Replies to This Discussion

Permalink Reply by Richard OBrian on March 13, 2011 at 5:32am

I'm not sure the FBI has a clue... In California a short sale is with the seller not the bank.  The seller picks the best offer and that offer is submitted to the bank (lender) for approval.  Short sale are NOT REOs.

The FBI should be looking into real estate fraud anyways...  

• ▶ Reply

Permalink Reply by Anthony A. Alfano on March 13, 2011 at 6:01am

I would not be worried about this so long as you present all offers to the sellers. In some of the systems such as Equator you can only upload one offer anyway. I have done a couple Short Sales for FBI Agents in which they selected one offer to submit to their lender. If the FBI was going to come down on Brokers for not submitting all offers, their agents would not advise me otherwise on their personal deals.

• ▶ Reply

Permalink Reply by Marcy Moyer on March 13, 2011 at 7:12am

Seems like a hoax to me.  The seller can only sign one offer.

• ▶ Reply

Permalink Reply by Andy Morris on March 13, 2011 at 7:58am

Hey Donna,

 

I agree most what seems to be the consensus here that this article is BS and in general there is no legal fiduciary obligation of care to the lenders.  

 

I do believe that this is an over reaction to some of the short sale "flopping" issues that have been going on.  I think most of the big short sale flopping gurus have got out of the business but essentially what would happen is that investors would make an offer and then list the house because they had an "ownership interest"  It would be misrepresented to the lender that the offer was an open market retail value offer. however in fact the offer that was known not to be anywhere close to market value from an investor that makes offers on all the realtors listings.  Then a true fair market offer would be used to close the deal while the investor got the bank to take much less and then would be reselling simultaneously at at large undisclosed profits. Although technically by the letter of the law it it is possible to do simultaneous close on a short sale legally... there are issues with these on a number of levels and they mostly come down to disclosure and misrepresentation, especially in regards to comunicating to the short sale lender taking the loss.

 

I believe this article right here would be an example of a realtor going to jail for such http://rtsl.us/jr

 

So if you exposed the house to the open market (i.e. you listed on the MLS) , if you aren't lyeing to the lender in any way shape or form, if you are fulfilling all duties of care to the seller you represent and you haven't otherwise also obligated your self via contract to the short sale lender then in my non attorney and very humble opinion you have nothing to worrey about here and this article is just lender influenced propaganda put forth in ingnorance by your board... :) 

• ▶ Reply

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on March 13, 2011 at 7:58am

As others have said already I find this news by the L.I.B.O.R. to be somewhat strange.  

 

Example: A Listing Broker receives mutilple offers on a listing, presents all offers to the seller and issues a "Multiple Counter Offer" to all potential buyers asking for their Highest, Best and Final offer.  Typically some will not respond, and some will not.  The Listing Broker reviews those remaining offers with the sellers and they choose the offer most likely to close escrow while netting the most $$ for them and the lender(s).  The seller signs that offer and it becomes a binding contract upon approval of the short sale lender(s).  No matter which way you slice it, it is a binding contract between the seller and that buyer.  A new offer may come in at a higher price or a lower price.  No matter, the signed offer is the one that's in full force and effect until one of the parties cancels.

 

If the FBI is expecting all offers to be signed by the seller and submitted to the lenders, we won't close anything !  NONE of the short sale lenders want more than one contract at a time sent to them.  In fact, accepting multiple offers is fraud because the property cannot be sold to multiple buyers.

 

On the other side of the coin, if there are Broker who are not providing all offers received to the seller for consideration, and picking / choosing which offers to review with the seller - that's wrong - and the FBI should go after those Brokers.  I'll even help them with a list of Brokers I know who practice that way !

 

Another reason I never double-end a deal so as to never give the perception of self-dealing.

 

Just my .02,

Thom Colby

Broker / Negotiator

Newport Beach CA

 

 

• ▶ Reply

Permalink Reply by Raymond Kennedy on March 13, 2011 at 8:30am

This has been a subject I consistently see coming up. There are conflicting issues with this but there is a way to do it correctly and cover yourself with both the seller and the lender. It is correct that you do have a fiduciary responsibility to the seller but part of that is not putting the seller in harms way. As a Realtor negotiating a Short Sale, we have two main goals here. One is to of course get an approval mitigate all and any liaiblity. The second is to get the highest and best offer.

Lenders do not own the home yet so they don't have any right to respond to an actual contract. Their position is to simply approve or disapprove of the loss and costs they are willing to take. So the statement of you having to submit all contracts is not accurate. You do have an obligation to try to get the highest and best offer for the seller to help mitigate the loss and potential liabilities. Submitting the highest and best offer would cover your risk against any potential fraud against you and your client.

Here is how I handle it. Maybe this will help some struggling with this issue, this should cover you on both ends. If I have an existing offer on a property and it's signed and accepted it is put in the MLS and disclosed to other agents and the public. If another offer comes in, we will negotiate this subject to cancellation of previous offer. In the previous offer I normally have a clause that allows us to bump the subsequent offer but it also gives them the opportunity to firm up the terms of the new offer. So essentially they have first right of refusal. If the don't firm up the property goes to the second buyer. If they do firm up it sticks with the first buyer.

