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Presenting Multiple Offers to the Lender for Short Sale Approval

Questions and more questions! While visiting at the NAR site regarding the new short sale designation and visiting the 'discussions' link, I found several questions relating to short sales and one, in particular caught my eye.

"Can multiple offers be submitted to the lender without seller signatures or can only one offer be negotiated at a time? Can the seller sign multiple offers to submit to the bank?"

Ahh, the question of the year! In Broker Bryant and Wendy Rulnick's classes (visit www.ShortSaleSuperstars.com) on short sales, we learned that we only submit one offer at a time. Numerous articles and webinars that I've seen during the last year also instruct agents to submit only one offer at a time. However, repeatedly, this question arises in our day-to-day business. Just yesterday, a client of mine who is selling a beach property informed me that it's been months and they have heard nothing from the bank--he said that they just could not understand because they had presented several GOOD offers to the bank! When I questioned him further, he explained that his agent had informed them that this is he way that she was supposed to handle this but, cannot tell him why the BPO has not been ordered or the bank has not responded. He asked me my opinion.

Short Sale or Foreclosure Here is my best understanding of this process:

A foreclosure property is owned by the bank, therefore, just as any client, we are required to present all offers to the bank for their evaluation, review and subsequent acceptance.

A short sale property is still owned by the homeowner or said owner of record, NOT the bank. If we receive multiple offers for a short sale:

We present them all to the SELLER
We review each of them with the SELLER
We assist the SELLER in determining which Offer carries more weight--
- Is the buyer prepared for the lengthy short sale process?
- Is the agent willing to work with us during this long process?
- How qualified is the buyer--if the bank were to counter this Offer, would they qualify for a higher mortgage or is the buyer at their maximum?
- How 'clean' is the Offer?
Evaluate all aspects of the Offers and compare them, selecting the strongest
Remember that the strongest Offer does not always mean the highest sales price!
Keep the cleanest & best Offer and have the sellers sign and return copy to the buyer
NOW, submit the entire package including hardship letter, financials, comparables, etc. with THIS ONE ratified Contract to the Lender for their approval.
Begin the waiting short sale process.

Sensory OVERLOAD! Once again, this is only MY understanding but, I have not spoken to one short sale expert who submits multiple offers. Instead, it has been my experience that if multiple, unsigned (by the seller) offers are submitted to the bank, nothing is ever done with them and this is a sure sign that the property will be foreclosed upon if the seller is unable to make their mortgage payments.

I would love your opinion as I know that many areas of the country have done far more short sales than we have here in Charlotte NC and I value your knowledge and expertise.

One thing that I know for sure with regards to the agents questions is that you don't submit multiple SIGNED offers (by the Seller) to the bank--you can't be 'under Contract' with multiple, independent buyers at once! The other part of the question, I get weekly from someone and would like to be able to confidently answer as to, "Can you submit multiple, unsigned Offers to the lenders for approval on short sales?"

What say YOU?

Charlotte NC Homes for Sale

(THE best Charlotte home search available - no kidding!)

Debe Maxwell, CRS/Realtor®/Broker
Broker@TheCharlotteScoop.com
Phone (704) 491-3310

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Posted by Debe Maxwell - Search Charlotte Homes for Sale - Charlotte NC Neighborhoods on 10/06/2009 12:03 AM

Comments (112)

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112 Comments on Presenting Multiple Offers to the Lender for Short Sale Approval

OCT

2009

This is the way I prefer to see it occur, yet the C.A.R. SSA (Short Sale Addendum) includes language that states that the bank may review any and all offers, and that the accepted offer may not be the one the bank accepts.

Debe: It is my understanding that multiple offers can be submitted to the short sale lien holder... but in the end... it is the seller who give the approval as to what is done. And... since there are so many lenders out that who may be lien holders on the seller's property... the different policies that each has makes things even more complicated. I'd love your opinion.

I have only been involved in one short sale - Buyer side, and luckily it was a pre-approved one because the previous buyer had backed out. The Seller's agent submitted our offer, which was exactly the same as the previously accepted one, and kept a second offer as back-up. It would seem to make no sense to submit multiple offers, signed or not, to the bank because it is in the Seller's best interest to submit the strongest one anyway, risking as he or she does, foreclosure. It would be interesting to hear what others have to say on this.

I have heard of many agents who are holding contracts. I am waiting on approval from the bank for 2 short sales....3 weeks later still waiting.

That is correct the bank is only saying they will or will not take the offer they are not the owner and they are not a part of the contract to list and have nothing to do with the commission.

Debe, I'd love to weigh in on this one. However, I've just joined the short sales group (Bryant & Wendy's brainchild). How you've laid out your reasoning "feels" right to me. But not having experience with short sales yet, I'll continue to learn from those who DO instead of those who WISH THEY DO.

Debbie, Great information explaining the difference between the two and how to navigate the muddy waters...

Helping you live your American dream...

Our business is almost 100% all short sales. .and I can tell you that I will never submit multiple offers to the bank simply because I work for the sellers and it is the sellers best interest for the bank to maintain focus on one single offer to get it done.

I do accept back up offers and they are utilized in the event the buyers drops off.

Even buyer's agents understand the process and want to make sure only one offer is submitted. I think the process is already challenging enough without cluttering the process with multiple offers.

Vickie: Yes, they may review all offers but, do you simply submit the one ratified Contract and give them the back-ups if they ask?

Karen Anne: I know, I think there may be a couple who do want them all but, agents here are submitting all offers and NO Contracts to the banks and then the never-ending waiting game begins until someone realizes that the bank won't look at it until they have a signed, ratified Contract. And you're SO right--there really needs to be a standard set so that things can run a bit more smoothly!!

