Replies to This Discussion

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 3, 2011 at 8:04am

I expect this really has nothing to do with whether it's a short sale, BofA, etc.  This has everything to do with the seller and the buyer have signed and accepted a purchase agreement.  THAT purchase agreement needs to be worked until it's dead and one of the parties walks-away.  Although it seems logical that a bank would want to see additional offers, especially higher ones, the original contract is just that - a signed contract.

 

These are no different than normal standard / standard sales except the bank has to approve how much they are willing to lose!  Think about it.... if you had made an offer for your client on a house that was not a short sale and your offer was accepted, would your client want to be superceded by any subsequent offer?  If another offer came in, the seller needs to be made aware of that offer BUT, they really can't do anything about it unless the first offer cancels.  The seller cannot sign two offers at the same time as they cannot be bound to sell to two buyers simultaneously!

 

I expect the first offer, will work it's way through and get approved.  Make sure you're lining up additional properties for your buyer.

 

Best of luck,

Thom Colby

Broker

Newport Beach CA

Permalink Reply by joe beauchamp on September 7, 2011 at 5:14am

Thom, this situation makes me wonder - it takes less than a butterfly going by to screw up a BOA short sale.  I assume that from a practical standpoint, I can tell a negotiator that I have a better offer and he is likely to waste little time sending a denial for insufficient offer on this one so I can put in the better offer.

That aside, you speak from the Buyer's agent side and the Buyer's agent has nothing to do with this offer.  So, the Seller's agent wants less commission for the sale and the owner wants less money for the house by not (easily) dumping the 1st buyer.  I try to understand how that makes sense and come up with: owner doesn't care much since it isn't money in his pocket (although he's the one interested in going with the 2nd buyer); the agent sees starting all over as a delay to payday for only a couple dollars more (note studies of how long agents keep their own properties on the market vs. their clients' and you see a shorter payday is more important than a better price for the client) (and, no concern of any legal issues with the 1st contract); the sellers agent sees the new buyer wanting a mortgage (FHA, etc) which makes it add more time until a payday or possibly the new buyer somehow doesn't seem capable of following through; or something funky is going on where the agent is working a great discount from the bank for the current buyer - friend or something.

It seems most likely to me that this seller agent is not representing the owner as he should (he could be increasing the likelihood of a short sale and lessening the debt left in the seller's name) and doing the easiest thing for a sooner payday.  And, isn't he representing to the bank at the same time that this 1st offer is the best out there at market value while hiding a better one from them?  What are the obligations and ethics there?

What am I missing?  It seems that the listing agent is self-serving over his client and his own representation to the bank of the property value or worse, some sort of thing going with the buyer.

Oh, and I have had backup offers which state that they are such in the contract - I don't know why there seems to be a problem with having a backup contract.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 7, 2011 at 5:28am

Joe -

 

I'm confused....  What part of a signed contract between Seller and Buyer do you not understand?  Seller and Buyer signed a Purchase Agreement - THEY are the parties to the contract NOT the agents or the bank!  This is Real Estate 101.

 

You said; "the Seller's agent wants less commission for the sale and the owner wants less money for the house by not (easily) dumping the 1st buyer."     WOW ! So it is all about the commission - and - how can anyone "easily dump the buyer..."   Would a REALTOR purposely derail a transaction to get a higher commission?  The other (backup) offer may be higher and net more for the bank and less of a loss for the seller, but the original offer has already been signed and excuted between Buyer and Seller.

 

Here in CA, by law, there is no deficiency on any mortgages once a short sale has been approved by the lender(s).  This fact should NOT factor into the seller accepting the best available offer at the time the offers are presented.  Remember, the SELLER determines which offer THEY will SIGN / ACCEPT.  Not the Agent - Not the Bank.

 

Best,

Thom Colby

BROKER

Newport Beach CA

 

 

 

 

Permalink Reply by Sharon Alters, CDPE, GRI on September 7, 2011 at 5:57am

Thom, in Florida there is still a Deficiency unless it is waived by the Bank in writing. We should pass one of those laws in Florida!

 

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 7, 2011 at 6:05am

Sharon - I know. I think CA may be the only state where this law exists.  Realtors need to lobby their legislators to enact similar legilation in FL and other states  !

