclosing lender.) just might find out they've made a mistake in their assessment of the property's value - when it starts going down in price, as an REO, because no one will buy it over market. It might take 6 months or even a year, and eventually sell somewhere near the offer you presented.

My advice to you, would be to move on. Find another property.
2 votes
Walter 'Skip'…, Agent, Brea, CA
Tue Nov 8, 2011
Hi Kbella,
The purchase contract is between YOU and the SELLER. The bank is not a party to the agreement. The bank holds the deed to the property and will only release it if it agrees to the amount it will receive from the transaction. So the seller cannot sell the property without the bank's approval to release the deed. The seller through their listing agent has every right to negotiate the sell price that will be presented to the bank. Hopefully the bank approves the deal.
Hope that helps.
Web Reference:  http://ocnorth.com
2 votes
Kawain Payne, Agent, Seal Beach, CA
Tue Aug 7, 2012
Kbella,
You are partialy correct.

The bank does have the final say in whether or not the short sale can move forward.

The seller however, has the right to select which offer they will submit to the bank. The listing agent should present all offers to the seller. Once the seller selects an offer that offer will be sent to the bank for short ale approval.

Best of Luck to YOu.
Kawain Payne, REaltor
0 votes
Aaron Zapata, Agent, Placentia, CA
Mon May 21, 2012
Kbella,

You are right and wrong. You are right in that the bank is the one to make the final decision. You are wrong in stating that they are the only one that choose the offer. The bank will often ask the listing agent if they made any counter offers. If the listing agent knows, or is reasonably certain that the bank would not accept your original offer, he has the fiduciary duty to his client to send you a counter offer.

Good luck!
-az
0 votes
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Thu Nov 10, 2011
A point of clarification - in a short sale the contract to sell the home is between the buyer and the seller. The short sale lender is NOT a party to the contract. As with a standard sale, the seller accepts the best offer they can get. The lender than has to agree to accept payment of less than the amount owed them (a discounted payoff) in exchange for releasing their lien against the property, which allows the buyer to obtain title to the property free and clear of liens. An experienced short sale agent will counter a "low ball" offer rather than waste their time negotiating an offer they know the short sale lender will not accept.

As I stated in a prior post, the bank obtains either an appraisal or a BPO (broker's price opinion) on the property and therefore they get an understanding of the value of the property. The sale needs to be within a reasonable percentage of the fair market value or the bank will REJECT the discounted payoff, thus preventing the sale of the property.

In California, due to a new law that went into effect on 01/01/11 and amended on 07/01/11, a lender who accepts a discounted payoff also waives their rights to pursue the original borrower for the deficiency. This is creating a climate where the lenders really scrutinize values and push for more money. A good negotiator will be able to get you a discount on the fair market value due to the home being outdated, but generally the banks only want to discount for NECESSARY repairs, not tile countertops.

I hope this provides you some good insight into the short sale process. Good luck in your home search and Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
424-2HELP12 (424-243-5712)
myrealestateanswers@gmail.com
http://shel-lee.listingbook.com
0 votes
Emily Knell, Agent, Huntington Beach, CA
Tue Nov 8, 2011
If you can't get the listing agent OR the seller to see the true light for the value of the property because of repairs needed this is going to be an uphill battle for you & likely a huge waste of time.

I'm sorry for that. When I have a short sale where the home is in need of repairs, I will strongly suggest to the owner that they actually DO pay for a home inspection to be done Prior to marketing the property, so the buyer knows just what they're getting into & we can all make sure it's being priced to reflect issues.

It sounds to me that this listing agent probably doesn't have enough experience with short sales in order to price it properly for the repairs needed.

If you have an agent you're working with, you need to make a double time effort to present your case to the listing agent & the seller as to why you're offering what you're offering. "here's what we're offering & why" It would be helpful for YOU to get quotes from contractors for the work that's needed. The listing agent CAN submit that info to the short selling lien holder.