Jane: I agree with you but, am anxious to read the thoughts of those who do them more than you and I because I don't want to EVER send a homeowner into foreclosure because I've done something wrong, right?!

Heather: Even when I present it correctly initially, I tell buyer's agents to let their buyers know that we're probably going to have 30 days of silence from the banks!! We don't always so, that makes them happy when we don't but, at least they're prepared for the LOOONG wait!!

Tim: Thank you, I agree 100%!

Sherry: LOL Didn't you just love their course--very easy to understand and I think the two of the asking questions to one another covered just about all of the questions that I had while listening to them--when I was on, we could not come up with any additional questions for them as they covered the material SO well! I, too, haven't had the experience of those in CA or FL but, am stanging by to learn all that I can!

Michael: Thanks! Be glad you don't have to deal with the paperwork on these!! LOL

Fernando: Thank you so much--that is what I'm looking for--not only validation but, I appreciate your sharing your knowledge with us. I do agree with you 100%!

Gary: You're right--it's scary to represent the buyer and know more about the process than the agent who is listing and doing the back end work on the short sale. VERY frustrating!

This is what I do, including finding out from the buyer agent the time frame of the buyer. Making sure the buyers are willing to wait for minimum of 90 days and sometimes longer.

Debe, as if dealing with short sale and foreclosure properties were not a challenge, multiple offer just complicate matters even more! I am just happy we don't have much of this in Austin and will keep my fingers crossed that it that it stays that way!

Hi Debe: It depends. Most of the time we submit only one offer; however, the short sale addendum that we use gives the seller the right to accept subsequent offers and send those to the bank. It's often a bad idea to send more than one offer to the bank, but there are situations where it is the smart thing to do.

It depends on whether the bank is receptive, for one thing, and some banks are; some are not. Say, for example, you receive an offer of $100,000 with FHA financing. The seller signs the offer, you prepare the package. That evening, before the package is sent to the bank, you receive another offer for $125,000, all cash, from a committed buyer. Since the seller has already accepted an offer, there are only 2 things you can do. Either send the offer unsigned (some banks won't accept that) or sign the offer, accompanied by a PAA putting that offer into back-up status, providing the SSA allows it, and most do.

Then send both offers. The bank will then ask you, after a negotiator has been assigned, which offer you want considered. The first is knocked out of the water, but the second offer is contingent upon cancellation of the first. Both are subject to bank approval. The bank approves the second, the seller cancels the first. If the seller directs you to do this, your duty is to the seller.

You might blame the listing agent but it's actually the buyer's fault for failure to insist in the contract that the seller send only that offer to the bank.

Thank you, Missy! I'm with you on the buyer qualification--not only their mortgage but, their STAY time capability!!

Russell: You are SOO lucky! I truly thought the market here be similar to yours since we're always near one another in the national statistics presented by Case Shiller, etc. but, we've had about a year of these now and it's become about 25% of our market. Hopefully you'll continue to stay clear of these in Austin!

Hi Debe. Nice post. I am becoming an accidental short sale specialist.

It is a sadly growing portion of my business.

Thanks for clarifying the process,

Ken

Having done several short sales, I only put in one offer at a time. If you have a short sale addendum which puts the buyer on notice that the seller has the right to accept subsequent offers and forward them for short sale approval, then you haave some flexibility. If you have a situation like Elizabeth above where you receive a higher offer and for cash, then you can submit it. Clearly you have a better chance of getting a short sale approval for a higher purchase and all cash.

Like some of the comments above, if you receive multiple offers, select the one that you think is best in terms of likelihood of short sale approval and borrower qualification and send that one. It is my experience that banks will considered signed contracts.

Hi Debe..Great Post on handling Short Sales..I have No experience with Short Sales, but logic tells me the Seller and you would pick the best offer(clean) to present to the Bank, I would assume the bank would not consider multiple offers instill the seller had decided on the best offer.

Cheers, lots of detail...Thanks forsharing :O))

Hi Ken! Join the crowd! This began happening to me about a year ago and it's amazing how much you learn with your first ones, isn't it?!

Paul: Thanks and you're right--I do think that there are certain situations that require a 'rule' change but, for the most part, I feel that if you're doing it as the majority do, submitting only one offer, then you're more likely to get the results that you need, instead of taking a gamble if you're uncertain!

Elizabeth: Thanks for your comment and lesson--I love your idea that the buyer demand, contracturally, that theirs is the only offer submitted. That opens up a whole new can of worms--is the buyer's agent informed enough to teach their buyer the rules of the game?!

Fred: Thank you! This is the way that I've been taught but, when my client here complained that his agent presented all offers and they have heard nothing for months, then I thought I'd throw out that question to those more experienced in this process than I!

I interview the selling agent before even showing a short sale. I need to know that they believe that only 1 offer is submitted to the bank. Multiple offers confuses things and does not help the seller or the buyer. Good blog!

Debe The Special Counsel to the Virginia Association of Realtors noted recently that it makes perfectly good sense for the seller to submit multiple signed offers to the bank since they are all contingent anyway. Art

We only submit one offer - the best offer, with the most patience buyer with the least about of issues that could prevent it from closing. In a perfect world, the process would be reversed and we would get an "approval" price from the bank that was good for 90 days and then we could sell the property normally and help more homeowners avoid foreclosures and more buyers pay a house without holding their breath and praying for 6 - 9 months.

Debe- Being in the trenches in ground zero of short sales and closing on short sales every single month and having done short sales since 1995- we have seen so much misinformation out there and plenty of it is coming by way of the certification programs for distressed properties also.

