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Multiple Contracts submitted to lenders on short sales?!?!?!?

An agent contacted about a week ago telling me he was going to submit an offer on one of my listings. I explained to him the listing price had been approved by the investor who owns the loan and that amount was what they would approve for, not one dollar less.

Two days go by and I received another offer on this property, for a little bit more than listing price. Seller executed and off it all went to the servicer to be sent for final approval.
As it always happens, the following day I received an offer from that agent, 10% LESS than listing price (I guess he did not hear a word I said, NOR did he read the broker remarks on the listing, anyway), to which I kindly replied that the property was now in Pending Sale since the seller had executed a contract and it had been sent to the bank.

The Realtor writes to me that he could get his buyer to up the offer if needed to compete with other offer. I explained that whatever his buyer wished to do with his offer would have to include a BACK - UP addendum since seller can only be under contract with one buyer at a time.
He was shocked, said he never heard of such a thing that I am wrong and he has submitted 7 contracts to Chase and 4 contracts to Countrywide on two of his listings. What else can I say but "W- O- W!"

Sellers need Realtors who care more than ever.. This Realtor is advising his seller to get into 7 CONTRACTS FOR SALE. In my opinion, Realtors that do not know how to practice REAL ESTATE should not risk the future life of distressed sellers.

Help lots of people and have a great day!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®, GREEN, CFS
BROKER - Owner REALTOR® - Green Realty Properties

Visit www.pattydasilva.com for SouthEast Florida's best properties.

Posted by Patty DaSilva, CDPE©- Certified Short Sale Expert- e-PRO®- Ft Lauderdale on 04/30/2009 07:18 PM

Comments (24)

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24 Comments on Multiple Contracts submitted to lenders on short sales?!?!?!?

APR

Lots of agents should be seeking alternative career opportunities.

Hmmmmm.....kinda scary that a fellow Realtor is encouraging Buyers to make MULTIPLE offers like that. What are they thinking????

Sounds like you reeeeeeeeeeeally know your business & take pride in taking care of business ETHICALLY - it's a wonderful thing, and makes us other ethical Realtors proud!

Here is a suggestion....I would contact the broker (no need to give your name, unless you want to and are comfortable doing so) to let that Broker know what his/her agents are doing. That Broker is the one that will ultimately be held responsible if they have an agent that is operating business that way.

I would want others to straighten me out if I do something blatantly wrong (I would truly appreciate them enlightening me!), since none of us are perfect. I am one who wants to do the best job possible, and I welcome professional feedback & guidance.

Edith Schreiber - Dallas, Texas

Patty,

I wouldn't necessarly have listened to "I explained to him the listing price had been approved by the investor and that amount was what they would approve for, not one dollar less." ether. But, anything I'd offer would be well supported!

On the other hand once the seller has accepted an offer he shouldn't have been presenting anything accept a back up! On this subject Roy Kelley's short comment can't be improved upon.

Bill

Roy, I think a lot of agents could benefit from some good training.

Edith, I do take a lot of pride. I would never advise my seller to place himself in such a vulenrable position as exectuing 7 contracts.. or two, or three.. or anything other than one.

Bill, the investor approved the listing price the prior day. Unless the supporting evidence was a closed sale for a very similar property that closed that day.. (and an appraisal to accompany it), the listing price was the approval price... Investors are pretty stubborn when it comes to the amount of money that is going back into their pockets.

Help lots of people and have a great day!!!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®

Patty-What an interesting story! Even though I've been an agent/broker for 12 years, I handled my first short-sale this month. A past client of mine - who does hard money lending - called me on April 10th and asked if I would list a short sale in my area. I said, "Of course, I will." He asked me for a price opinion and I gave him one based on "solds". He said, "Great. I want you to move this fast."

I sent off the listing agreement to the sellers on title (they now live out of town) and - even though this was a little dicey - I called all of the investors I could think of and told them that this house was coming on the market. (Okay, this was a little scary, because I didn't have the signed listing agreement back - but I had the key and permission to show the property.)

I found an investor to buy it, who is paying cash, and I had the PSA in escrow exactly one week after the initial phone call I received to list the property. I also found out who the lender's processor is, and I've been in close contact with him, so that we can get this closed within less than 30 days.

I've listened to many agents complain about long closings take when it comes to short sales. That does not have to be the case if the listing agent for the short sale is on the ball.

Now I can see how the system for short sales gets so bogged down - IT'S BECAUSE OF LISTING AGENTS LIKE THE ONE YOU'RE REFERRING TO - HE IS NOT DOING HIS JOB!