If the bank were to actually foreclose on this property, they would be getting quotes from 3 different contractors to see how much repairs would cost & they would have to deal with this if the property ended up in their hands. They will NET MORE doing the short sale than taking it back. That's part of presenting your case.
0 votes
CJ Brasiel, Agent, San Jose, CA
Tue Nov 8, 2011
Kbella -

The listing agent's job is to do the best job for the seller. Avoiding foreclosure, obtaining the best offer for the seller that the bank will agree to is all within doing the job of a short sale listing agent. With all that said, the seller is the owner and therefore has the right to accept or not accept or counter any offer. The lender is only approving the short sale. Therefore it behooves the seller and listing agent to get the best offer to present to the bank because - the less short the offer, the more likely the lender (or investor or mortgage insurer or second lien holder or...) will accept the offer an allow for a short sale to occur on the property.

Approaching the seller is not the best idea and they might say anything to get you out of their space. : )
Offer what you think is fair and if you don't believe the counter offer is fair; reject it. Your prerogative to not accept the counter. The seller had to know about the counter because they have to sign the counter.

If you have a short sale addendum or a short sale advisory, read it over. It explains that the buyer nor the seller have to agree to the lender(s) terms. However, the lender does not have to approve a short sale and does have the right to foreclose if the owner is in default.

If you want the house but think it is worth less, you may get a second opportunity when it/if it goes to foreclosure. Amazing that lender(s) will turn down a certain price short sale and then foreclose and sell it for less than the short sale offer presented and rejected. It is the way of this strange default market.

Good luck,
CJ
0 votes
Kbella7780, Home Buyer, 92833
Tue Nov 8, 2011
The reason why we offered low is because the house needs to be gutted out. I mean walls floors bathrooms the only thing I am getting is a decent kitchen a furnace and a a/c unit. That's not takin into consideration I have to put in 100,000 in repairs. I spoke with the seller and he had no clue about anything he thought his house was only on short sale for a month it's been since march not for anything but the listing agent is persuading him to disagree with the offer.
0 votes
Emily Knell, Agent, Huntington Beach, CA
Tue Nov 8, 2011
I do take on the responsibility of negotiating short sales, I take listings at 8% for a short sale because it is 4x as time consuming as a standard sale.

The same way many agents have assistants & buyer agents on their team is not a matter of the agent being lazy or bothered by the extra work, it's a matter of running a company like a well oiled machine.

Again, about 70% of short sales fail & it's because these agents don't know what they're doing. That's why there are so many REOs on the market. These REOs could have closed as short sales, but many buyers waited & waited for the listing agents to properly negotiate with the banks & they couldn't & failed.

This is why some people would pay Gloria Allred to defend them vs. settling for the public defender who's going to get you a life sentence, because they just got out of law school yesterday.

You can buy a Yaris or a Ferrari. Both will get you from point A to point B. People should respect the fact that we work much much harder on closing / negotiating short sales & we shouldn't get bashed because we ask to be compensated for doing it right & getting the buyer an excellent deal in a timely manner.
0 votes
Allison Norm…, Agent, Santa Rosa, CA
Tue Nov 8, 2011
Adam, I was totally in agreement with your great response, until I got to the last paragraph....then my jaw dropped. The short sale is never "wholly at the control of the listing agent" I'm sure that's not what you meant.

Kbella7780, The Seller is in control with the listing agent facilitating the sale, advising, and negotiating the short sale approval terms with the bank. The contract is between the buyer and the seller only! The bank however can choose not to approve the amount offered by the seller to settle the debt. A good listing agent will ADVISE a seller to take an offer that is likely to be accepted so as not too waste precious time, especially if a notice of default or truste sale has been filed. THe counter offer is probably getting your offer closer to what the bank has indicated they will agree to

BG; Your scenario is that of a foreclosed property. A short sale is the sale of a property by the homeowner who is askinig the bank to take less than is owed. The seller has hired the listing agent to represent them.The listing agent's commission is paid out of the negotiated terms and proceeds of the sale.The bank is a big part of the decision as it is up to them to approve the short payoff, but it is ultimately the seller who has the final word...as they can choose to not accept the terms offered by the bank if they are not satisfactory.
0 votes
Thom Colby, Agent, Irvine, CA
Tue Nov 8, 2011
Kbella -

This is off your topic but addresses another answer posted below and may be helpful. If a buyer or buyer's agent finds themselves faced with a requirement of paying a "short sale negotiation fee" JUST SAY NO....

