Multiple Offers on a Short Sale Listng
Once an executed contract has been submitted to the lender and another offer is submitted on the property, how is the 2nd offer supposed to be handled? Obviously present the offer to the seller but:
Does it HAVE to be presented to the lender? Even if unsigned or higher than the 1st offer that the bank is currently processing?
Or are you supposed to hold all offers as backup offers until the 1st offer is processed?
Or is it the sellers decision?
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Seller owns the home.... Any offer that my buyers team submits always has verbiage that any back up offers DO NOT get submitted until our buyers offer is dead.
The bank does not own the property, the seller does. Regardless of what rights the bank thinks they have, they are not party to the contract
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Permalink Reply by Smitty on
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We do it the exact same way. 1st buyer has right to increase their offer, but if they decide not to second or back up offer is then submitted.
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Smitty did you get my email about masterminds next month?
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Permalink Reply by Sheyenne Schultz on
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Jeff is right...the SELLER owns the home. Once you have a fully executed contract between buyer and seller, THAT offer is in 1st position and gets submitted to the bank. All other offers are in back up position. IF buyer in 1st position should decide to walk or not agree to the banks approved price or terms ...THEN u can submit your next best BACK UP offer..the BANK is NOT a party to the contract...period.
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Permalink Reply by Kevin - Greenville, SC on
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Unfortunately the NC Real Estate Commission thinks differently (and incorrectly in my opinion). As always, follow State Laws and your RE Commission.
NORTH CAROLINA REAL ESTATE COMMISSION REQUIREMENTS. The North Carolina Real Estate
Commission requires that the real estate agent or the attorney handling the short sale inform the
bank of the existence of another offer, even if it is lower. Further, the North Carolina Real Estate
Commission has stated that, even if the Seller does not accept another offer as a back-up offer, the
bank should be informed of the unsigned offer as they have a monetary interest at stake.
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This shows how out of touch with reality that some real estate commissions are! How in the world do they expect an agent to notify a lender such as bank of america on equator that there is another offer. Utterly stupid but shows that the commission is in the lenders back pocket. Can not imagine why NAR and the state association are not throwing a fit over this.
Is this a law in NC or just the real estate commission suggestion?
Just wait until a a buyer loses a home because an agent submitted multiple offers, that buyer would have a potential lawsuit and the NC Commissioners should be named on it for making suggestions that obviously could be suggesting that a contract is interfered with.
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Jeff, I believe it's just a strong suggestion by the NC REC. I'm involved in some rather interesting stuff here in SC too.
Here is what their Addendum states -
11. Disclosure of Offers/Contracts: Seller understands that in a Short Sale, any offers that may be received by Firm must be presented to Seller according to the Rules of the NC Real Estate Commission, and that the NC Real Estate Commission also requires Firm to inform Lienholders of all offers and contracts of sale on the Property received after a request for a Short Sale has been submitted to any Lienholder.
http://www.ncrealtors.org/uploads/sample-104.pdf
In Blog #9 we talked about Flopping and how withholding information from the bank regarding
a higher offer could be viewed as mortgage fraud. Because of this, I would recommend that,
regardless of what state you are in, you consider informing the bank of all offers as suggested
above.
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Kevin I read the "flopping" definition and don't really see that being much different than the ole option contract scenario we used to see. First problem with that scenario is that an offer is made that is 99.99% likely it will not get approved. Next problem is that the "investor" is NOT the seller but still believes that all offers go thru them. Third problem is that the "investor" wants to handle the negotiation themselves....... This was popular about 5 years ago in Florida and we were constantly being approached by "investors" but have not heard a peep from these investors in many years. That blog is just another attempt for an attorney to scare agents to drive more business to the attorney in my opinion.
Reading the addendum, again I believe it just shows the real disconnect between a governing body (NCRealtors) and reality.
Continue to market the Property for sale according to the rules of the multiple listing service until the Short Sale is fully approved and agreed upon by all necessary parties;
MLS rules can vary, my MLS requires the property to go to contingent or pending status and it can not remain active. I would be curious how this rule could be enforced and what would happen if an agent did this on an REO or non short sale property? Why would that be any different than a short sale, especially if any and all contingencies have not been lifted. Does NC Realtors require a non short sale to continue to be marketed if the financing contingency, home inspection and any other contingencies be lifted?Disclosure of Offers/Contracts: Seller understands that in a Short Sale, any offers that may be received by Firm must be presented to Seller according to the Rules of the NC Real Estate Commission, and that the NC Real Estate Commission also requires Firm to inform Lienholders of all offers and contracts of sale on the Property received after a request for a Short Sale has been submitted to any Lienholder.