Why would any agent submit more than one offer at a time to a short sale lender? The biggest confusion is that people still don't get it. They think that the short sale lender is a party to the contract and they are NOT. There should not even be a discussion of this matter. Anyone's opinion contrair to what you learned is simply not helping the seller and therefore should not even be considered.

The seller chooses the best offer based on all the criteria that Broker Bryant and Wendy and I have taught in our classes and on our blogs. The agent is supposed to get the best possible outcome for their seller.
If you are sending multiple offers to the lender you are:

hurting your seller,
the banks do not know how to do real estate-
how in the world are they going to understand multiple offers?

if I were a bank, I would be saying- keep them coming! or You have the listing priced too low!

Like- use your brain! This is not rocket science but it is an art of negotiations. You need the bank to know that this is the only buyer in the world that wants to buy this property so the bank better jump on it now. You are not in this to look out for the banks' best interests! Katerina

I have multiple offers in as the Buyer's Agent, and, after reading this post I called the listing agent on one of them to confirm it was the ONLY offer sent in with the short sale package. She assured me that it is. I was hoping it wasn't the case and maybe that was the reason for it being 4 months into the contract and still waiting for an answer from the bank.......

P.S. This should be a public post. The public needs to know what is going on in short sales and so they won't choose agents who don't know what they are doing in short sales.

We have an addenda that says we will accept back up offers but they will be held in back up position and not go to the lender unless the first position buyer walks or defaults or can not perform.

I have learned through a lot of short sale training to negotiate the best offer up front and then just submit your best offer to the bank for approval. This way you have a shot at an actual closing.

Finally getting to a good place with the bank-so you know what they are looking for...most banks tell me that you don't have to submit one that is signed anymore and that if multiple offers come in, to give a 48-72 deadline and then submit the best one to the bank, put this on the listing through MLS and then talk with bank on the best pick, it has seemed the most fair and easiest without agents feeling slighted. In the end, the bank will take the best offer and make changes anyhow, one of those changes is usually, "get the sellers signatures"

Hi Debe, fascinating and unfortunately a growing situation. Typically we write backup offers on short sale multiple offer situations. This is not by choice, on the last 2 occasions it is listing agent instructions.

this whole short sale process is really frustrating can't wait for it to all go away in 3-5 years ;-)

Hi Debe: This is pretty basis stuff ... although my sense is that many agents don't know. The homeowner has legal title on a short sale ... which means the homeowner/sellers accepts one offer ... no different than a regular sale except it must be approved by the lender(s). By the way, I suggest CDPE certification.

Hi Debe,

I submit the one offer that is reviewed by myself with the sellers and signed by the sellers.....any offers after that we keep in file as back-up offers if bank does not accept the first signed offer. I let all parties know what is going on and if buyers agents want to submit an offer they know it is only going to be a back -up and submitted to bank once first one has been rejected.

If we have 3 back-up offers when the one that is submitted has been rejected by lender then we look at the other 3 ..choose which one seller wants to accept and submit that one.....again I stay in touch with all parties and it is there choice whether they want to leave their offer in or pull it out. Hope that was not to confusing but it all comes down to submitting 1 signed offer(the best) with all others being back-up......I have had no problems doing it this way...

Hi Deb -- thanks so much for your post. You delineate a clear, logical short-sale path. I learned lots from the various comments, too. I have been involved in very few short sales so far, but suspect more will be coming. With your help, I'll be ready to do it right.

I've bookmarked this post, for sure.

From what I have read on AR, the general consensus seems to be that only one offer at a time is submitted, giving the bank a chance to work on it. Who knows, though, with short sales. I have seen ALL KINDS of situations!!!

Excellent post; Love your clarification. I agree with Nestor & Katerina.

Who owns the home? Would you EVER accept two offers on a regular transaction? The seller can't take two offers so the second has to be back up. The bank does NOT own the house; the seller does so don't you think the same rules apply as in a regular transaction? Accept one and take others as back up.

What is an unsigned contract? NOT a contract. Why would you want to submit that to a bank? Would you submit the backup to the bank? I wouldn't. Do you want to confuse the bank? What is in your sellers best interest? Get the property sold. Is one offer better than another? Maybe but if you get your best offer after you accept a contract normal procedure is "oh, well. have to take the better offer as backup." Same rules apply.

Thanks Debe for an informative post. We've not been involved at all with shorts here in Raleigh... just REO's. Interesting stuff. Congrats on yet another shiny !!

Debe, Excellent post! I agree this should be a public post. Nestor and Katerina Gassett nailed it. There is too much misinformation floating around out there. Banks do not know how to do Real Estate and submitting more than one offer for approval is just silly. You hurt everyone including yourself so don't do it. Just like any other transaction a short sale is a contract between the seller and buyers. The bank just needs enough information to make the decision on whether or not to accept the loss.

Since I am starting the education process on becoming a someone who can handle short sales professionally and correctly...I am going to park and watch on this post! Great comments so far! Thanks for the insight!

pick yer girl and ask her dance. Sending multiple offer to a bank who has a hard time handling one is asking for trouble. If it is not signed by the seller it is not a contract and if I am the buyers agent I would say thanks but no thanks, we'll just keep looking if that is how you are going to handle the process.

Debe - Excellent Post and Excellent Comments! I recently encountered a listing agent who submits multiple offers to the bank and when I pulled up her sales history the proof was in the pudding, she has only closed one short sale over the past few years.

Debe, Great discussion! I thought I had this one nailed until I got to Elizabeth Weintraub's answer describing how to submit a second, "backup" offer. Hopefully Buyer No. 1 receives notice that a second offer also has been submitted so it doesn't come as a total shock when the lender approves the second offer and rejects the first. After waiting months for an answer, the uninformed "first in line" buyer with a signed contract could be inclined to sue everyone in sight.