Here's why.... when the Listing Agent signed the Listing Agreement with the seller - they automatically assumed the responsibility to negotiate that short sale. If they can not, will not, are too busy, don't know how, can't be bothered, etc. and hired a short sale negotiator - that was THEIR choice - not the Buyer or Buyer's agent. Also, if there is a 3rd party negotiator involved, there are certain disclsoures that must be made and ALL parties have to sign. This disclosure spells out what the fee is and who gets it. It has to be signed by BOTH Listing and Selling BROKERS in addition to the agents.

BEWARE of negotiator fees. I negotiate short sales for other agents and brokers and the fee is always paid directly from the Listing Broker's commission - not from the Buyer or Buyer's agent.

Best of luck,

Thom Colby
Broker / Negotiator
Newport Beach & Palm Desert
0 votes
Emily Knell, Agent, Huntington Beach, CA
Tue Nov 8, 2011
Regarding short sale negotiation fees, I would just like to point out that it's an industry standard that a piece of land for sale gets the buyer agent a 5% commission or the listing agent takes a 10% commission total on the listing.

On a standard (EASIER) equity sale, the standard for a listing is 5-6%

Then on a Short sale, which is selling the home TWICE, once to the buyer & then again to the bank, people complain that we shouldn't be charging negotiation fees.

If you ever receive a counter offer from an agent asking for 1-2% to go towards a negotiator, ask to see their track record & percentage of listed short sales to closed short sale ratio. Remember, 70% of short sales listed FAIL. Have you seen any bank owned properties recently? About 85% of these are Failed Short Sales!! Someone's doing it right & they should be properly compensated for that.

Ask this listing agent what they want to see for an offer & then ask him/her to back it up with comps.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors
0 votes
Michelle Sco…, Agent, Fullerton, CA
Tue Nov 8, 2011
Kbella,

To add to the comments below, I have begun to see a long list of details on counter offers from the listing agents that include not only a counter in price, but items such as, Seller to pay no termite, home warranty, NHD report or transfer taxes, and more often now I'm seeing comments such as "buyer to pay short sale fee to lender in the amount of 1%". This is usually done if the agent already received an approval from the bank for a previous buyer with these specifics, who decided to back out. The listing agent is attempting to prevent delays once submitted to the bank, as each new counter or review can take weeks.

Don't let the counter offers deter you as sometimes much of the jargen is repetitive information already in the purchase agreement that they just want to emphasis. Just make sure your agent reviews it thoroughly.
There can also be per diems of up to $100 if the closing is delayed. Just thought I'd prepare you for future offers.
0 votes
Alain Picard, Agent, Puyallup, WA
Tue Nov 8, 2011
The seller will first have to accept your offer and they can counter offer you or not accept your offer at all. Once you and the seller have mutual acceptance between each other it will go to the bank and they will take their time and decide whether approving the agreement between you and the seller is in the banks best interest.
0 votes
Thom Colby, Agent, Irvine, CA
Tue Nov 8, 2011
Kbella -

The Seller is the owner - The bank is NOT the owner.

The bank is merely approving how much of a LOSS they are willing to accept to allow their lien to be released. The transaction is just like any typical standard sale. Buyer makes offer, Seller counters offer, Buyer and Seller come ot agreement on price and terms - then it gets submitted to the bank / lender. Bank / Lender decides if the loss is within their guidelines or too much. If too much, then the lender counters how much of a LOSS they are willing to accept - increase the price / reduce the loss.

