Lowballing a short sale can cost a buyer that home. Not so much because the lender will counter the offer -- although, that's pretty much a given -- but because some other short sale buyer might snatch that house away from the lowballer.
Depending on your state laws, a seller may or may not have the right to send all short sale offers to the bank. For example, in California, we use the short sale addendum. This document, which buyers willingly sign, gives the seller the right to accept and send other offers to the bank.
One of my Sacramento short sale sellers received a lowball offer last month. I let the agent know at inception that the offer was probably too low -- I don't know why so many agents don't show the comps to their buyers. But the seller wanted to accept the offer in hopes that she would receive a better one down the road. Sure enough, she did. Within a week, we received another offer for about 10% more.
The seller accepted that offer in back-up position and directed me to send that higher offer to the bank. The ethical thing to do was to cancel the existing escrow. Besides, if we didn't cancel the first escrow, we couldn't put the second buyer's earnest money deposit into that escrow. I called the first agent with the lowball offer. Her options were she could wait to see which offer the bank would take or her buyer could cancel the short sale. Her buyer wisely chose to cancel.
In an effort to deflect getting bumped out, I see some buyer's agents write into their purchase offers that the seller will only accept back-up offers. I swear. If The Three Stooges sold short sales, this is something Curly would do. I can see him twirling his forefinger at the contract and tapping that sentence, Nyuk, Nyuk, Nyuk, with a goofy grin on his face. What this does is it allows the seller to accept a back-up offer and bump out the first offer. At any point in a short sale a seller can tell the bank to stop processing and start over.
People can get so wrapped up in Sacramento short sales that they forget the seller still owns the home. The seller calls the shots. Of course, if the seller has hired an experienced short sale agent, that agent is unlikely to advise the seller to start over upon receipt of a higher offer. But it doesn't mean it couldn't happen.
Photo: Big Stock Photo
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