Can sellers sign other offers when they already sign one offer with subject lender approval in short sale transaction??

i thought you can not sign other offers and sellers have to wait for lenders to reject the 1st offer then sellers can accept 2nd offer?


i'm california, what's the right way to do the short sale transaction?

The sellers could sign back up offers. In short sales it's not the purchase price for the bank it's the NET they will recieve.

Really the bank is the seller as without there approval the sale doesn't happen. The seller (homeowner) really can't do jack.

Did it say in the first contract the sellers reserve the right to accept other offers for bank approval??

Having a higher offer will increase the chances of the short sale getting approved. However if the offer that is higher is from a weak buyer then it doesn't mean anything. The bank will most likley come back with a highest and best anyways.

In signing any new offers when there is already a pending contract from an earlier offer I always recommend adding a note "Acceptance contingent on the Cancellation and Release of prior contract"

New offers are "backup offers" until the first offer is released.

The bank is not the seller, your contract is with the property owner and your fiduciary duty is to the owner. You are negotiating with the bank so they will release their lien in order for the seller to transfer clear title. Hopefully, for your seller’s sake, you can get the bank to accept the short payoff as "payment in full." Otherwise the note the seller signed is still enforceable. At least in Michigan it is.

The buyer and seller have an accepted contract once both parties sign. The banks acceptance of the short payoff to release the lien is a condition of the sale, just like the buyer's home inspection or ability to obtain financing would be. Unless there is language in the contract stating otherwise. Language drafted by an attorney.

keeerect in North Carolina, a backup can be signed but it does not override the current accepted offer.

It sounds like we are pretty much on track her.

One of the things that lots of agents don't seem to be able to get there mind around is what WorkingBroker mentioned (I'll paraphrase)

"That the contract is subject to lender approval, is a condition of the sale, no different than the buyer's home inspection contingency or financing contingency would be."

It is as simple as that.

One of the surest ways to make sure that a Short Sale will take longer is to send (and keep sending) multiple offer to the lender. If you make the Loss Mitigators job easy, the short sale goes pretty quickly. Give him multiple deals to look at - well he's going to look at my file before he's going to look at yours.

Just like anybody else, he's going to look at the deals that are the easiest ones for him to get his bonus on first. So a simple deal will always get his attention first.

If you then have any backup offers, great. But use them only if the first offer is declined.

Chris

If I understand this thread correctly, it is much different in our state.

When submitting an offer to a seller, the buyer signs an addendum stating they are aware that the seller may accept other offers up to the point that the bank approves the short sale.

I don't believe these are back up offers, as they are accepted by the seller and submitted to the banks.

You could have waited 2 months, and a buyer comes in with another offer better than yours and the bank could drop your offer and take the better.

Basically your offer is not binding until you have written approval from the lender.

At least that has been my understanding according to the short sale addendum verbiage and past experience, which isn't much as I can't stand short sales.

Floater, this really has nothing to do with your state. It may be the custom for how people are handling short sales in your area, but it is not the law or anything like that.

And it is a very bad custom - for everyone involved.

Not having seen the addendum that agents are using in your area I don't know what "out" the buyer has in your addendum. But when I have seen this type of addendum in the past, the buyer usually has the right to walk away pretty much at any time. It's usually that way for this type of addendum since the seller is not bound to this contract, the buyer usually isn't either.

So this type of situation is bad for everyone for several reasons.

First the buyer not having confidence that they are going to be able to buy the property will keep shopping, and may disappear. The loss mitigator knows this too.

Then it's also bad for the listing agent. They continually have other agents, and potential buyers to deal with. They continue to have to field questions from the buyers agents about what's going on, and continually have to deal with questions from agents who want to show the property. That makes the Short Sale listing a great big hassle.

Then, and really most importantly, the loss mitigator doesn't like this approach either. Let's remember - and this is a great big deal - the loss mitigator gets a bonus for a completed transaction! Why do we care about that? Simply because this simple fact gives us the leverage to rise to the top of his stack of 100 - 200 short sale packages on his desk. It also is the answer to why, if we send them a deal they don't like, our package can sit around forever and gather dust.

