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Darleen, Home Buyer in Valencia, CA

I just submitted a short sale offer & recieved a couter on a few of the terms, a few of which seem strange since it hasn't even been sent to

Asked by Darleen, Valencia, CA Tue Jun 14, 2011

the bank I just submitted an offer on a short sale and received a counter on a few of the terms (not the price surprisingly), a few of which seem strange since it hasn't even been sent to the bank yet. Here's one term I'm a bit confused about, “A copy of the initial deposit check made payable to XXX Escrow and shall be provided prior to acceptance of offer and submission to the short sale lender." Additionally, “All terms and conditions are subject to short sale approval. Escrow period will be automatically extended until short sale is approved." Are they really going to go to escrow without first getting bank's approval? Is this a usual tactic?

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Shanna Rogers’ answer
Hi Darleen,

1. "A copy of the initial deposit check made payable to XXX Escrow and shall be provided prior to acceptance of offer and submission to the short sale lender." - Just write the check out, make a copy of it, retain the original check yourself (do not give to Escrow until you have WRITTEN approval from the lender/investor and all parties have signed the contract, counteroffers, amendments, etc). Have your Realtor send the COPY of the deposit check to the Listing Agent.

2. “All terms and conditions are subject to short sale approval. Escrow period will be automatically extended until short sale is approved." - The "All terms and conditions are subject to short sale approval" part is standard. I believe (?) the "Escrow period will be automatically extended until short sale is approved" means that if the approval takes a while (as it sometimes does with short sales), the close of escrow will be extended. You may want to have your Realtor counter that part to make it clearer with something like "Close of escrow will be XX days after written acceptance by all parties including lender/investor". This will just eliminate the necessity to keep doing Extension Of Time Addendums to the contract.

Good luck!

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
1 vote Thank Flag Link Tue Jun 14, 2011
Hello Darleen,
This is a common practice when purchasing a short sale, the bank wants only a copy of the check to go along with your offer to make sure that you are ready to deposit the stated money in the contract. You would send a copy of the check to the bank while you would hold onto the original check until both parties have come to terms and have a fully executed contract. Also the time frame should be specified in the contract as well...or example, close of escrow to be "X" amount of days after short sale acceptance. Best of luck to you and let me know if you have any questions! Take care!

Best Regards,
Alex Meguerditchian
661-964-7321
AlexM@Troop.com
3 votes Thank Flag Link Mon Sep 16, 2013
makes sense! Thanks!
Flag Mon Sep 16, 2013
This is not that unusual. Listen to what Laura Coffey said below. I agree with her.

Sincerely,
Richard Szerman
Silver Creek Realty
661-253-3000
1 vote Thank Flag Link Tue Jun 14, 2011
It sounds like they just want a copy of the check not the actual check. Sometimes banks want to see a copy of good faith check to see if you are ready to make the deposit. The new 2010 Purchase contract actually states you will deliver the check to escrow 3 days after acceptance. I would be leery of giving it before you have written short sale approval in your hands. I would also want to see a copy of the HUD of what was approved before you move forward. Valencia has a lot of HOA's so make sure they are current or the approval will cover the difference.
All terms should be a condition of the short sale approval. Just because the seller is okay with what you offered doesn't mean the bank will approve it.
Without seeing the whole contract I'm not sure if you are opening escrow or not. Your Realtor should be advising you. I hope you have a different Realtor than the listing agent. If you feel your Realtor isn't looking out for your best interest also see if their Broker can help.
Good Luck
1 vote Thank Flag Link Tue Jun 14, 2011
Hi Darleen,
The check part does not surprise me, I don't love it, but it doesn't surprise me. Short sale listing agents are doing everything they can to make sure the buyer stays in the game, or at least know if they are cancelling. It is not uncommon for a seller to go all the way through the short sale approval process and find out the buyer purchased another home and is no longer interested. If there is a deposit in escrow, the buyer would have to send a written cancellation to get their deposit back. Then the seller would know that they have to put it back on the market and find another buyer. Generally, when we see this it is a smaller deposit amount, but not always.

I don't really like the line that reads Escrow period will be automatically extended until short sale is approved. This can keep you in this for a long time and sometime situations change.

Best of luck!
0 votes Thank Flag Link Wed Oct 2, 2013
Hi,
The listing agent wants to know that you are still in the game, that you still wants the property. The moment you ask to get your deposit back (you can do that whenever you want) then he knows that he will have to find a new buyer asap.

The agents wants you to be a reliable buyer, not a buyer who will give offers here and there.
He wants a serious buyer.

So, if you really want that property I suggest you to pay a small deposit, normally $500 should be enough and when escrow opens you will have to pay the rest of the deposit,.

Good luck.

Marianne Leopold
0 votes Thank Flag Link Sat Sep 7, 2013
The seller and agent's hope is that if you open escrow you will be more committed to staying out the long short sale approval process. It is common and even if you do open escrow you can cancel and get your deposit back.

