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?

Views: 3559

Reply to This

Replies to This Discussion

Great reply Jeff!

Not to mention much polighter than I'd have said it.

Bill

It is no different than a standard sale - If you have an executed offer and another offer comes in, it should be handled as a back-up offer.  If the 1st offer is declined, buyer walks, etc. then the backups come into next position.  Remember, the contract is between the Seller and the Buyer CONTINGENT UPON lender approval of the LOSS to them.

Most lenders require an affidavit signed by all parties at closing stating all higher offers (signed or not) have been presented to the lender.  All higher offers must be submitted or you are committing fraud to sign the affidavit.

David Richardson, can you share which lenders and which affidavits you are referring to. Also, I would love to know how you are submitting more than one offer in equator for Wells and BofA.  

The BofA broker affidavit says that all offer have been submitted to seller (not to bank)..............

Since higher is not always better I wonder what the bank would do at closing if they found out there was a higher back up offer.

Not a darn thing because the bank does not own the property, the seller does.  

Jeff and others are correct. If you have an executed Offer, that is the one and only offer that gets submitted to the 3rd party bank. If the other agent (below) is suggesting that the offer has not yet been executed, the sellers do need to review them all, choose one, execute it, and get it to the bank. It's amazing to me how many agents I have come across who are handling their own short sales, but do not know what they're doing. I've heard some agents say that they are submitting "all" offers to the bank over the course of the last couple of months the property has been up for sale, and they express frustration that the bank hasn't "chosen" one. It's because this is NOT the way it's done! The seller still owns his/her home, it has NOT been foreclosed, and the executed offer is always subject to 3rd party approval - the bank. Therefore, it's the bank's choice to either accept, decline, or negotiate all of which, by the way, they base upon either BPO's or actual appraisals, if they're not to cheap to pay for them. No-one is doing anything illegal. Any other offers that may come in after the first is executed remain as back-ups. As for NC and their requirement, I'd re-read it or have an attorney review it and advise. I do not believe what is stated is correct. I have read the other affidavit mentioned and have concluded that it pertains to all offers prior to one being executed. Obviously, the seller should review all offers if there are multiple offers with a cut-off date, but once one is executed, all others are back-up until some state or federal law is implemented that requires us to do something else - which, personally, I don't see happen because it would be interfering with basic property rights of the owner. As for the Offer, you are talking about basic contract law, and once one is executed, then you are under contract! The seller owns his/her property, and the bank has a choice to work with the borrower to either modify the loan, short sale it, consider deed in lieu, or foreclose. Think about it, if you "had to" submit all offers that come in over time, who decides the "end date?" In effect, you are hand-cuffing your sellers, extending a very stressful situation, causing further financial ruin, and you'd never get the short sale done because the people at the bank can't or won't make a common sense decision - not to mention giving a damn about your seller(s). Oh, and by the way, if you do that, you've now lost the first set of prospective buyers who have moved on... so start over. Those agents who do this sort of thing are not truly helping their sellers - and it's every agent's or broker's fiduciary duty to do just that.      

Thanks for that detailed explanation Toni Nicholas. Even on a site such as this we have agents replying who have very little knowledge of how a Short Sale works and are probably the listing agents on shorts. The time frame for considering all offers happens before the seller accepts and signs ONE. After that, they are back up offers and stay right there unless something happens with the seller and buyer team in play.

If agents would think of Short Sales contractually more along the line of traditional sales,  there would be less confusion. The lender approval is just a contingency.

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

1. NCRC Violation for the Agent. According to the Short Sale Addendum we use in North Carolina and the North Carolina Real Estate Commission rules, the bank must be informed of ALL offers once the short sale negotiations have started with the bank. This is a requirement of the real estate agent’s governing body. This is the responsibility of the agent, regardless of who they have helping them negotiate the short sale. Any failure to abide by the rules will be enforced against the agent… Ouch!

 

Kevin, can you direct us to the "NCRC" Rule book, would love to dig into this discussion some more.

Good information.  From my personal perspective, the "back-up offer" is overblown.  I don't want back-up offers.  When I explain to the buyer agent what it means (i.e. that their buyer will be committing to the property for 60-90 days or more while remaining in 2nd position - i.e. their buyer probably can't buy another property because they will bound to this short sale property - true for most home buyers) they usually won't write it.  Also, what good is having an expired (by the time you hear back from the short sale lender on the original contract that was submitted) back-up contract sitting on your desk when you do not even know the price?  I just tell buyer agents that I will update the MLS and notify them (if they email me) when/if the property comes available again.  At that point, I can at least tell them the price (for now) and see if their buyer would even be willing to pay that price for the property. If not, it would just be a waste of time again to be contractually bound to submit their contract even though we know it won't be approved.  On the other hand, if the lender responds with a very attractive price, but the 1st buyer still bails out then I will have no problem re-selling the property anyway.

Exactly Jim.

RSS

Members

© 2024   Created by Brett Goldsmith.   Powered by

Badges  |  Report an Issue  |  Terms of Service

********************************** like buttons ************************