When does a short sale offer become a contract?

The more I think I know about short sales and how to handle them the more I realize I don't know.  You raise a very good question and I can only tell you that I have not seen the listing status changed when sellers have accepted offers and the bank has yet to acted on them.  I have seen listings agents have their sellers take and accept multiple offers over weeks and present them all to the bank.  I don't think this is right but I truly don't know the correct answer.  I will follow to see who weighs in.

Great question, and the mark of much controversy---

Here is my opinion.  The buyer makes an offer, the seller and owner of the home accepts and SIGNS the offer, creating a contract.  With a contingency.  My view of the contingency is that it's the same as a home inspection contingency, etc.  So, it can be put in as active/contingent.  I generally put all of my short sales into a pended condition because I only submit ONE contract at a time--back up or not.  And do not continue to market the property actively.

I do have an issue with agents who have their seller sign muliple offers and submit all to the lien holders without back up marked.  My issue is that you can only sell a property one time, one piece of dirt.  As such I am thinking that this can cause problems in the future. 

So, that's my view-----:-)  I forgot to add that I am actively encouraging my 19-year old to become a real estate attorney!

Just another reason why I HATE short sales, but they really are inevitable and buyers all want to try them - maybe twice and then they are ready to move on too.

Hi there, from one Lynda to another Linda...

Your comment about "ACTIVE-CONTINGENT" sounds to me like the appropriate category in the description you described. Of course bottom line...it depends on what your "contract" says, it's the basis/foundation of your transaction.

And then of course you/we all have MLS rules to follow. Similar (based on NAR-rules & regs) yet not always the same. Seems to me like you're right on top of things and doing it correctly.

Congrats on your closing!

This seems to be addresses differently in different MLS and states.

I mark mine "contingent" but an argument could certainly be made for marking it "pending". A regular deal is typically marked "pending" even though the deal is contigent on several things (appraisal, loan approval, inspection, disclosures).

I also mark mine contingent - or for our mls - the equivalent is SHOW (under deposit/continue to show). I consider it the same as any other contract. Once a contract has been accepted the property is no longer active, however only once all contingencies have been met ( bank approval, inspection, mortgage) will I change status to under deposit (pending).

Once both buyer and seller sign, it becomes ACTIVE-CONTINGENT. Once ALL contingencies are lifted (including lender contingency) then the status goes to Pending.

Linda--It looks like you received a variety of practices dependent on state and MLS rules & practice.  PA has a form title 'short sale addendum' that addresses some of your questions.

Our MLS, Metrolist - California - requires that we put the offer in Short Sale - Contingent status once we have sent an offer to the lender.  Not pending until the short sale is approved and signed by all parties.