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When is a Short Sale "Accepted" Can the buyer keep "Looking"?

By Ryan Bretzel

Real Estate Agent with Keller Williams Premier

June 19, 2009 02:27 PM

With the volume of short sales out in the market, it has sparked my brain to get a few tips out to my fellow colleagues. For many when a buyer writes an offer on a short sale we continue to look for "better" properties in the mean time as many short sales will not work out. Many have even started to use a "short sale addendum" which provides many great benefits to both parties.

The biggest problem though comes when you have an offer on a short sale and want to back out of it to write on another property....problem you say. Yes, unless the seller has accepted some extra verbiage in the purchase agreement, once the seller and buyer have signed off on the whole purchase agreement it is in effect and binding. Regardless if you have not heard from the bank yet!!! Beware, you may be stuck waiting until the seller has an answer. Bank approval is not "final acceptance."

Here are a few tips when writing offers on short sales:

1. Add "buyer can cancel purchase agreement at anytime prior to final bank approval."

2. If there is a time period on how long the seller has to get the bank's final approval make sure you have #1 in there otherwise you could be waiting until that date.....months away.

3. Regardless if you do your inspection prior to the bank approval or after put in the purchase agreement that buyer has option of doing an inspection a certain number of days after bank approval as well.

4. Add "buyer shall not be required to provide earnest money until short sale approval has been obtained. Buyer will provide earnest money to be deposited in trust account within 3 business days after seller has provided written notice to buyer that said approval has been obtained by all necessary mortgages and lien holders.

The two most important clauses are #1 and #4. You want to protect you buyer's earnest money and right to move on to another property. This should help greatly to reduce potential issues down the road. Of course with all added verbiage seek your broker or attorney for legal advice before proceeding. Each state will have different practice and standards. This is based mostly for Minnesota Law.

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Eric Reid

Renaissance Realty Group of Keller Williams Atlanta Partners - Lawrenceville, GA

Good advise for all you Buyers to Follow but understand the seller can still except other possible higher offers

Jun 19, 2009 02:32 PM

Brian Brumpton

Keller Williams Boise - Boise, ID

Boise Idaho Real Estate

Ryan,

While these are good points it's also important to remember that real estate is local including state laws. Best practices in your area may not work in another.

#4 for instances in our area can cause some major snags. It's common here to write offers that state earnest money is not to be deposited until we have lender approval. It becomes and issue in underwriting makes the clearing of the earnest money check a condition of approval and the lender gives you a very tight time-line to get it closed. 3 extra days in the process can kill a deal.

Jun 19, 2009 02:36 PM

Sharon Alters

Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL

Realtor - Homes for Sale Fleming Island FL

Ryan, in our area we have an addendum that starts all contract time periods upon lender approval. Deposits are usually made 3 days after lender approval. We add the right for the buyer to withdraw anytime up to lender approval.

Sahron

Jun 19, 2009 02:40 PM

Konnie Mac McCarthy

MacNificent Properties, LLC - Cobb Island, MD

Broker/Owner - VA & MD "Time To Get A Move On!"

what is interesting about that, is many agents will have the seller sign multiple offers, and leave the buyers hanging, by leaving the home on the market, even when the seller has ratified a contract..that should not be allowed either.. :) but it happens.

Ryan Bretzel

Keller Williams Premier - Stillwater, MN

Thanks for all the comments. I agree that different state standards and laws allows or prohibits our actions. Use what you can.

-Eric, though once the buyer and seller have agreed in writing on terms the only contingency is the inspection and bank approval (ok also financing). Technically the seller should not be able to accept another offer because there is one accepted. Bank approval is only a contingency that the seller can remove with written notice from the bank, right?

-Brian, true with the earnest money. Of course you need to be aware of your closing date and redemption period if your state has one. Minnesota has a 6 month redemption period. Usually I put the closing date will be 40 days after final bank approval.

Jun 19, 2009 02:50 PM

Lisa Wetzel

RE/MAX Realty Affiliates - Carson City, NV

CDPE, SFR carsonvalleyland.com

Ryan - If you wrote an offer on my listing with the clause that they can cancel anytime prior to final bank approval ... I'd refuse to accept the offer and not represent the seller on this property!

There is too much work for the listing agent to even consider working on a short sale where the buyer has a "easy walk" policy ... come on!

Jun 19, 2009 03:02 PM

Lisa,

I totally understand. Though, we all know that if the listing agent doesn't know what they are doing then it is all a waste of time the buyer could be stuck waiting for no reason. Short sales suck, there is no ifs, ands, or buts about it. Each party needs to know what they are getting involved in. Thanks for the comments.

Jun 19, 2009 03:12 PM

Jim Hale

ACTIONAGENTS.NET - Eugene, OR

Eugene Oregon's Best Home Search Website

The easy walk languge is very common. The seller is in no position to object -- s/he is entering into an agreement that s/h cannot even fulfill without third party help.

Jun 19, 2009 07:38 PM

Anonymous

jay

I had an offer on a short sale that had 3 loans on it. The seller accepted the offer and a PA was signed. Everything was a go the first bank wells fargo accepted and the third bank accepted also the sellers agent. The second bank was wells fargo mortage so the listing agent assumed that the first bank since it was wells fargo that it was the same bank accepted.....but it was a diffrent bank. She gave us a closing date and told us to get an apprasial and inspection done and set a closing date. So we waited for the closing date to approach and 3 days before closing she finds out the second bank didn't approve yet. So we waited about two weeks and were told we would have an answer in the next 2 days. So we were excited the following day after hearing that the seller cancelled the sale. The only contingencys they had on the PA were Banks approval and terms and conditions from the banki. So we have been trying to get our apprasial and inspection from the listing agent cause she messed it up. It turns out they backed out of the deal for there own personal reasons and nothing to do with the bank. We also found out that the second had accepted. They backed out not cause of the bank just that they wanted to. They have move out and the place had been empty for 1 month before any of this had happened. None of this adds up. Well the point is who should pay for my inspection and apprasial? and is there anything else we can do?

Sep 21, 2009 04:21 PM

Tony and Suzanne Marriott, Associate Brokers

Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ

Coldwell Banker Realty

Contrary to popular opinion, Buyer Inspection Period is not an opportunity for a "free look". The Buyer must act in "Good Faith" when making a decision to cancel during the inspection period. Deciding they no longer like the floor plan doesn't count.....

Oct 21, 2010 03:26 AM

When is a Short Sale "Accepted" Can the buyer keep "Looking"?

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