He should be communicating with all of those agents who said they were preparing to submit offers and telling them to submit their best offer possible and then communicate with the seller regarding which offer they might want to sign - and why. If he's just throwing offers at the bank and the seller and expecting them to sift through the contracts, he is not doing his job and not representing his client.

Why do banks even work with these incompetent agents?

Best regards, Linda

Only one offer at a time, that's how we do it and have always done it in short sale positions. Not only is it ethically correct it is more practical. The more offers the lender receives the more it delays the process. We always explain this to both agents and clients. Any subsequent offers get placed in back up roles. Good post Patty and best of luck to you.

Patty, I have to agree with Bill, that what the "firm" price is does not necessarily mean you will or should get an offer for that amount. First, our clients dictate (or should anyway) what offer they want to make. We are only the messengers, not the principals. Second, just because the investor has a number in mind, doesn't make it the reasonable market value of the property. (In your case, it might have been, don't know.) Just because the investor approved the price yesterday doesn't make it any more valid, because we don't know the time lag for the comps that were used.

Linda,

Congratulations on your first short sale. It seems you have done a great job.

The system only gets slower and less efficient with agents acting with so little common sense (not to mention the legal ramifications of allowing a seller to promise to sell the same home to 7 different buyers).

You ask: "Why do banks even work with these incompetent agents?"

Well, few reasons.. banks do not have any agency (fiduciary or not) relationship with any of the parties involved, they do not have any duties to buyers or sellers, they do not hold licenses nor are bound by our ethical rules. Lastly, they could not care one bit who gives them the opportunity to get thier hands money to be recovered.

With that said.....I have had this conversation with many loss mitigator and some supervisors and I can share that many MANY loss mitigator will NOT work on multiple offers. One of them told me "I am not a Realtor nor am I the owner of the home and I should not be doing their jobs".

How sad that a loss mitigator knows more about being a Realtor than a loss of agents. He followed that sentence with.. "If I receive more than one offer I do not know which offer to work on and I have to close the file"

Help lots of people and have a great day!!!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®

Jerry, one offer at a time! Anything after - back up! Please feel free to make an offer on any of my listings anytime!

Robert, buyers agents have to present the offer their buyers want them to, of course. But in this case his buyer was willing to pay the listing price, which was the investors bottom line. I should have mentioned that the price was discussed and negotiated to where it would not be negotiated anymore and they would just not issue a demand letter for anything less than that. Lower offer is not the issue here, but an agent who allows who advises his seller so poorly.

Help lots of people and have a great day!!!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®

Patty,

It's agents like that that are making buyers so hesitant to submit offers on short sales. I had one last week where the listing agent told me he had an accepted an offer to submit to the bank and asked me to submit a back up. That was all fine except I check the MLS and he's still got it marked Active so he can continue to collect offers.

They really need to catch up on guidelines for handling short sales.

Good for you..so many agents take multiple offers on short sales... I think it's rediculous... Good Luck... :)

Brian, sometimes I get a little bit annoyed when asked the same thing (for the 9879485394857 time) by a buyer's agent but then I remember what they are dealing with out there, and quickly I reply with compassion. I do not envy buyer's agents theses days. Buyers have a reason to be cautions and buyers agent's have a duty to interview the listing agents to make sure they know what their are doing.

Being a listing agent on short sales is not a walk in the park, by any means, but I am competent, I run an honest and efficient shop and though they are a LOT of work, my short sales flow pretty smoothly.

Something has got to give sooner or later, Realtors cannot be doing some of the things they are doing without having any repercussion. It is basically malpractice..... in my opinion. =D

Konnie, I would have to agree that "ridiculous" is a good description for what they are doing. Thank you and good luck to you!

Help lots of people and have a great day!!!

Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®

MAY

Good stuff . Thanks for posting this up. It's always good to read these blogs every now and again

I'm getting fed up with this "cr*p". I agree with you that there should be some "straight-shootin'" in our profession. Once an offer is accepted, that's it, period.

Just one thing to keep in mind. In many areas, short sale listing agreements and contracts include special addendum clauses specifying that the property can continue to be shown while a contract is being considered by the lender and that multiple offers may be submitted. While I would MUCH rather deal with one offer and then backups, with signed addendums like this in place multiple offers would be legitimate on a short sale. All parties involved have to be informed and consent in writing to these terms up front. Otherwise, you are exactly right. Without these specific clauses, advising your seller to accept multiple offers could open him and you to liability. Great post! Just another issue unique to short sales that can really trip up inexperienced agents. Information is the best protection!

Wiston, Thank you for stopping by.

Tom, I wish agents were more upfront about they they they practice, correct, or not, it would give the other side of the transaction the chance to make an informed decision.