Great information. Most of the banks do not even want to look at more than one offer. If each bank negotiator had 400 files and each file had 8 offers, how would they ever get anything done?

Why is there confusion?

The seller enters into a contract of sale with a buyer with a contingency for bank approval.

The seller then presents that contract to the bank for approval.

The bank may or may not have conditions for approval.

When and if the bank's conditions are met, the bank should approve.

Nothing else makes any sense.

Debe --It is my understanding that banks will not look at a short sale offer without a signed contract.

Mama Liz

Hi Debe, Love the comments and the post! Congratulations on the feature, and moving our understanding of the process along. Seems like we are making it more complicated than it should be. One offer, contract , one approval...makes perfect sense.

Well stated Debe. I don't submit ANY offers to the lenders. What I submit is a contract. One contract that has been negotiated and accepted by my seller. My seller can certainly accept back up contracts of they want but they will not be submitted to the lender unless something happens to the primary contract that cancels or voids it.

My seller and I have already negotiated the best possible deal we can get. We don't need the lender to tell us that.

Hi Debe!

Our AZ Short Sale Addendum says that

Other offers are 'backups' UNLESS the creditors deem one of them the 'most acceptable'.

Our MLS says we must Pend when accepted subject to creditor approval.

The way I read this, the seller has discretion over whether to submit the backups for consideration.

I tell buyers to take a good shot outta the gate because you CAN hit the wall--even after an erstwhile acceptance from seller. :)

Debe - well my experience with short sales has been limited to the buyer side, and I know of one agent here who reportedly does submit all the offers, at least that is what they state. I would assume that the offer the seller accepts, signs, and sbumits to the bank is also provided to the buyer...or should be as documentation the seller has accepted it. Gonna hang out and see what others have to say but clearly this is an area of muddy waters in some cases.

Jeff

Debe, thank you so much for the great post. I have learned a great deal by reading the comments. It's nice to know there are so many agents here on AR that so generously share their expertise.

Debe ~ you have started a great discussion here regarding presenting multiple offers to Banks for a short sale approval. It is interesting to read the different opinions here. I only submit one offer at a time. The seller can only sign one offer. The bank can approval or not this offer. They way you explained the process above is the way I handle my short sale listings.

If a contract sent to the bank is not signed, the negotiator will ask for a signature when reviewing the file. Why not get is signed when submitting to bank, it helps to save time!

Please read comment #46. Banks don't deal with offers. They deal with contracts signed by both buyer and seller.

The biggest hurdle to overcome is to make sure the potential buyer is willing to wait months and months for the bank to make a decision!

Debe

An outstanding post with excellent information regarding the differences between a short sale and a foreclosure.

Good luck and success.

Lou Ludwig

Hi All! GREAT dialog going on here and I appreciate each and every one of your answers--a few of which need a comment back from me--

Katerina--THANK you--your opinion is important to me and you ARE a short sale expert so, if you say present only ONE Contract, then that's what should be done--no if's, and's, or but's! Also, in case you didn't notice, I took your advice and made it public! Then I sent the link to several folks who had this very question recently!

BB--Well, I learned everything from you--and you're right, it's not an Offer submission, rather a CONTRACT (singular, not plural)! Thanks for all of your wisdom too!

Lenn--I just have to say, I love your to-the-point comment!

and, Michael--'pick your girl and ask her to dance'...I haven't heard that in a month of Sundays!! LOL

In NC, we are required to present all Offers to the Sellers--please note, the lender is NOT the Seller in a short sale--the owner of record is! This is where I think many agents miss the point of the short sale--as BB said, YES, the Contract IS contingent upon bank's approval but, ultimately it is the Seller who selects which Offer they are going to work with and subsequently accept. It makes no sense to confuse the banks with multiple offers--like Melissa said, what if all short sale offers have multiple offers attached! YIKES!

Thanks everyone! I love the response and appreciate you all reading and commenting, as always!

Hi Debe: I took the CDPE Designation course, and with our State Laws...."My seller" can only sign/execute ONE contract...or they would be bound by multiple contracts. Legal mess....so I will present all offers to my seller, but only ONE executed contract becomes the short sale package to the lenders. We use a Short sale addendum. My seller can accept "back up offers" - but only the 1st offer goes to the lender. I will watch this post to see other responses too.

Here's what confuses me, even while understanding that one short sale offer at a time makes sense:

WHAT IF a MUCH better offer comes in down the (waiting-for-an-answer) road? Does the seller have recourse against the agent if they've accepted a lower offer that nets them less, or creates more out of pocket? Wouldn't the seller WANT the higher offer in? It's not like a "regular" sale in that regard- are the short sale agents interrupting the process to provide all better offers? Or are there sellers that don't want to jeopardize a "solid" offer, just to begin again with another one? The answer must be obvious, but does that happen to listing agents? A deal is close to getting ok'd when a better offer comes in?

Hello Debe,

I agree with Christine Bohn, submit the best offer to the bank. On another note, keep an eye on the state of California. New short sale regulations for banks beginning Jan. 1. Banks are to approve offers with 21 days and with a HUD 5 days. WOW, wouldn't that help the housing market!

Debe, as far as we have heard around here, the one signed submitted offer goes to the bank. Others can be taken as backups, but the seller is the seller, not the bank. So if the seller has accepted one, the bank has to REJECT the first if they want the seller to accept another...

I send ONE accepted contract to the lender as they are not in the real estate business but rather a contingency to the contract.

Maybe I am naive, but a purchase agreement signed by a seller and buyer in a short sale situation is a legally binding contract subject to the mortgage holder's approval. It follows then that unsigned offers are just that- unsigned and therefore not legal purchase agreements that the banks can consider. Sure, they may consider them anyway, but that would make me feel very uncomfortable legally. Obviously you cannot have more than one mutually signed purchase agreement for the bank to consider either, unless they are "secondary offers". (We can do that here)

Love to know what I don't know...

