Buyer backed out--when do I tell banks?

We just got approval from both banks and the buyer backed out--after 3 months of waiting! I have put it back on the market at the approved price. Is it better to wait to tell the banks when I have a new offer or just tell them now? The seller is not in default so there is no worry of a foreclosure sale date.

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Permalink Reply by Richard on July 20, 2011 at 7:26am

Hi Shari,

 

I'm not an agent but I'm a little curious, 

  • Were there any set rules from the lenders about multiple offers regarding the approved price?
  • Are you allowed to use your back-up offer?

If you are allowed to then, I'd say take a page from Nike and Just Do It.

Richard

Permalink Reply by Shari P on July 20, 2011 at 8:17am
There are no backups. There was another offer at the time but it was less money so I'd rather see if we can get another one at the approved price.
Permalink Reply by Richard on July 20, 2011 at 8:46am

 

 

Hi again Shari,

As I said earlier I'm not an agent but, I'd still have to ask if

  • there were any set ground rules from the lenders about multiple offers regarding the approved price?
  • are you allowed to use your back-up offer?
  • and, if there was a close of escrow date set?

 

There should be some way to work around this obstacle.  I'm sure there are some really verse agents and experts on this site that can give you good advice, but I still believe they'll probably ask what the lender's ground rules are as well.

 

Richard

Permalink Reply by Richard on July 20, 2011 at 8:55am

Shari,

 

Some agents on this site that comes to mind is Tracy Hatchell, Smitty, Brian Avery and Eric Mieles.  They helped me out with my questions.  Tracy's been working on short sells for 8 + years.  I'm sure she's run into this problem before.  It may be worth sending them a message.

Permalink Reply by Jeff Payne on July 20, 2011 at 9:09am
Shari, who is the lender and will they allow a substitution of a buyer.  GET IT BACK ON THE MARKET YESTERDAY and find another buyer ASAP.  Once you find another buyer, do your best to get the bank to switch the approval letter to teh new buyers name
Permalink Reply by Shari P on July 20, 2011 at 9:15am

Two different lenders--GMAC and Specialized. It's back on the market now.

So Jeff, you are saying don't tell lenders until I have a new buyer to substitute??

Here's one hitch...I think it's very interesting...the lenders approved this short sale just BEFORE last Friday when the state of CA put into effect a new law that states the lender can not make a prom note a condition of the short sale. Both of these approvals have prom notes. It could benefit the seller to start over.

Permalink Reply by Jeff Payne on July 20, 2011 at 9:25am
At some point you are going to have to tell them, you should be able to get both of them to substitute a buyer but you are going to have to work fast
Permalink Reply by Kimberley Kelly on July 20, 2011 at 11:22am
It is not easy to get a Lender to allow a substitution.  B of A just enacted new guidelines last week to give us 48 hours to slip in a back up without shutting the file down entirely.  As inefficient as it may seem, when a Buyer walks, generally I have had to close and re-open with a new Buyer.  Re-list it, contact the Lender, find out if they allow substitutions, then get another buyer and pkg. together. 
Permalink Reply by Kristy Hamilton on July 21, 2011 at 5:06pm
Equator has an option under "my properties" for a new offer.  But, the property has to still be available in the system.  BOA also has a "soft decline" (sent through the Equator message system after responding to my information regarding the buyer change) which I am dealing with on one where the buyer couldn't get financing (prior issue) because of the 15% condo assoc. due issue.  The agent found a new CASH buyer, for less money though, and am working through Equator.  It is supposed to be quicker than initiating a brand new short sale. I believe that it will depend on what the difference is in the offer you had and what you now have.  Also, it is my belief that if you think you can make it happen before the end of the month, they might jump through some hoops to help achieve that. 
Permalink Reply by Kathleen Couch on July 22, 2011 at 4:51am

It happens all the time.  Banks know it.  Just tell them.  You cannot actually substitute another offer, but now you know what they will accept. For short sales, they want one offer turned in at a time.  But, you can take a back up offer if you explain that it cannot be sent in unless the present offer does not close.  Many times after 3 months, the bank will re-evaluate to a lower listing price for future offers.

The only time I may not tell them right away is if the buyer backs out just before you get final approval.  For two reasons, sometimes the buyer will come back on board when there is a final approval, and also, it is helpful to know what the bank will accept for future offers.

Permalink Reply by Bryant Tutas on July 24, 2011 at 12:02am
It depends on who the lenders are. With BofA you can now substitute a buyer but yo would need to have a new contract in hand before doing so. Other lenders as Suntrust are very easy to switch a buyer. Some lenders won't allow it at all.
Permalink Reply by Gabe Sanders on July 24, 2011 at 1:55am
Typically, you will have a time frame to close on this approval.  Let the lender and/or negotiator know the buyer walked and you're looking for a new buyer.  If you can't get one in time, hopefully the next offer will go through faster.

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