Blynthe, It is very common for my listings to receive multiple offers. When that happens, I ask the buyers to sign a multiple offer disclosure saying that there is more than one offer being presented to the SELLER and the form provides them a couple of days to change their offer to best and highest. Once that day comes, I present all offers to the seller and the seller will pick the best and highest offer, executes it and that is the offer to be sent to the seller's lender. Any other offer after that is a back-up offer.

I have not found good language (nor would I advise me client to) sign more than one contract. If the issue is submitting unsigned pieces of papers to lenders, that is just a personal decision that to me does not make much sense. Everyone involved is working based on a paper that is not binding or enforceable.

Information is always the key. My listings have offer guidelines that explain how my short sales are processed and negotiated and it has worked out nicely for all involved. Experienced Buyer's agents like to protected themselves, and their clients of course, from much time and heartache.

I agree with you, experience makes a big difference. =D

MAY

Patty this sounds like a continuation of the convo from the Realtown discussion board earlier today. That agent you spoke sounds absolutely crazy for misleading their client regarding how to submit offers and how many offers to present. Crazy!

Patty: Great post -- I was joking with a realtor friend of mine this week and told him I thought agents need much more training about short sales, so many don't really understand what they are doing.

Amber, the whole thing is very crazy. No matter how much I try to make sense why an agent would do such a thing, I just cant.

Kathy, I wish it was a joke but it is not even close to it. Agents that do not have the training should not be doing short sales. They are just putting the seller's at a much higher risk of foreclosure and complicating the lives of the buyers.

Patty, I'm a little confuse and hope you'll be able to clarify this issue for me: When I take a short sale, the homeowner provide me an authorization letter to handle the process and the negotiations with the banks. I never got the seller signing his/her acceptance on the offer. My understanding, at least until now, is the the banks are the ones that aremaking the decision to accept or decline the offer (they are the ones to loose money and not the homeowner). The homeowner will sign all contract forms + demand letter just before closing. Am I missing something???

Steve,

The seller's lender is not a part of the contract in any way whatsoever. It does not agree or disagree with anything, it does not negotiate terms, (down payment amount, number of days for inspection, closing day, etc.).

The sale of the home is between the buyer and the seller. Seller's lender approval is a contingency, much like a mortgage. The banks make NO decision about accepting or denying an offer, that is a decision for your seller. The seller's lender only verify that the lender is a candidate for a short sale and how much money will they be willing to receive in exchange for releasing the mortgage and the note of the home.

If you do not have your seller sign the offer, you do not have a contract. That buyer is NOT bound to that offer is ANY way, it cannot be enforced in any way and it does not have to be performed.

The lender do not care about your seller or your transaction, you do though, why would you ever work your heart out to get an approval and have the buyer not be there? The buyer is not engaged in that transaction at all......

For a buyer to make an offer in any of my listings, they must put a deposit (open escrow) with enough money that I know it would hurt their pocket to lose if their were to breach the contract, they also must perform inspections within 5 days of effective date of the contract. I also required proof of funds and I verify a buyer's ability to obtain a mortgage with their lender.

I treat my short sale transactions as I would a non-distressed transaction, they just are a lot more work.

Help lots of people and have a great day!!!

BROKER Associate REALTOR® & Licensed Mortgage Broker - Senior Financial Advisor

Visit http://www.pattydasilva.com for SouthEast Florida's best properties.

http://www.twitter.com/pattydasilva

Steve,

This might also help you:

http://www.realtor.org/rmolaw_and_ethics/ethics/pastarticles/0905_ethics_shortsaleoffer

Let me know if you have any questions.

BROKER Associate REALTOR® & Licensed Mortgage Broker - Senior Financial Advisor

MAY

Yeah and I am sure he had seperate deposits on each of those also right???? I doubt it. You mean the lender doesnt dictate what we as licensed professionals can or can't do? Wow i had no idea I thought the seller/lender tell us how to do our jobs. lol its crazy the stuff I hear but it is all education. Unfortunately the ones that need it do not use the tools such as the internet to learn what is going. they depend on us to do both sides.. Good luck all..Hopefully this new Obama bill will help the short sale process. I read Bank of America is already on board. There are not that many banks left so hopefully they all come aboard quick..

MAY

Hi Chuck,

I wish they turn to ANYONE with knowledge before doing stupid things that put their clients and licenses at risk.

I truly hope Obama's plan helps, the system needs the relief, Bank of America could use a lot of improvement in how they handle the files and how long it takes them. BoA actually removed the loss mits voice mail boxes because they got full, instead of hiring more people!!! Meanwhile property values are declining while good offers sit there with no work being done to get them approved and off the books.

The whole thiings makes no sense...

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