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Permalink Reply by Joseph Alfe on March 25, 2012 at 3:09am

No you do not.  You have no fiduciary duty to the lender whatsoever.

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Permalink Reply by Marjorie Blumenfeld on March 25, 2012 at 5:36am

Jerri,

I have this scenario also. The accepted offer by the sellers is good, but the back-up all cash offer that came in after is much better. I feel it is my fiduciary duty to the seller to reveal there is a better offer on the property. The seller wants to accept the cash offer, but has already signed and submitted the other offer. The sellers would like the bank to say send in the cash offer!

I don't have any answers, but would also like advice on how people are handling the situation.

 

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Permalink Reply by Joseph Alfe on March 25, 2012 at 5:45am

This is basic real estate 101.  No matter what the seller or the bank says, you have an executed offer.  The only way that you can do it is find a legal way to terminate the first offer and go with the second.  Either way, you are NOT required to disclose the other offer to anyone but the seller.

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Permalink Reply by Marjorie Blumenfeld on March 25, 2012 at 6:11am

Thanks for the basic training Joseph.

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Permalink Reply by Kevin - Greenville, SC on March 25, 2012 at 3:05pm

Amen, except in NC where you do actually have a duty to disclose to the Servicer of another offer. 

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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Permalink Reply by Lori & G-II Klindera/Varrato I on March 25, 2012 at 9:14am

Ok, so I get it, that the buyer and seller have an accepted offer. However, if the offer is ‘contingent’ on the seller’s bank accepting the buyer’s offer then, isn’t there an opportunity for the first buyer’s transaction to be terminated under the ‘lender/servicer approval contingency’ if the seller’s lender/servicer does not agree to the terms presented to the lender/servicer?

Are questions like this one really able to be answered with ‘black and white’ answers? For example, in Arizona, we have a "Short Sale Addendum" that stipulates the following:

“…Buyer and Seller acknowledge that there is more debt owing against the Premises than the purchase price. Therefore, this Contract is contingent upon an agreement between the Seller and Seller's creditor(s), acceptable to both, to sell the Premises for less than the loan amount(s) ("short sale"). Buyer and Seller acknowledge that it may take weeks or months to obtain creditor(s) approval of a short sale.

Nothing shall limit a Seller from accepting subsequent offers from subsequent buyer(s) and submitting the back-up contract(s) to Seller's creditor(s) for consideration. All parties understand and agree that Seller's creditor(s) may elect to allow the Seller to sell the Premises only to the holder of the Contract with terms and conditions most acceptable to creditor(s)...”

So you see, questions often are not as ‘black and white’ as one might expect. There may be more yarn to untangle in your transaction than you realize.

G-II

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Permalink Reply by Jerri Schick on March 25, 2012 at 11:47am

Wow.  Our short sale addendum does not speak to multiple offer at all.  I can see how that language could create some really upset buyers (which is what I am trying to avoid) in a rapidly moving market and a desirable property it could take a while and multiple accepted-then-declined offers to finally settle on the absolutely highest and best buyer.  For example, buyer 1 submits offer and seller signs and agent sends to bank.  Before the approval is issued, buyer 2 comes in with a higher offer as backup, seller signs backup, agent submits to bank and bank kicks buyer 1 to the curb and issues approval for buyer 2 offer.  3 weeks later buyer 3 shows up with an even higher backup offer, etc., etc.   Where does it end?

By the way, does a back up offer make for a 'multiple offer situation'?

 

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Permalink Reply by Lori & G-II Klindera/Varrato I on March 25, 2012 at 1:45pm

The idea behind the Arizona Short Sale addendum is that the document is a bit like a safety valve. The seller has no obligation to send backup offers to their lender/servicer. What the seller wants, most of all, is to put a bad real estate adventure behind them, with as much space as possible between the seller and the banks lawyers as possible. In Arizona, we have anti-deficiency statutes that have advanced the thought process of most banks to write into the short sale approvals, waiver of deficiency, even when not a HAFA or BofA Co-Op short sale. If, by some stroke of misfortune, the seller is facing down a promissory note, and if there is a higher backup offer sitting in the wings, it may be advantageous to the seller to advise the first buyer of the higher backup offer, giving the first buyer an opportunity to better his/her offer or move out of the way for the next best offer. Then, the seller may be in a position to negotiate the promissory note down or rid him/herself of such a requirement all together. At the end of the day, the goal is to represent our “seller clients” in a way that puts them in the best possible position when the short sale closes. Joseph is absolutely correct, the seller nor the seller’s real estate agents or negotiators owe any bank any fiduciary duties. Fair and honest is all any bank is owed or should receive.

Lastly, banks don’t want to field multiple offers. They want to work with only one offer at a time. Soooo, even though the Arizona short sale addendum includes the option to submit multiple offers to the seller’s lender/servicer, skilled, knowledgeable good short sale agents don’t do that.

Regards, G-II

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Permalink Reply by Satar Naghshineh on March 25, 2012 at 2:20pm

As Joseph states, you have no obligation to the seller's lender. Your obligation is to the seller. I suggest to keep the current buyer in place and if the terms don't work out, then contact the backup buyer to see if they are around. Maybe you get lucky and the bank approves the short sale and the current buyer walks. Then you can approach the backup buyer and have them lower their offer to match the approved price, but then have the buyer pay for things that the first buyer or seller's lender refused to pay for.

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