Great post Debe, What it takes is both agents know ing what to do and working together to get it done. I worked with a listing agent on a short sale and it was his first one but he said you know more than I do so help me through this. We worked together on how to present the contract to the bank and called each other every other day. It took only 6 weeks and we closed. Sometimes it just works!

I agree with Valorie, great post. I been reading through the comments, a lot of great impute. Sorry to say Short Sales have become a part of our lives. On Maui it is slowly becoming a reality in our market.

Amen Debe! ONLY SUBMIT 1 OFFER! I showed a house a few weeks ago that was a short sale with several offers submitted to the bank. The agent should have flagged the property in MLS as offer accepted waiting 3rd party approval, but it was still listed as available and was being shown and there were more offers coming in on it. And those additional offers were not considered backups. I just felt for the homeowners. Their agent has them in a huge mess! I was torn over whether I should call her on it or leave it alone. I left it alone.

Laurie: If an offer has been accepted by the seller and submitted to the bank any other offers are going to be backups even if they are better offers. You shouldn't have another offer coming in if you have the ability in MLS to flag the status to offer accepted waiting 3rd party approval.

Debe - The ONE OFFER we submit is with every intention it will be APPROVED! If we did not think it would be approved, next! The system works. Thank you for the mention, too:)

Erin, thank you. We aren't doing short sales, in part because of the many unanswered questions and the huge burden of "what if" that seems dicey (NY was later to the party). It just seems as though with lawyers on both sides, and fiduciary in our NY verbiage that if the seller ends up with one nickel under what buyers are offering, irrespective of how far along the short sale is, we're playing with fire if we interfere with that somehow. On the other hand, if a process has begun, with contracts signed, the seller has accepted the outcome...and the dollar amount potentially out of pocket (whatever that amount might be). In addition, the interference of other offers that may or MAY NOT culminate in a sale seem absurd somehow. I'm going to just keep reading to try to find some balance/comprehension/100% comfort level before engaging- watching the Florida contingent certainly helps!

One offer to the bank. Unsigned offers should not be sent to the bank.

However, I disagree with the method of selecting a buyer. My personal take is the strongest buyer who is willing to pay more and then have them submit a lower offer, ask for closing cost and ask for the moon (make it dirty, not clean!). It allows more room for negotiations and motivates the buyers to stick around and pay for expenses that the lender does not pay for, such as your commissions and additional monies to the 2nd lien holder.

Hi Debe,

I don't do short sales, not interested. This is good information however for anyone who does.

Patricia

Hey Debe -- good discussion. I agree that it's the accepted offer that goes to the bank or other 3rd party for their approval. The REO properties are another matter. I also agree with #30 . . . ;-)

Hi Debe. I noticed that this post is now a public one. I deal with short sales in Tampa Bay so I agree with Katerina. Only one signed contract between seller and buyer is presented to the bank. I do not submit multiple contracts. Excellent post. ~ Lana

Debe it really amazes me that so many Realtors do not understand the concept that the seller still owns the home and controls ANYTHING that happens with it included offers to purchase. The Realtors that don't know what they are doing with short sales bog down the system all the time.

Yes, I forgot to mention to Katerina that I took her wise advice and made it public--I trust her judgement on this one, Lana! I agree that the public should be aware of the process and as far as I can tell, alot of homeowners are in the dark about short sales. Hopefully this post will help to some degree!

Erin--I love it when people passionately agree with me!! LOL Additional offers should be held as back-ups--BY the SELLER! What IS awesome is when you have a buyer in place and good solid back-ups, the bank approves and the first has JUST found another home and withdrawn! Just slipping that 2nd place back-up (which COULD very well be an even BETTER offer!) into place and not missing a beat--very exciting!

Carla--We didn't have that many here for a very long time either. I fought it as one of my partners REALLY wanted to do short sales and I thought she was CRAZY! She got her CDPE and ignored my words of caution--thank goodness! We're seeing a surge of them here now and I think we're a couple of years away before they begin to taper off.

Wendy--You deserve more recognition--you, BB and Katerina are our resident experts and we are so fortunate to have learned from the BEST! Thank YOU!

Debe - Submit the best offer with the best terms with the best chance of getting approved. Hold any other(s) in backup position if the buyer walks, but only ONE goes to the lender -- the one that you and your seller believe has the best chance of getting them out of their predicament.

Great feedback for you here Debe, like you in Charlotte we in Raleigh have not had the volume of short sales as some of the agents on here.

Lets hope it stays that way.

Debe, I just submitted my first short sale offer last week for my buyer. Following the written instructions from the listing agent, with the exception of a pre-approval letter and FICO info (It's a cash offer, though offer is less than the asking price), I also called the agent to make sure I had done everything of what was asked BEFORE submitting. (It clearly states "Please note that incomplete offers will not be responded to." Agent told me the offer was too low and that the bank would most likely reject it? Mentioned this was my first short sale offer, the listing agent was helpful and gave me some insight on how to submit an offer for a short sale in the future. It didn't take long before I got the feeling she didn't want to bother with me, especially when I mentioned the cash offer amount. In the end, we submitted the offer anyway. Since my buyer isn't in a hurry, does this fact make a difference in consideration of the offer?

Like Bill mentions above, a short sale is still a transitions between a seller and buyer. In an effort to not bog down the system, I'm doing all that I can to learn the short sale market. Like many, I thought I could work "around" this particular market, yet, when I'm working with a buyer who decides to make an offer on a house they like, including short sales, what am I to do? It's posts like this and others that remind me I'm not alone in my inexperience, though I'm learning, learning, learning... Incredibly helpful post as well as comments! Thanks, Debe.

