I don't really like to correct a fellow real estate professional. However, in this situation it is very important for everyone to understand the full role of the Lender in approving an offer on a Short Sale MLS listing. The MLS Listing status determines how offers are supposed to be handled by realtors in short sales, and who is supposed to receive and appropriately approve the multiple offers.
The National Association of Realtors also have an excellent webinar recording by Freddie Mac (October, 2008) on their website that explains why sending multiple offers to a Lender will cause the lender to immediately dissaprove the short sale case submission and schedule the sheriff's auction. A Lender's role in the transaction is to approve a bi-lateral contract already approved by the Seller. If the Lender receives more than one contract signed by the Seller, it raises all sorts of red flags. And unsigned contracts will not be accepted by the Lender, because there is simply no transaction to approve.
Our local MLS requires the initial MLS listing as "Active" and "Short Sale" is noted in the listing details. This means that the current market conditions will not allow the property to sell for enough to cover the balance owed on the mortgage. At this point the Seller has not even begun negotiations with the Lender.
Only when a Buyer's Offer is accepted by the Seller (contingent upon Lender's approval), the complete short sale application package, with the Buyers Offer and a Preliminary Closing Statement (HUD-1), is sent to the Lender and negotiations begin. At this point the listing changes to "Active Contingent Short Sale" meaning negotiations are in progress. Interestingly, Lenders are not party to the transaction, and therefore not obligated to approve it. But they must approve the transaction before it can close. Everyone involved is at the mercy of the Lender.
If the property you are referring to is listed as "Active" or "Active Contingent Short Sale" You may still have a shot at buying this property. Your Offer should be presented by the realtor to the Seller (defaulted homeowner) as a Backup Offer. Other offers can also be received as backup offers until the Seller accepts the terms and conditions from the Lender for settlement of the defaulted mortgage (Price, Deficiency Judgement or Taxable 1099, Release of Lien only, etc.). Backup Offers stay with the Seller and should not be signed as approved or forwarded to the Lender.
If the current Offer is not closed (Buyer couldn't wait, Offer did not meet price acceptable to Lender, etc.), the Seller will select the best Backup Offer and submit that ONE for the Lender's approval and continue negotiating. Only ONE offer at a time is EVER negotiated with the lender, the other offers remain with the Seller as Backup Offers. Multiple offers sent to a Lender will kill the short sale loss mitigation negotiations.
Once the negotiated offer gets approval from the Seller and the Lender, the MLS listing changes to "Pending" and no more offers are accepted. Then it's on to the closing table.
I know it's a lot to take in, but I hope this information helps you understand offers on short sales and how they are handled. I specialize in short sales in Lehigh Acres. And remember that each MLS has it's own rules, so listing terms and procedures may vary.
Best regards, Tom