So the loss mitigator by human nature is going to want to work on the deals that look most promising first, and the least promising last. Makes sense right? If you were in their shoes, wouldn't you do the same?

So what the loss mitigator is looking for is a complete package, with everything he needs, a serious and committed buyer, a low BS factor, and an offer price that looks reasonable. If a package has these ingredients it will get fast attention. If not, well they'll get to it sometime or another.

Now when you send an offer with the kind of addendum that you are talking about, just like agents know that this leads to trouble, the loss mitigator knows that too. After all he's worked on far more short sales than virtually any agent. He knows that this kind of thing leads to a package that never closes because the buyers walk before he can get it approved. And even if they don't walk, this is still a package that he will have to spend more time on.

So there is no good reason to handle a short sale in this way.

Whether on the buying or selling side - we would never get involved in a short sale with this kind of addendum. We just won't do it! Why would we want to? This isn't an REO. We are not working for the lender!

We only work with a qualified (for the short sale situation) buyer, and one signed and completed contract. That is what is best for everyone. That is what will get approved the quickest.

Chris

My above quote is wrong....sorry.

The offer is binding on both the buyer and seller. The addendum provides a line for a date the buyer is free. You can also add your own line that states buyer can unilaterally waive at any time.

My point was, in our market area, the seller can accept several offers none of them being backups. The seller's home remains active on the market until the lender approves a sale. I believe the addendum makes the lender's approval a condition and also informs all parties that multiple offers can be accepted by the seller.




Good information! Like I said, I hate short sales and avoid them at all costs.

On another note, you say you only deal with one buyer at a time. I assume you are on the listing side? If so, and you only deal with one buyer at a time, how do you handle other offers that come in? Simply have your seller reject?

We will take other offers as a backup, nothing more.

If the first offer looks like it will be approved we show the listing as pending, so we don't get many backups.

If however the first offer is weak, we will take it, but show the listing as a contingency listing. So then it is posible to get other listings.

If the first offer is weak we take it to get the Short Sale process started with the lender. When the lender turns the offer down then we know exactly what they will take for the property, and we are also then in position to close quickly for the next offer.

If I was in your market area, I wouldn't play the Short Sale game the way the agents there are playing it. Because of the reasons mentioned in my previous post. The agents are acting like they are working for the lender. And they are making it harder on everybody.

Chris

No the sellers lender is not a party to the contract and is not approving the contract at all. Its a contigency just like inspections. What you have is the contract is contigent on the sellers lender taking less for the sellers note then what is owed. Its a contigency just like inspections. If the buyer and seller signed a contract then everything after that is a back up offer. Then if the seller can not get thier lender to accept taking less then you cancell the contract just like an inspection that did not go right.

This is a great thread for agents to learn a few things about short sales.

The way Chris SLM works on his short sales is EXACTLY how I do my short sales as well. There is no better way.

In my area, we actually have a short sale addendum as well. It is usually presented with every offer I receive from the buyers' agents. They always try and push the addendum to be signed because it allows the buyer to cancel the contract at any time for any reason releasing earnest money.

I have not once allowed any of my sellers to sign this addendum. Once I explain to the buyers' agents pretty much what Chris explained in his previous post about the seller is also allowed to accept several offers, the buyers' agents will typically be ok with moving forward without the addendum. An addendum like this shows no committment from either the buyer or the seller. Why not just accept a verbal offer at that point? The initial contract means absolutely nothing if that addendum is signed.

The way I look at short sales is that no committment = no deal.

By the way, I also request that any buyer deposit earnest money "once buyer and seller agree to terms, prior to lender approval". This way I have a committed buyer and their offer that we can work with. I then throw the property into contingency status to show our committment as well. I am fair with everyone in the transaction and I don't play games. It gets done right the first time around and my closing ratio has been right at 100%.