 

In some cases the buyers agent will ask this clause that allows them to bet bumped removed. I will not let this kill a deal over this clause so on occasion I have to remove the clause. What the buyers/buyers agent don't realize is that by removing this they lose all rights to firm up. So what could potentially happen is we could still execute this contract subject to cancellation of previous contract and submit it to the bank. The obvious result will simply be that the bank will automatically deny the original offer. This is risky because of timeframes so it's better for everyone that the clause is still in the contract. 

If you get multiple offers at the same time, you can just negotiate these until you get the highest and best. Basically handle it like most REO agents handle it. Once you have the highest and best than you submit that to the bank.

 

By handling it this way you will not only get your seller the highest and best offer you will also be submitting to the bank the highest and best so you don't have to worry about fraud.

 

Problem solved. Would love to hear feedback on this.

 

 

• ▶ Reply

Permalink Reply by Jim Hale on March 13, 2011 at 8:45am

I would recommend adopting/including contract language that specifically obligates the seller and the listing agent to NOT forward any other offers other than that of the agreed upon buyer.

That protects the buyer whose offer goes forward.  No one is going to sneak in on him....with a slightly higher offer.

I want to motivate that buyer to agree to making his earnest money non-refundable for a specific period.  I also want that buyer to agree to do the inspections and the inspection period up front, so that it doesn't have to take time and so it can't blow the deal at the last hour. 

That protects all parties from having things get screwed up half way through the process.  That doesn't prohibit the LA from keeping a "waiting list" for the possible benefit of the seller. 

But it does put one offer in front of the lender for approval......and the fact that the restriction on other offers has been made a term of the agreement is right there in black and white for the negotiator to see.

• ▶ Reply

Permalink Reply by Andy Morris on March 13, 2011 at 8:48am

Jim, nice point... for the very same reason i have that in my addendum... there is no other way to justify the buyer risking so much upfront if you don't make them exclusive...

Jim Hale said:

I would recommend adopting/including contract language that specifically obligates the seller and the listing agent to NOT forward any other offers other than that of the agreed upon buyer.

That protects the buyer whose offer goes forward.  No one is going to sneak in on him....with a slightly higher offer.

I want to motivate that buyer to agree to making his earnest money non-refundable for a specific period.  I also want that buyer to agree to do the inspections and the inspection period up front, so that it doesn't have to take time and so it can't blow the deal at the last hour. 

That protects all parties from having things get screwed up half way through the process.  That doesn't prohibit the LA from keeping a "waiting list" for the possible benefit of the seller. 

But it does put one offer in front of the lender for approval......and the fact that the restriction on other offers has been made a term of the agreement is right there in black and white for the negotiator to see.

• ▶ Reply

Permalink Reply by Smitty on March 13, 2011 at 8:56am

Raymond, it is a TOTAL misconception that the HIGHEST offer is the BEST offer.  Your job is to get the STRONGEST offer.  The offer that has the BEST chance to get to closing is going to be the BESToffer.  I've seen multiple contracts rejected that were FHA with 3% down by lenders and then had a LOWER all cash offer on the same property and somehow that offer was accepted.  I literally just had it happen last week with Bank of America.  I had an offer for $315,000 with 5% down.  Seems pretty strong to me.  It got rejected...file closed and I fought and fought with them about their appraisal, but they wouldn't have it.  I ended up putting forth my back up CASH offer and BAM, auction stopped, file put forward for investor approval.

 

It's a COMPLETE misconception that highest is best.  It's the STRONGEST offer that's best.  If you're lucky enough to get multiple offers have the seller look at the overall offer before they make a decision.  The decision is theirs and truthfully not up to us to decide...we can only give our opinion. 

 

NY may have different laws.  In MA we have an offer before a p&S is signed.  Still a homeowner cannot sign more than one offer with a buyer at a time.  There CAN be backup offers but they all have timelines for acceptance and then a P&S follows. Many times we tell buyers all offers have to be presented to a homeowner before a certain day, but still NONE of that has anything to do with the lender.  It's all between the seller and buyer.

• ▶ Reply

Permalink Reply by Phil Hanner on March 13, 2011 at 9:30am

I do not believe the FBI is investigating short sales. They are investigating bidding at foreclosure auctions for antitrust violations. 

 

There is no fraud in submitting a single contract for approval. I will never submit multiple contracts on a short sale as the listing agent. When working with buyers I prohibit other offers. It is unprofessional to string along 10 or 15 people for a deal that may not even happen.

 

The lender is just a lien holder and cannot force the seller to accept multiple offers. I see a few agents who get 6 and 7 offers on a property. In this market, that tells me they priced it too low. How does pricing too low help the lender?

• ▶ Reply

Permalink Reply by Todd Stearman on March 13, 2011 at 10:14am

Donna-

 

I have to agree with the other replies.  There person/entity who holds legal title is the only person/entity that can "accept" a contract to sell that property.  The ONLY right a lien holder has is to accept or reject a net amount to release their lien so the property can transfer with clean title.  The story sounds more to me like a scare tactic that these wonderful banks send out into the public.

 

Todd Stearman

• ▶ Reply

Permalink Reply by Ashly Alexander on March 13, 2011 at 10:24am

You know, they should. I am so tried of unethical agents who lie about submitting offers!

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• 4
• 5
• …
• 9
• Next ›
• Page