Permalink Reply by joe beauchamp on September 7, 2011 at 11:06am

Not looking for an argument - if you don't agree that "approved by the bank" means that they can kill a deal, that ain't my problem.  And if you feel that a bank prefers to honor the 1st buyer who signed a contract with a seller rather than get the best return for its investor, I totally disagree, but that I also do not consider my problem.

I ask those questions because they are logical.  I see you as "arguing" that an agent is supposed to be loyal to an honor of a contract with the first buyer regardless of anything changing, etc.  In effect, his loyalty is not to his client, the seller.  I disagree - they have an earlier contract and the agent is being paid by the seller, in effect.  His loyalty should be to the advantage for the seller. (In this case, the seller stated a desire for the better deal and the agent said no, not even as a backup - and that is in the seller's interest how?)

2nd, as a legal member of the state's real estate agents, I find the ethics questionable in discouraging better offers or withholding that information from the bank - haven't thought much about it, hence the question.

And the seeming (emphasized) "about commission", have you never seen a study of how realtors treat their own property vs. those of their clients?  If it wasn't about commission or faster payday, they would treat them them same, right? - they do not, on average.  Yes, realtors actually like being paid - sorry to burst any bubbles on that one.. ;-)

Although I do not know, I suspect that CA has done nothing to help on the seller's credit.  He will still be dinged by incomplete payment of debt on his credit.  I assume most sellers are so beyond that issue, they don't care much, however, a short sale is not a free pass - there is still some potential value in minimizing the loss for the seller/bank to the seller..

Perhaps I see things differently in NJ than you do in CA because we have a 3 day attorney review.  When housing was going crazy, that was frequently used for the seller to look for a better buyer while locking in this one.  That isn't what it is labeled, and to add humor to the law, the seller (or buyer) cannot just state that the contract is unacceptable, he actually has to hire an attorney to simply say that.  I never considered that I had a real contract until those days had passed, but I legally had one - although I hope that farce was not the intent.  I suspect it was a very rare contract that actually got rejected by an attorney because it was unfair..

I just thought I was missing something - looks like I wasn't..

Permalink Reply by Sharon Alters, CDPE, GRI on September 7, 2011 at 5:56am

Gary, the Seller is signing a back-up contract, which only moves into first place if the original contract is voided due to various reasons, including buyer not agreeing to the bank's counter offer, getting financing, etc. There is no risk to the Seller of signing two contracts at once.

 

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on September 3, 2011 at 8:33am

This one thing everyone needs to remember is that Short Sales are no different than standard sales in terms of contractual rights - except - short sales have a contingency for the lender's approval for the amount of loss.  Otherwise, they are exactly the same!

 

Thom Colby

Broker

Newport Beach CA

Permalink Reply by Jeff Payne on September 7, 2011 at 5:34am

Yes sir, the bank is not party to the contract and other than the short sale contingency, it is no different than a normal sale

Permalink Reply by Kathleen Lordbock on September 3, 2011 at 10:40am

I would advise her not to sign either- she is already under contract!!!

You should not be able to contact the bank about  this property- you are not a party to anything and have no authority to talk with them.

Permalink Reply by Jeff Payne on September 7, 2011 at 5:30am

I see no problem with accepting a back up offer, but that offer needs to be held as just that, a back up offer.  The seller and buyer signed a legally binding contract and that contract should be honored.

Joe, it is certainly not about the money, if it was we would be doing something else.  It is about the fact that the seller already signed a contract and could open themselves us to a legal issue if they arbitrarily cancel a contract.   I think that you are forgetting that the bank is not party to the contract, they are there to approve the lien release so that the property can be sold. 

Permalink Reply by Sharon Alters, CDPE, GRI on September 7, 2011 at 5:49am

Jeff, I agree with you. The contract we submitted was clearly a back-up, with a back-up addendum. We never questioned whether the Seller was under a contract, but we question why an agent would not want his Seller to sign a back-up just in case the first contract fell through.

I am aware that we have no authority to speak with the bank. My question was to ask if anyone was aware of any bank policies for BofA regarding back-up contracts.

 

Thanks for all your comments :)

 

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