Best of luck,

Thom Colby
Broker
Newport Beach & Palm Desert CA
0 votes
Siobhan "she…, , Fullerton, CA
Tue Nov 8, 2011
Kbella,
A listing agent should have done a comparative analysis of that property so they know roughly based on what has sold recently (that is comparable similar square footage, location etc etc) and the physical condition of the unit you are interested what the bank will be willing to approve the sale of the unit for. Because it takes up to 30, but sometime 45 days and longer for the bank to come back with an answer the listing agent has a duty to submit an offer that has "a reasonable chance" of being approved. If you are paying all cash or putting down a significant down-payment you may well get the property at a "discount" compared to what the comparable properties have sold for in the last 3 months. If you want to discuss this further I would be happy to go over the details of the specific property.
Siobhan Long,Realty Executives Premier,(562) 773 3731 - direct DRE#01866486
0 votes
Ingrid Ski R…, Agent, Mission Viejo, CA
Tue Nov 8, 2011
Hello Kbella,

Yes, Rhe seller/owner can counter you back on your offer. I have done this many times.
The owner does not have to accept your offer or respond. This is very rare. I had this happen once.

Good luck on your countering!!

Ingrid Ski Realtor
949-874-0432 cell & text
OCAreaHomes@gmail.com
0 votes
Adam Brett &…, Agent, Fullerton, CA
Tue Nov 8, 2011
I list a lot of short sales and coming from the listing side standpoint - we don't like to submit offers to the lender that have no chance of being accepted. It is a waste of time for all parties involved. If I feel the offer is too low for the lender to consider - I will counter it.

The lender will do an appraisal on the home - and based on this value they will either accept or reject your offer. So it does no good just to submit a low offer as they might simply reject it and then I have to start the process all over again.

You can however make your case to the listing agent that you would like to start low with the lender in hopes that the appraisal comes in commensurately, however you would be willing to come up if the bank countered.

Not all short sales are processed the same and they are wholly at the control of the listing agent.
Web Reference:  http://RealtorAdam.com
0 votes
BG, Home Buyer, Phoenix, AZ
Tue Nov 8, 2011
Listing agents have a lot more power than you think. Banks hire them to represent the bank to deal with buyers so there is a certain thing that Listing agent can do. Bank still make the final decision though.
0 votes
Brian Wilson, Agent, Laguna Beach, CA
Tue Nov 8, 2011
Not at first, the seller/owner is still the owner on title. Once the offer you wrote is negotiated to an agreeable point then the offer will be sent to the bank with the sellers hardship package (which may have already been sent). The lien holders, banks and maybe HOAs and whoever, has to negotiate on what they will get based on what was agreed to.

As I understand it the Federal Government will get paid any owed taxes first, then the 1st lien holder then the lower liens may be offered an amount by the first. The 1st lien holder has the power basically but the minor lien holders, especially 2nd loan banks, have been the toughest to get to agree to take what they are offered.

Good luck with your search,
Brian Wilson, Realtor
DRE# 01321478
0 votes
Rosina del M…, Agent, Alexandria, VA
Tue Nov 8, 2011
Yes and No.
Yes : The listing agent should present the offer to the 3rd party involved ( the bank/s). Wait until the bank counters and let you know about the counter offer.

No: If you send a low ball offer and the listing agent knows that you are not even close to the fair market value, the listing agent might be reluctant to send your offer and take the property out of the market for 1 to 3 months until the bank counters when she or he knows that the bank will come with a counter offer much higher than your low ball offer.

Unfortunately there is no legislation on Short Sales only a set of programs, process, rules that sometimes are bent or adapted.

At the end the bank is always going to try to get a Fair Market Value and that your Buyer Agent can have it if he does a BPO (Broker Price Opinion) or even a simple CMA.

Good Luck with your offer!
0 votes
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