I think that many Realtors just do not know and seller's are not being educated. The short sale has opened up whole other can of worms. We have new unethical business models taking advantage of these sellers.

Sellers and Realtors must be very aware that the the release may not be as complete as they may think. Are the sellers leins recourse or not? One may get the escrow closed today but what may happen in the future, 2-3 years from now. These banks or other collection companies who are buying this debt may have a legal right to recourse. There are so many tangles in this mess.

Your practice is sound and your post is right on. Well done.

Stefan

Carin: Kudos to you and everyone else who readily admits their lack of experience with short sales. If you have a patient buyer, to me, that's worth $1m!! As for the pricing on your short sale--most short sales are listed right at or a bit below market price and alot of buyers don't understand that, thus they'll offer far less, knowing it's a short sale and hope that they'll only have to come up a little with any counteroffers. However, that is generally not the case--many short sales do bring in multiple offers and the ones that I've had, usually come in right on the money (list price) or slightly above in order to win the bid. That said, I don't know your market, nor the listing or market price. I would only say that if your bid is far lower than the list price, that could be why the agent seems like she doesn't want to 'bother' with you. It does seem that she didn't mind sharing her short sale knowledge with you so, I'm thinking the offer may be too low??? Just my hypothesis!!

AMEN, Barbara & David! I agree 100% and David, I do hope you manage to stay that way in the RDU area too!

Stefan: Thanks and I agree that there is yet to be a whole new rhelm of issues with these short sales--coming from the investor's as well. I'm certain that NAR is on top of it as well as the State Boards--at least I hope they are!

Debe,

I only submit one offer to the bank and then wait for the response from the lender. I am happy to take a back ups, but don't think submitting more than one is in the best interest of my seller.

Additionally, I have had banks inform me that they won't accept unsigned offers, so I can't see submitting several signed ones unless with addendums stating the others are back up offers.

Christine: Coming from an attorney/broker's view, I have to know that I'm doing the right thing then! I was hoping that you'd weigh in on this post because I know you're the Costa Mesa expert in short sales!

Thanks for your valuable opinion--much appreciated! Any news on your bank statement issue?!!

Great topic and discussion. I agree with most here, that it is best to submit only one offer. I try my best to treat each short sale as much as a "normal" sale as possible. I have been on seller and buyer side as agent many times, and it does nobody any good to submit a bunch of unsigned, meaningless offers to the bank. Buyers and agents will have zero loyalty and patience without some kind of contract.

I believe that the best way to get a short sale to work out, is to pick the agent and their qualified buyer that are most likely to stick around to get approval and stay in constant communication with them. I have found that when regular updates are given to all parties, the tension eases back and patience increases. Even if the update is that there is no update, communication is key.

Good luck.

Michael: You know, buyer loyalty is a great point--why, if you knew that 10 others had offered on a property that you were interested in and you were advised that the offers had ALL been submitted to the bank and you knew not if yours was the strongest, would you stick around and wait? If it's a deal you're looking for, you won't want to miss the next one that comes along for fear that the seller and the bank will accept your offer. Who makes a 'well, let's see if we can get this' offer and waits for months to see if they got it?

Buyers need solid confirmation in way of a ratified Contract to keep them loyal. As well, they need the patience of Jobe!

I would like to address the comment from Ila, since it showed up in my Google alerts: She said:

I thought I had this one nailed until I got to Elizabeth Weintraub's answer describing how to submit a second, "backup" offer. Hopefully Buyer No. 1 receives notice that a second offer also has been submitted so it doesn't come as a total shock when the lender approves the second offer and rejects the first. After waiting months for an answer, the uninformed "first in line" buyer with a signed contract could be inclined to sue everyone in sight.

Buyer #1 does not receive notice because, in California, buyer #1 signed a short sale addendum giving the seller the right to do exactly what the seller did. There is no legal ground for a lawsuit. All offers are subject to lender approval. But don't for a minute forget that the seller owns the home and calls the shots. Buyers and their agents need to be more educated as to how the game is played. Plus, listing agents have a fiduciary responsibility to sellers. They have an ethical obligation to deal with other agents honestly. Nobody says a listing agent must inform a buyer's agent that a better offer has arrived. I don't know what part of this I can better explain.

OCT

2009

You're right on track, Debe. We submit one accepted contract to the lender and start the ball rolling. There have been instances where back up offers have been taken, but only one goes to the bank at a time, unless, as Elizabeth describes, extenuating circumstances come up.

Elizabeth: Since different states have different 'laws' governing short sales, I think confusion arises. With the banks, however, they are pretty consistent about wanting only one Contract and not multiple Offers. I think that has further confused the issue with some of the commentors because in their states, as in yours, the short sale addendum gives the seller another option--which, as you say, leaves no ground for pursuit of litigation in that matter.

Jesse: I agree but, when I saw that question on NAR, I could not believe that no one responded to it so, I began to doubt what I knew to be correct--just as I said, present the single Contract with the package and not to confuse the bank with the multiple offers. But, as you said, in some states, the rules are different.

Have a wonderful Wednesday...

This has generated some great comments and I especially liked the time qualifying for buyers. We can teel them it may take a long time but without the 90 or more days before getting a response from the bank, a long time may not be understood. I will be using that in the future.

Hi Paddy! Thanks and you know, I think garnering a patient buyer is one of the most important steps in the process! Good luck with your short sales!

Submitting more than one offer to the banks just clogs up the system even more. The homeowner is still the "seller." The bank just happens to give the approval in the end or not I just don't know why we like to complicate this more. Thanks for the post.

