Do buyers have any rights in a short sale?

Asked by Sylvia Wilk, Jacksonville, FL Tue Feb 17, 2009

I put an offer on a short sale home. The listing agent was also the homeowner. Mine was the only offer at the time. 40 days later, the agent's broker submitted another offer. Mine was cash, the other finance. The mortgage company countered both offers. I met their counter (with cash) and still lost out to the other offer after waiting 90 days. I feel like there was something shady going on from the beginning. Are there any guidelines? Does a buyer have any rights.

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Shonda Campa…, Agent, Jacksonville, FL
Tue Feb 17, 2009

Yes as a buyer you do have rights. This is common with shortsales. The bank is trying to get the most money possible, because they are already taking a loss.

Every short sale is different and every agent handles them differently! When I send in a short sale offer, if we are the first offer I like to add special addendums such as making it to where the seller can not submit any other offers to the bank until our offer is accepted or rejected. The seller can take backups, but not submit them to the bank. This seems to help, because as long as the bank is recieving offers, they will hold out for the best.

If you would like assistance in finding a home, give me a call. I am a single agent which means I have a fiduciary relationship with my clients. I work for you, not the contract.
Prudential is unique in the fact that we are one of the only companies in Jacksonville that can offer you this type of relationship.
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Eric Cavanagh, Agent, Jacksonville, FL
Tue Feb 17, 2009
Yes, buyers do have rights...but I'm not sure they are the kind of rights you are referring to. You have the right to inspect the property for defects, mold, pest infestation and the like. This gives you the legal right to back out of the contract should the seller (or the sellers lien holders) accept your offer.
The problem with short sales is that everybody thinks that they can get a killer deal and save a bunch of money. In truth, you can but there are conditions. Short sales are cheap for a reason; they typically take much longer than an ordinary sale and the condition of the property can vary wildly. For the average home buyer, short sales are not the way to go. You need to able to wait the extended period that short sales require; you need to have closing costs saved up in addition to your down payment because most banks won't pay for any closing cost help; you need to have some cash set aside for repairs should the property require it and you need to be able to close quickly once the approval is granted.
If you figure 3.5% for a minimum down payment (on an FHA loan ), 3-4% for closing costs and prepaids and $5-10k for paint, carpet and maybe some appliances..that's 6.5 to 8% of the purchase price (up to $16,000 on a $200k house) PLUS $5-10k for possible repairs/upgrades.
On the other hand, if you get a good deal on a spec home from a builder where they'll pay most of your closing costs on the same $200k house you'll need about $7-9k to get into it and it'll be brand new. You might get a better value in the long run form the short sale, I said...there's still a price to pay.
Something for nothing is not real in any world, and while you can get a good deal in todays market -a better deal than in a long time --you have to understand what you are working with.
As for your original question, it's hard to really tell what was going on there. Could someone have taken advantage of you? Possibly. Is there anything you could have really done about it? It depends. Were you promised anything contractually that wasn't delivered? Did you suffer any monetary damages specifically related to a failure to perform on behalf of the contracting party? Probably not. Did you have expectations that weren't met? Absolutely. Were things handled in the best way be the agent you were dealing with? By the sellers agent? Probably not. With so many people involved in the transaction -you, your agent, the seller, his agent, the primary lien holder, possibly a secondary lien holder, maybe a home owners association attorney, the mortgage insurance company, a title agent, you get the idea - the possibility of something going wrong or somebody not getting their expectations met is great indeed. The real problem is that this whole process is so complicated and so few people are really good at it and there are so many more shortsales now than before that the whole thing is out of whack and will be until it catches up with itself. soon as it does, then we'll be on the tail end of it and things will go back to normal and shortsales will become the exception rather than the rule just like they always were before.
What you didn't say was whether you had your own agent or if you were using the homeowner as your agent. If so, well...that was a mistake. Anytime you buy Real Estate you should use your own Realtor. Not to would be foolish. The seller almost always pays for it and even if they didn't it would still be worth it to have an professional looking out for you.
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1 vote
Danbarnes47, Home Buyer, Jacksonville, FL
Thu Nov 15, 2012
Don't get involved in a short sale with chase bank.. total SCUM-BAGS. liars nd thieves !!!!
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John Bennett, Agent, Orlando, FL
Thu May 3, 2012
And by the way, the owner gets to accept any offer he wants to accept. He may not like something about your offer or you. He gets to sell his property to anyone he wants to, for what ever reason. Maybe he just doesn't like the car you are driving, or maybe the other buyer had an Realtor who said, LOOK there is another buyer bidding, so why don't we offer more money so we win. Would you take the higher offer, sure you would, because is all cash at the closing table.
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John Bennett, Agent, Orlando, FL
Thu May 3, 2012
If you are a buyer with a good agent, you will get beat up in a short sale.

If you are a buyer with out a agent and you don't know what you are doing you are going to get killed.

Short sale also go better with lawyer.
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Tracy Ponto, Agent, Jacksonville, FL
Thu May 3, 2012
The listing agent was the Homeowner? To my understanding, the Listing agent can not benefit at all from the proceeds of this short sale on their own property.
Buyers do have rights. When I right an offer, I ask the listing agent to discontinue marketing the property. All buyers can have an agent represent them in a sales transaction at no cost to them. I would recommend that you are fully represented when buying or selling real estate.
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Keith Sorem, Agent, Glendale, CA
Tue Feb 17, 2009
In a short sale the owner is asking the lender and the investor to take a big loss. As much as I prefer "regular sales", about 75% of sales are short sales in LA.

So, you need a Realtor representing YOU that knows short sales, and you need to know how much the listing agent knows about short sales.

Short sales are not fun, and on the lender side it is no fun to lose thousands of dollars. On the buyer's side unless you want to pay full market price, you are simply banking on getting a "good deal" and the trade off is the sales process.
0 votes
Blaine Rabe, Agent, Jacksonville, FL
Tue Feb 17, 2009
Good Day,

I have been on both sides of this one.

Being a buyer, your best defense is a good big oily 2x4. Have your broker put in offers. Yes offers. Have the dates expire! Don't get in love with a property. Make the best deal you can, on the ones that negotiate with you.

Life is good!

Blaine Rabe
REMAX Specialists
0 votes
John Bennett, Agent, Orlando, FL
Tue Feb 17, 2009
nar 1-6 will help you

short sales are so very ugly
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Antonio Car…, Agent, San Leandro, CA
Tue Feb 17, 2009
Unfortunately on a short sale situation, and depending on how many loans were on the property, the seller does not have much of a say. The lender will make a decision based on their own guidelines which sometimes are totally out of the norm. As Realtors, sometimes we scratch our heads trying to figure out what is the lender thinking? If there is more than one loan, there is more than one lender, typically is the PMI company (Mortgage Insurance) that wants something and those two lenders will have to come to an agreement before escrow closes. We have had several offers on a house with above asking prices and after months, the lender comes back and counters everybody! By then most buyers have bail out. Guidelines for these types of sales are not so clear. Buyers are at the mercy of the lenders, banks now are getting a bit better at handling offers in a shorter time frame, I think they are learning. I hope this helps. Good Luck
0 votes
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