The short sale that wasn't, or is it?
We were house hunting in CA and on a short list of about 10 homes had one listed at $388k we were planning on seeing but that was kind of mid pack on desirability. Before we contacted anyone about the house there was a price reduction to $319k, we weren't too far away so we arranged to see the property.
After seeing the property we told our agent that we were interested in putting in an offer, and that $319k seemed a good price. Later that weekend we were told there was another potential buyer, so we put in a written offer at $322k. We were told the deal was a short sale and our offer included a short sale addendum. Our offer was accepted and signed, and we settled in for the anticipated wait for the short sale process to happen.
We had been tracking all our prospective houses in an online service and noticed the house went from For Sale to Pending with the price still at $319k. A couple of weeks later we got an email notification that the house has gone back to For Sale and the price increased to $359k. We contacted our agent and were told no reason to worry the sellers were just continuing to look for backup offers and had decided that $359k would be enough to do a straight sale.
This week we hear that the seller has a cash offer for $359k. Initially this news is presented with a kind of sorry your deal did not work out tone. It turns out the sellers had been about 3 payments behind, had submitted an request to BofA for a loan modification, but had done nothing in terms of submitting it for short sale approval. I quickly pointed out that I still have the primary signed contract for $322k.
Obviously the seller sounds interested in avoiding a short sale, and I felt there was some benefit in doing so on my side as well to get the deal done sooner. I indicated verbally through my agent that we might be open to increasing our offer by say $30k especially if the seller would consider including some additional items they had valued at $15k. My agent was suggesting that if we went this route we could do an addendum to the existing contract specifying that it was no longer a short sale and addressing the change in price and additional items.
The verbal response was that it would take $366k and they might consider reducing the price on the additional items "a bit". They say their plan was to counter offer on the verbal cash offer to request $366k. No one will tell us what the actual amount is that would be required to clear the title.
So now I am being pushed to do the $366k deal, because they say BofA will reject the my offer because of the larger cash offer, my contract will be void, and the sellers can immediately take the cash offer at that point.
So if I understand my position correctly I have two options, I can pony up the extra $44k and go to a straight sale, or I can sit tight and see what happens when the deal is reviewed by BofA.
The question I have gotten multiple answers on is whether if BofA denies the short sale, or requests an increased amount I still have the first chance to respond or whether the sellers can immediately move to the back up offer.
I have checked with a local broker, other agents, and even the Short Sale Dept. at BofA, and so far more people are saying I will have a chance to increase my offer if needed than not, but the responses aren't very solid, more the "I think..." variety. The BofA response was actually one of the more solid in saying I would have a chance, but they were speaking in general terms rather than this specific deal as it has not even reached them yet.
I have a call into a local real estate lawyer and have also found out that an acquaintance is also a lawyer who specializes in real estate, so I hope to check with both of them today.
Does anyone know, or have a good suggestion for how to find out if I do have the chance to counter with BofA?
Replies to This Discussion
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Permalink Reply by Shel-lee Davis on
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Short Sale lenders are unpredictable. Sometimes they will just close a file if the offer is too low, sometimes they will counter. The main problem being, if this does not need to be a short sale, what would motivate the seller to submit himself to the short sale process, including providing all his financial information and sign the necessary documents so his credit can be ruined and he cannot buy another property for at least 3 years. If the property is truly worth the additional money to keep this out of short sale, then I recommend that you pay that amount. If on the other hand the only reason you were interested in buying the property was because "it was a steal" then walk away and look for the next steal. Good luck.
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Permalink Reply by Jon Hunolt on
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Hi Shel-lee, thanks for the reply.
The seller already has another house in a different state and I suspect had to disclose all their information to apply for loan modification?
I agree I think there is a lot of motivation on both sides, part of why I was willing to increase my offer by $30k, and suggesting they include the $15k items, so we would each be out $15k more. I also feel I did nothing wrong in this deal. I made an offer for $3k more than asking price at the time and that offer was accepted and signed, now it is being left up to me to spend $44k more to sort it out.
The property is probably worth it, though no one has been forthcoming with an appraisal but I have considered having one done as a sanity check. Is it that much nicer than a lot of similar properties for similar prices? not really. I didn't go into this looking for a "steal" I offered list price+, I went into it looking for a nice place to live.
The flip side to your advice are the comments I have gotten that I have a signed offer and I should stick to my guns, and that how the seller has to meet that offer isn't my problem.
I was trying to take a middle course, but so far the motivation for me to stick with the offer as it stands is that it could be accepted by BofA, or BofA could request more, say $350k, in which case I am still ahead other than the extra time involved in a short sale. The motivation for the seller to reach a deal with me is all the downsides you describe plus being able to get the deal done that much faster and move on.
If BofA closes the file does that void my contract? I have had people say yes, and others say no it just means I may have to modify it at that point to cover the cost of not being a short sale.
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Permalink Reply by Anna Chroscicki on
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I started writing advice for you, but after few sentences I realized that I can't really. Selling Real Estate in Florida with different contracts, laws, etc I could just confuse you, not help. But I can give you one advice....Look at your contract. Banks can do whatever they want, but sellers and his agents are bound by contracts, so if you are not sure, show it to somebody who can help you understand if seller can take back up offers, have property available while really under contract and other do other things that to me seem not right.Good luck.
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Permalink Reply by Bryant Tutas on
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Hi Jon. The contract will outline everything. If the seller is in breach then you need to speak with an attorney. All else is really just speculation.
As a buyer you really can't force a seller to go through with a short sale. Nor can they you. The SS addendum will outline their and your options.
I hope this helps
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Thanks for all the replies.
I made 3 separate calls to BofA yesterday and today, had one helpful but vague person, one who refused to answer any questions, and today one that was great. It is probably not a guarantee, but there policy is to counter, negotiate, etc the primary offer prior to moving to any backups. I am still checking with a lawyer, but this gave me a good enough feeling to say that unless the sellers/agents are willing to negotiate I will wait to let the 45 day short sale period expire as is and see what happens. I am hoping we will reach some agreement, but I don't think I should be the only one that has to give some to do so.
For other CA folks the two parts of the SSA that come into play are section 1 and 6
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Hi Harry,
The 45 days is not up until 3/20, but I guess they can drag their feet to try and reach that.
Also considering going through my lender and paying for an appraisal up front to help establish value.
Still hoping they come around to some value between what they accepted and what they are wanting now.
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Permalink Reply by Rachael Babinchak on
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I'm in AZ - if I understand your issue correctly $359k would allow the seller to avoid a short sale. A traditional sale would give the seller no negative consequences, as a short sale would, thus it is in the seller's best interests to avoid short sale. That reasoning comes into play later here.
I had something similar happen...a buyer came in after contract and the short sale was submitted to the lender and offered a higher offer with better terms. Although our short sale addendum allows that a buyer can cancel before short sale approval is received, it said nothing about a seller being able to do so after they had executed a contract with buyer #1. My broker advised that I could counter buyer #1 to meet or beat offer #2 terms and price, and give full disclosure that buyer #2 existed. If buyer #1 refused, seller could cancel buyer #1 because in a short sale "it was in the seller's best interests to come to an acceptable short sale agreement with his/her lender" and offer #2 would do that. Specific performance from our contract was overriden by the contingency clause of the short sale addendum that lender approval is needed and "it must be acceptable to the seller". Buyer #1's offer was no longer acceptable. That is just my situation and obviously the best resource is a REAL ESTATE attorney.
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