Any offers recieved by firm must be presented to seller according to Rules of the commission, of course they do. Let me change the next sentence, The NC Real Estate Commission also requires that the seller interfere with a binding contract and accept and submit other offers to lienholder. Total nonsense, the NC Real Estate Commission can not force a seller to do anything as it is the SELLERS decision to accept or reject an offer, the seller owns the home, not the lender, not the idiots at the NC RE Commission. BTW it says "inform" of all offers and contracts, two things that are completely different animals. How does the NC RE COM expect this to happen? Do they realize that we can not submit more than one offer in equator, a platform that many lenders are using and one that most are going to use?
This addenda just shows how out of touch the RE Commission is and shows how they like any other government entity, protects the interests of the banks. This addenda is full of possible future litigation in my opinion........ Imagine what can happen if your buyer is under contract and ready to close, they have their moving van packed, have paid all of their prepaids, home inspection, appraisal, etc and drive across the country to close on their new home and the day before closing a "higher" but not necessarily better offer is submitted to lender and the lender cancels the short sale approval. Think the NC Real Estate commission and their "rule" would have potential legal issues?
Looks to me like realtors in NC might need to clean house and get some leaders who understand the current situation and current market.......
Sorry for the long rant!
OH I forgot one thing....
Because of this, I would recommend that,regardless of what state you are in, you consider informing the bank of all offers as suggested above.
IF I HAD ANY DEALS WITH AN ATTORNEY WITH THIS ATTITUDE I WOULD MUSTER UP MY BEST DONALD TRUMP AND SAY "YOU'RE FIRED"
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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Not too long ago I was at a collective meeting of several SoCal AOR BODs. The discussion regarding submission of multiple offers to lender was discussed in a side conversation. One BOD member stated that she had packaged-up 12 offers she received on one property and sent them to the lender via FedEx (only one lender on this property - one of the biggest). After 2 months of waiting, she got a note back from the lender in US Mail. It was an 8.5 x 11 page and hand-written on it was a note: "We're not doing YOUR job, please resubmit the offer selected by the borrower". Of course the lender didn't return the 12 offers and very foolishly the agent had sent the originals! In this small AOR, this is the way they were handling Short Sales. Not anymore.
The way I handle it (if there is more than one offer) is to include an Excel Spreadsheet with all of the offers and the terms for each. (Price, Downpayment, Financing, Proof of Funds, Terms, COE timeframe, and any other terms) I list them in order of receipt and include a "rank" for each based on "most likely to close". It seems to work for me even though it's not required in CA. I also use this sheet when discussing the offers with the seller to make the decision of which one to accept.
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Permalink Reply by Jim McCormack on
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Good information Thom. The spreadsheet is a good idea.
It is so frustrating to deal with Listing Agents who know nothing about short sales. I wrote an offer on a short sale listing a little over a week ago. The listing agent said she got two offers and was sending both to the lender (BofA FHA short sale). I told her to STOP! Only one contract gets sent to the lender. She had no clue. I am sure she just went ahead and submitted them anyway. Sometimes the agent is the biggest reason the short sale did not get approved.
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Permalink Reply by Toni Nicholas on
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If that is the quote from the NCREC, then I think I see the problem. Yes, it states all offers be presented to the sellers, but it also states "...requires firm to inform Lienholders of all offers and contracts of sale on the property received after a request for a short sale has been submitted to any lienholder." This does not mean - all offers to be submitted to the bank for their decision on which one! It simply means, as I see it anyway, that if you are submitting a request for a short sale, then you will be submitting an accepted (executed) offer. In other words, you cannot just request a short sale and submit the request - without an offer. There must be an Offer presented to the bank so they will consider their decision of whether to grant a short sale. If this is the exact verbiage, I think it's being totally blown up into something it's not. Further, you can only have one executed Offer at a time - again - basic contract law. If your seller signs multiple offers, and you submit them all to the bank - good luck with that! That's a lawsuit waiting to happen!!!
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I wouldn't submit a higher offer, nor execute one if one was already executed. We are interferring with that first contract if we do that and it's tortious interference and people get sue happy in short sales. There is already enough liability, so lets piss off the first buyer but submitting another one. NO THANK YOU.
RE: flopping/flipping or however you want to term it. Again, this is ALL PERFECTLY LEGAL if there are proper disclosures in place. You MUST disclose to the selling lender you are immediately resellign or holding for a short time. It is not fraud if this one simple step is taken no matter how much Freddie Fannie and the like want to tell you it is.
Keep in mind investors are helping clean the glut of homes on the market. I work with many of them. I've seen them remediate mold in homes I wouldn't step foot into. There is nothing wrong with making a living by buying a house and resellign it for a profit. NO ONE, whether they are investor, retail buyer, wholesaler, first time home buyer, etc., goes into a buying a home hoping it will lose money. We all buyer our homes with the hope that some day it will appreciate. Unfortunately, for many in this market, that wasn't the case. I don't see any issue with an investor making a quick profit on a property. I've seen lawyers and negotiators charge thousands of dollars, so if an investor knows what they are doing and can clean up a property, clear title, etc., I don't see an issue with them getting paid to do it. Proper disclosure is the key to avoiding the big F word.
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