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. â€œAll 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.
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!
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.
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!
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,.
Confirm with escrow first that they will not take out any "fees" if you decide to cancel.
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.
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!
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.
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.
â€œIs this a usual tactic?â€ Having something on the line may be a good tactic to show the bank that youâ€™re a â€œserious buyer.â€ 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.
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.
Realtor at Milbank Real Estate Services