OCT

2009

Hi Keisha! That's a good way to look at it--clogging up the system! I don't understand why it is complicated by some either--the only thing that I'm thinking is that agents who have absolutely no training are falling upon these listings and don't know what to do with them once they receive Offers! We need some sort of universal system in place to prevent the poor sellers from having their homes go into foreclosure as a result of uninformed agents handling these sales.

When contacting the banks early in the process of listing short sales, I've actually had a couple of banks tell me that they only wanted to see one offer; the offer deemed best by the seller.

-Scott

Hi Scott That's seems to be opinion of the vast majority--especially from those in states that to a ton of these things!

Have a great day...

I agree that the best offer should be submitted. One question that maybe hasn't been addressed is: Is the seller making up the difference? I think that will have a larger impact on what the bank requires. The bank may want to see multiple offers or be more involved when it will be their loss. Just a thought...

OCT

2009

Hi Valerie: Thanks! The bank's approach is that if the BPO comes back higher, then the bank will counter and if the buyer still wants the property, then they'll respond accordingly. If they walk, then the next offer will be submitted and the seller/listing agent will let the replacement buyer know the bank's BPO results and work from there.

OCT

2009

Debe,

With 93 comments, I did not read them, so forgive me if I duplicate the comments already there.

You answered your question nicely. It is a lazy agent policy to submit all offers to the Lender and let them decide. They are not there to decide, the Sellers are. They Lenders are to see if they can accept the offer, or not.

Now, look at it this way. We get multiple offers, and give them to Seller to sign (it says that it is contingent on the third party approval, so there is no risk signing several offers). But in reality it is wrong. There is only one property and the Seller should not sign more than one offer. Imagine if you submit 5 offers, and the bank sends you an e-mail and says that they do not care, and you have to choose which one you want them to consider.

Now you have 4 unlucky customers with signed contracts, that can sue the Seller for specific performance (attorneys can explain it better, of course).

I think it is simple. One property - one signed offer.

OCT

2009

I agree with Jon 100% - and again, not sure if it was said here, the goal is to keep your seller from foreclosure and get them thru the process. Multiple offers seem to muddy the waters for the bank negotiators (especially with the large banks with long waiting lines to even get to the negotiator) and upset the buyers as well. If you have a dedicated buyer who is ready to go and the offer looks like it will be within guidelines on what is owed, stick to it and get the job done. Getting a few thousand more is not going to make any difference at all to the sellers as long as they get the sale done and overwith.

OCT

2009

Hi Jon! Someone did mention that they did that and I'd hate to see their E&O insurance bill!! My question to you--Is it laziness or ignorance?! Hmmm...perhaps a little of both?!

Vicki: EXACTLY my point! You put it better than I did! I don't think that many agents don't know what to do with these and this is a HUGE liability to them!

OCT

2009

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FEB

2010

ok, short sale listed several months ago, high priced. no lookers, finally in Dec. a very low cash offer. presented to bank with NO sellers signatures, they do not like the low offer, but want to get the process rolling...two days ago, 1st lien negotiator acknowledges receipt of all form, and will begin to negotiate with investor. MLS noted that offer has been submitted. Buyer calls me to see..dual agent...proper disclosures made to buyer and seller. Buyer believes they will make an offer Monday..cash also. In the meantime, short sale addendum has been allowed to go beyond expiration date declared to make contract moot with buyer one. I told them to submit an extension amendment, not done. I actually made one up for them to extend their date, and the closing date as the bank was taking so long. Not returned yet, or signed by buyer or seller. We have been communicating in good faith, I have kept buyers agent abreast of file as it moves through the process with lien holder 1. I did not have the seller sign, they did not want to commit to the offer if a higher was to come in, but did not want to reject in case it was the only offer. So...any words of wisdom before Monday!

Hi Victoria - I would not have presented the first one with no signatures but, because that is the way that it was handled, you truly do not have a CONTRACT at this point--with anyone. What I would do is instruct both buyers to present their highest and best and have your seller sign the best one--make it a win/win for everyone.

The other buyer, who would not sign the extension, could have just lost out on this deal! HOWEVER, in NC, a Short Sale Addendum is an addendum to a Contract and you have no Contract. So, I don't think the Addendum would have been legal here without referencing a Contract anyway.

Again, I would ask both parties for Highest and Best and present the best one, signed by the buyer AND the seller!

Note that my advice is purely my subjective opinion and you would be better advised seeking the advice of a real estate attorney. Hope this helps!

JUL

2010

Debe I wrote a lengthy post on this subject that you would probably enjoy. The article talks about presenting multiple unsigned offers to a lender and other foolish things that some Realtors that don't know the process do with short sales.

SEP

2010

Many who post act as if the bank has no interest in multiple offers. Do not understand this thinking. The bank is the one who is losing the money, and the seller is taking a walk. The bank has every interest in receiving multiple offers. Realtor be damn if I am a lender. How do you feel folks, protecting people who are walking on their obligations? Ethics anyone?

SEP

2010

Those in loss mitigation do not WANT more than one Offer--they demand that we provide them with the best Offer which becomes an executed Contract and hold the rest. Agents who don't know how the loss mitigation department works, present multiple Offers with no signed Contract which only delays the process. The bank then sits on the Offers because they don't want the responsibility of reviewing them, awaiting a signed Contract. Sometimes when this happens, the foreclosure department winds up foreclosing on the property because the other department (loss mitigation) did not respond to the Offers as such.

We are working for the sellers here and the sellers have done everything that they can do to get their loans modified with the banks; they stay and some even make repairs; they don't WANT to give up their homes to short sales but, the banks are not helping them get out from under their inflated mortgages which they can no longer afford, thus forcing them into short sale. These are not homeowners who are simply walking away, they're homeowners who stay and see this through until the end.