Confirm with escrow first that they will not take out any "fees" if you decide to cancel.
0 votes Thank Flag Link Sat Sep 7, 2013
correct. a photocopy of the EMD check made out to the assigned escrow company and yes these conditions are typical. Make sure the listing agent is on top of it and check to see how many times an escrow for this short sale has been cancelled. Just a head up on that, have your agent check.
0 votes Thank Flag Link Mon Sep 10, 2012
Good answer Crystal. Pre-opening an escrow is a good thing to do for buyer and for seller. It happens often.
Something else.
Remember, a short sale is a case between the seller and the bank/investor. It is NOT between a buyer and the bank/investor.
In your case the seller wanted to have something cleared out between you, the buyer, and him, the seller, and it was therefore you got the counteroffer.
Marianne Leopold
Rodeo Realty
0 votes Thank Flag Link Tue Jun 14, 2011
Some agents DO prefer to open an escrow early in the short sale process, particularly if they have lost a buyer or buyers before on the property. Opening escrow and requesting a copy of the earnest money check (or even deposit of some earnest money with escrow) prior to short sale approval "vests" the buyer in the property, and exhibits a more serious approach to the process. It's not really a common practice, though it is coming up more often. Per the CA Residential Purchase Agreement and the Short sale Addendum, your EM funds would NOT be in jeopardy if you do not receive short sale approval and/or do not remove your buyer contingencies in writing. And opening escrow, with or without a deposit, allows you receive a HUD or settlement statement from the escrow officer, so you can more accurately plan for your closing expenses.

In this instance, you have to put yourself in the shoes of the listing agent and the seller: Mr. Buyer writes offers on short sales all over town, causing undue grief for a seller when he/she gets a short sale approval, only to find out that Mr. Buyer has moved on and purchased another property without telling anyone. The seller and agent want some security. But putting any money in escrow can be a scary proposition when only about 25% of short sale listings are actually bank-approved and close escrow. Talk openly with your agent, and if possible your agent's broker, and submit only the copy of the earnest money check if at all possible. (If that's really all they're asking for, then no need to worry...it's a very standard procedure to provide this.)

Laura Coffey was right on the button with regard to the importance of receiving and reviewing the HUD...HOA dues and unexpected liens will kill a short sale deal every time if they aren't accounted for early in the transaction. Wishing you all the best of luck!

Crystal
0 votes Thank Flag Link Tue Jun 14, 2011
It is normal for the listing agent to request a copy of the deposit check with every offer, short sale or not. However, it is just a copy of the check. They are not asking that the funds be placed in escrow. It is sort of an odd request for that reason, however, providing a copy of the check implies that the money has been set aside and will be available once the bank approves the short sale.
It is normal to open escrow for a short sale before bank approval, as well.
One of the most important tasks the listing agent has is to make sure the new buyer has clear title when escrow closes. In order to do that, the listing agent needs to order a preliminary title report and that can't be done without an open escrow. Reasons to order the prelim early:
Sometimes sellers have liens they have forgotten about or do not know about.
There have been a few times when I have ordered the prelim. and found that title was not cleared when the seller bought the property. Remember that many properties listed as short sales were purchased during a time of chaos. Homes were purchased without appraisals, inspections, and other seller and buyer safeguards. It is not surprising that clouds on title were over looked or lien releases were not recorded correctly. Ordering a prelim before bank approval gives the listing agent and sellers time to clear up any title issues. That way, once bank approval is received, everything is ready to go.
Another reason escrow is opened is that the listing agent has to order a HUD to be presented to the lender/servicer with your offer. The HUD is a line item sheet that shows the investor, who currently owns the loan, what they are being asked to pay for and what they will net if they approve the short sale. Title companies cannot produce a HUD without an open escrow.
Opening escrow before short sale approval is not so much a tactic as it is a necessity.
0 votes Thank Flag Link Tue Jun 14, 2011
Darleen, you may be dealing with a CDPE, a Certified Distress Property Experty, in which case the chances for success are enhanced many times over a Realtor without this knowledge or ability. There are many agents that know what they are doing without this training as well.

The benefit to you, provided you are committed to the purchase, is that Lender knows that the buyer is willing to open escrow, make the deposit and commite to the purchase. This will make the process grab the attention of the asset manager and get you the best results the soonest. Keep in mind that the best results in dealing with a short sale is an answer yes or no quickly rather than lingering for a long period of time.
Web Reference: http://www.TonyLewis.com
0 votes Thank Flag Link Tue Jun 14, 2011
In a short sale situation, you first need to enter the contract to purchase the home with the seller. The bank can allow the deal to go through or not. The seller must find your terms acceptable then the bank.

“Is this a usual tactic?” Having something on the line may be a good tactic to show the bank that you’re a “serious buyer.” I have seen buyers complete home inspections before the bank is notified (packet sent). It is a gamble, but only you know if it (the home) is worth the risk of locking yourself in.

You can always counter and ask them to hold your check and open escrow until you get the banks approval.
0 votes Thank Flag Link Tue Jun 14, 2011
This is the exact reason buyers should always work with a Realtor (after all it doesn't cost you anything and can only help).
Let me tell you something here... the listing agent here is a smart one. She or he wants to "lock you down" by getting the $$$ upfront and putting it in escrow (yes, she will open it witout bank's approval as the bank is not the owner). Bank usually take their time to give approval to short sale so by getting initial deposit now the listing agent has more confidence that you will wait for the bank to appove/reject the offer instead putting offer on another property.

Let me know if you have any more questions.

Ewa Reza
Realtor at Milbank Real Estate Services
ewareza@gmail.com
0 votes Thank Flag Link Tue Jun 14, 2011
Very common, I have seen this before. Your offer will be presented to the bank with the copy of escrow check, and those term. The sale is subject to bank approval of short sale. My advice to you...get a real estate agent to represent you.
0 votes Thank Flag Link Tue Jun 14, 2011
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