Possible Short Sale issue (Wells Fargo). We have a signed contract with seller and now things seem a little shady.

Asked by Kristin, Littleton, CO Thu Oct 25, 2012

We put an offer in on a short sale and the seller accepted our offer. We executed the contract, however, never asked to sign the short sale addendum. Now I was told by my agent that the seller received 6 offers higher than ours. The short sale is thru Wells Fargo - is there going to be a problem with us not having a signed short sale addendum? The short sale addendum states that the seller and withdrawl from the deal for any reason and we certainly dont want this to happen so that the seller and submit a higher offer than ours. It has been 2 months now we have been waiting and we were told yesterday that the BPO has been requested. I have 2 questions:

1. Since we have a signed contract with the seller can they force us to sign the short sale affidavit?

2. Can the seller submit all of the offers to the bank or only ours since we are the only ones under contract?

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Carmen Gomez’s answer
Carmen Gomez, Agent, Littleton, CO
Thu Oct 25, 2012
If you were willing to wait until the bank provided a response on your offer you should also be willing to sign the short sale addendum (not sure this is the document you mean). If your offer is at least the asking, and the seller had executed that contract, that offer should have been placed in first position for bank review. If a BPO comes back higher than the purchase price and the bank counters the offer, if the buyer rejects the counter, the seller then moves to the next highest and best offer. I have been negotiating short sales for sellers for approximately seven years and have never heard of a bank reviewing various offers at once. They usually request for the listing agent to send the highest one for review. In your case provision 8.4.1 of the short sale addendum should have been checked off. See below:
8.4. Early Termination
8.4.1. Not Applicable. This § 8.4 shall not apply.
8.4.2. Applicable. Both Buyer and Seller have the right to terminate the Contract by written notice to the other party so long as it is received on or before Short Sale Acceptance. Additionally, Seller has the right to accept subsequent offers from other buyers prior to Short Sale Acceptance without liability to Buyer.
Note: If no box in this § 8.4 is checked, the provisions of § 8.4.2 shall apply.
Hope I was able to assist you in some way.
Good luck.
0 votes
Daniel Herron, Agent, Lakewood, CO
Thu Oct 25, 2012
I've got the same answer as several others. Short Sale Addendum must be signed and sent with the offer or else you've got no deal. And you don't want the seller to have the option of canceling the contract at any time you need to make sure the box at the bottom is checked that voids this part of the short sale addendum. Of course you void your right to cancel by having this box checked, until inspection or other deadlines.

You may get lucky if the sellers and sellers agent decides to work with you guys, but they are fully within their rights to accept other offers with yours technically being voided.

My suggestion would be to get the short sale addendum in place as quickly as possible with the section voided. And perhaps to fire your agent as they don't seem to know what they are doing, even if you do have a signed agreement with them, this would seem to be plenty of grounds to fire them.

Good luck,
0 votes
Phil Lunnon, Agent, Lakewood, CO
Thu Oct 25, 2012
You may want to speak with an attorney about this. Once the contract is signed, the seller cannot force you to sign anything else. Read your contract carefully. Is there a provision (check the Additional Provisions) making the contract conditional upon bank approval? If not, the seller may be obligated to sell the property to you regardless of whether the bank approves the contract. This could be a very uncomfortable legal problem for the seller. The seller can submit any offers they want to the bank, but since you have a contract with the seller, ideally those offers should be backup offers, and as such, should only be valid if your contract is terminated. If those offers did not contain provisions making them backup offers, and if the seller signed any of those offers, the seller may have sold the property more than once: yet another uncomfortable legal problem for the seller. Again, read your contract carefully, and seek legal advice if the seller does not perform their obligations under your contract in good faith.
0 votes
Chuck Strau…, Agent, Denver, CO
Thu Oct 25, 2012
I totally agree with Ben; when you sign a purchase agreement on a short sale, the addendum MUST be executed at the same time. I would definitely take this up with your agent.
Good luck,
Chuck Strauss, SFR, SRES
Your Castle Real Estate
0 votes
Ben Grisinger, Agent, Denver, CO
Thu Oct 25, 2012
The short sale addendum is mandatory, period. It outlines specific risks to both buyer and seller and must be attached to your contract. Without it, it is my understanding you don't have a valid purchase agreement. Both brokers are at fault for not having it completed.
Web Reference:  http://www.my5280homes.com
0 votes
Ben, quick question - since we know that there are other offers that are higher than our (which by the way - our offer was $100 OVER listing price) will the seller be able to cancel our contract and go with higher offers even though our contract was approved and executed by the seller? It appears both buyer and seller have very inadequate agents and I am nervous that after 2 months, and being told last night by the our agent (buyer) that we look good and that the bank will not know about the higher offers. Are we being fed a line by our agent - can the seller show Wells Fargo the higher offers and in essence we have wasted 2 months of our time? Thank you for your assistance on this - it sound like you know what you are doing.
Flag Thu Oct 25, 2012
Sally Grenier, Agent, Boulder, CO
Thu Oct 25, 2012
You want to sign the short sale addendum because it protects both sides! What if you decide you want to back out?? You should be asking your agent these questions. Every deal is different, and every short sale is different.
0 votes
Bill Donovan, Agent, Centennial, CO
Thu Oct 25, 2012
Things are ALWAYS shady in a short sale!!
When trying to buy a short sale I always explain to my buyers to get into a "seige" mentality, because it could take forever to break down those walls.
Perhaps your agent has not done alot of them and wasn't aware of the issues.
If you need something by a certain date, a short sale is never the answer.
Good Luck
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