Those who leave the keys and walk away are a WHOLE other story!

Those who represent the banks in foreclosed properties, yet another story--they DO present multiple Offers as the foreclosure departments DO want them presented in that fashion. They're accustomed to handling and interpreting Offers from all 50 states (which are ALL different). Loss mitigation does not have the bandwidth for that training.

APR

I contacted the listing agent to make an offer on a house. I placed a cash offer and I am not getting much transperancy from the listing agent. He told me that there were two offers but mine was the highest. I do have a seller singed as is contact but I think the listing agent submitted both offers (I am having doubts on weather my offer was submitted to the bank). Even though I offered to put a deposit on the offer he said that it was not necessary because the bank did not require it. My question is would it be better for me to put a deposit down? Why would the listing agent discourage me from having to put a deposit?

Thanks,

Maria

APR

Hi Maria,

If you have a signed, ratified (both parties are in agreement) Contract, then the listing agent most definitely should have presented that to the bank. If the listing agent is a one-man show (has his own firm), oftentimes they don't have a special bank account for escrow money deposits. If you don't have an agent, then he has no way to legally hold that money. That would be the only reason that I could think that he would not take your earnest money.

Your earnest money deposit should show the bank good faith--the stronger the deposit, the more serious they (the seller and the bank) perceive you as a buyer. I would think he would want to show that strength, along with a cash Contract, for his seller so that the bank would be more likely to approve.

Are you in North Carolina?

Debe and Maria: What happens to the earnest money on a ratified contract can depend on the state in which the contract is written. In Texas, the earnest money NEVER goes into the Broker's account. It is made out to the title company, and is given to the title company along with the contract. That check is then deposited "cashed," and held in the escrow account of the title company. There are so many differences... and things vary state to state.

PS... I think it is so interesting when a member of the public... this time, a buyer, finds an Active Rain post like this... that is meaningful to them... and then makes a comment, or asks a question. This post is more than a year and a half old. Cool. April 29, 2011

Thanks, Karen Anne! Yes, that's why I asked what state she was in. Like you said, many states use Title Companies but, here, it's held in an Escrow account and credited at Closing, generally via the agent commission (whomever is holding the EMD) or that firm issues a check to the attorney who is doing the Closing.

Still yet, would you NOT take EMD? If not, for what reason? I just emailed my favorite short sale attorney to see if he could give me a reason not to take EMD from a ready, willing and able seller!

And, YES, that is super cool, Karen Anne! I love that we can help the consumer with even year-old articles!

Thank you so much to both of you for your feedback.

I am in the state of florida and in the contract it states that the deposit will be held in escrow with a lawyer upon acceptance. The contract has the lawyers name on it. Another weird thing on the contract is that the seller signed the contract but did put a date next to the signature.

When I told him that I wanted to give a deposit he said it was not a requirement by the bank. I should have gone with a separate agent and not the listing agent directly.

I actually did find this site very interesting. I think the listing realtor submitted two offers to the bank mine and another who was not a cash sale but the other was higher but at the same time the other buyer wanted a 6% back for closing costs. So he told me that mine was the highest offer. This is what he is telling me at least! In the meantime he never updates me with anything.....I am the one that is always calling him and it takes me a few tries to reach him because he never returns my call. I am not sure if the other offers that he is talking about is someone that he knows to me there is something shady going on.....!! Do you think ...I can get a realtor involved on my behalf this far into the process.

Hi Maria! I forwarded this link to a broker/owner in FL who can possibly assist you. He's the most knowledgeable person I know with regards to short sales--especially in FL!

I cannot answer to whether you can bring in your own agent but, this is definitely one of those times that the lesson learned is quite frustrating. I truly hate to see consumers taken advantage of and unfortunately, it happens far too often.

I don't think the agent that I contacted for you stays up as late as we do but, hopefully he'll answer your question early in the a.m! Have a great evening...

APR

Hi Maria. Deb sent me over here to answer your question since I'm in Florida. It sounds like you may be involved in a transaction where the listing agent does not have experience with short sales.

Only one accepted contract should be submitted to the bank. That's their requirement and it's really the only way to handle it. Escrow should be placed according to the terms of the contract. Right on the front page it will outline when the deposit should be placed in escrow. This will be addressed again in the short sale contingency addendum ot the contract.

My suggestion would be to seek legal advice.

I hope this helps.

Thanks, Bryant. That is what would apply for NC as well but, since I don't know your state laws, I thought someone who did would be more appropriate to answer Maria's question.

Good luck, Maria.

Have a wonderful weekend...

Thanks so much to both of you!!!! I will have to first of all clarify with him what he did and then I will decide what to do. Hope you have a wonderful weekend.

NOV

Love this post - so timely for us right now! I'm wondering what the normal procedure is if there is a signed contract (agreed to between buyer/seller) that is submitted to the bank and the bank rejects the price (assuming they want a higher price). Is the potential buyer able to negotiate with the bank at that point or are back-up offers now put into place? Is the original buyer signed contract held up until the point that the buyer walks away if they can't go any higher on price? Just wanting to understand what the steps will be if we offer / are accepted by buyer and then rejected by bank. Thanks for all your input!

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Presenting Multiple Offers to the Lender for Short Sale Approval

Presenting Multiple Offers to the Lender for Short Sale Approval

Debe Maxwell, CRS/Realtor®/BrokerBroker@TheCharlotteScoop.comPhone (704) 491-3310

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Debe Maxwell, CRS/Realtor®/Broker
Broker@TheCharlotteScoop.com
Phone (704) 491-3310