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"Sly" Short Sale Buyer - A Cautionary Tale

My story takes place in Destin, Florida. I have modified parts ever so slightly to protect identities, but I write this as a cautionary tale for short sale listing agents and short sale sellers.

I received an offer on one of my Destin FL short sale listings. It was a well-done contract with a fair price- $270,000- just slightly low, but in the realm of "workable" for acceptance by the short sale lender, Chase. The selling agent said the buyer was a single school teacher, and he provided a pre-approval letter with the offer. My seller was excited and signed the purchase agreement right away.

The next day, while finalizing my short sale package, the seller called my office with potentially disturbing news. He said his neighbor mentioned to him at the mailbox, that she received an offer on her own identical floorplan short sale home- from the same agent on the very same day, from the same buyer, the "school teacher". The neighbor happened to be a real estate agent. Concerned, I immediately called the buyer's agent. "Is this the same buyer? Does he really intend to buy two homes? Or is he playing games with my seller's time and my time, waiting to see which offer was accepted and a better deal from the respective short sale lenders? Would he use the ‘as is with right to inspect' clause as an out on buying the house he didn't want? Does he understand both of these properties had to go into ‘pending' status with our Board of Realtors?"

Very dismayed, I got uneasy answers from the buyer's agent. He said with a chuckle "Yes, he would buy both homes if both were accepted. (On a teacher's salary?) Oh, and don't you know, Wendy, that this is what you should do anyway, this will help you out to see what the bank will take. This is how short sales are done", he instructed me. I explained to him that both houses had to go under deposit per our board rules, and if the buyer was really playing games, there would be serious consequences for one of the sellers. I hung up the phone and called the neighbor, the real estate agent. She told me her suspicions were the same as mine, that the buyer was basically using each seller, and that she had unfortunately signed her offer, too. She was going to speak with her attorney. I called my seller, and he said he did not want to proceed with the contract unless the buyer decided "which home" he wanted, and to tell the agent to tear up the other contract, or he might have an ethics violation.

The analysis of this situation is indeed disturbing. The buyer has every right to make an offer on as many properties as he wishes to purchase. He also has a built-in "out" with the inspection clause, and can easily trump up an acceptable defect to nullify any contract. But, is his intent legal, if he cannot perform on all his contracts? This story has yet to be completed. When I left my last message with the selling agent, his voicemail said, "Thank you for calling Josh, your ‘honest' Realtor in Northwest Florida. God bless. "

It's Wendy!

Wendy Rulnick, Broker, CRP, CRS, GRI, ABR Rulnick Realty, Inc.

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Wendy Rulnick specializes in real estate sales, short sales, traditional sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field. Wendy Rulnick, Broker and Realtor, has been selling real estate for almost 20 years. She has won numerous awards, including the coveted ADDY for advertising design. An expert marketer of real estate listings, she negotiates successfully to her dients' advantage. She is supported by a team of top buyer specialists. She lists and sells homes, condos and townhomes.

This site, Wendy Rulnick or Rulnick Realty, Inc. is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information

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Posted by Wendy Rulnick "Its Wendy!" Destin Short Sales on 11/23/2008 11:49 AM

Comments (13)

Short Sales in the Sales Strategies / Tactics Channel

destin fl short sales, emerald coast short sales, buying short sales, listing short sales, selling short sales

Originally posted at: Destin Short Sales- Emerald Coast Florida Real Estate: "Sly" Short Sale Buyer - A Cautionary Tale

Post is included in group: Sharing Information of Short Sales
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13 Comments on "Sly" Short Sale Buyer - A Cautionary Tale

NOV

2008

It seems that with short sales that all is fair ---- I don't understand why some agents do what they do and I have yet to fully grasp why lenders do what they do.

Wendy I agree with you

This guy is a snake.

The one good thing that could come out of this is that you do get an acceptable price from the lender, and you can advertise that price with the confidence of selling it. It has helped me in the past - get over that fear of how long a short sale takes for the buyer.

1: you already have a negotiator

2: you have the short sale packet completed and approved

3: In the past I have been able to just switch the buyers name, and proceed forward.

But this guy should have been honest with you - again - low down snake, it would fun to come in with a buyer that has $100.00 more on the approved price and slip him in.

Have a great day

I have the same thing going on with one of my short sales, Wendy. Except the buyer is also the agent. By mistake, she sent me a cover letter that indicated a different property address. I called her on it and asked how many homes was she planning to make offers on, anyway. She responded that she had lost out on a bunch of other offers so now she had made offers on two homes, and that the first one to get approved is the one she will buy.

Is that against the law? Of course it is, but there is little one can do but hope your listing gets approved first. What I am doing is telling every other agent who calls me what the buyer has done and urging them to submit an offer for a bit higher in price so we can knock that buyer out of the running. But I'm not going to reject the first offer because it has a good chance of making it.

It really doesn't seem right but on the other hand listing agents also take several contracts and submit them up. That doesn't seem right either. I don't know if there is a right or wrong way the way banks are operating now.

NOV

2008

Lorraine and Loretta - One can make anything up in one's own mind and then "Justify it"- it seems.

Lance - Story update: Agent claims he will provide a "righ of first refusal" addendum so the seller can still market the property! I have yet to see it... I understand your points- but in my market without right of refusal clause, seller would lose 4 months marketing. Also, I have seen some bank refuse substitute names, and must resubmit entire package. (groan)

Elizbabeth - Good for YOU for catching her! I think it's right that you are informing your colleagues about the scoundrel, too.

Gene - Hi. My board does not allow multiple signed contracts. This is also the opinion of the Florida Association of Realtors legal council- with whom I agree. I wish I could PROVE the buyer couldn't afford both homes, thus was doing something perhaps illegal, but I can't. I agree with you, it doesn't seem right.

DEC

2008

Why does your board not allow a Buyer to have multiple contracts? I work with numerous Buyers that have 5-6 accepted offers at a time, and they can close on all of them. Just because this buyer is a teacher doesn't mean anything. Maybe he has a trunkful of cash that he can put down... Maybe he has a father that is giving him to buy a property he can rent out for him... who knows?

The only thing you should be looking at is if he can perform on your property. Make sure that the seller takes care of any defects, and there shouldn't be any issue with inspection. The other thing that I would do is insist on a larger EM deposit up front.

DEC

2008

Matt- Our board does indeed allow multiple contracts. Perhaps you are right, perhaps this teacher can afford both houses, although he states he is personally relocating to be closer to his teaching job. He can easily get out of performing, however, by using the "as is with right to inspect" clause, which states if the buyer finds the home inspection unacceptable for ANY reason, they can cancel the contract without penalty. I have seen trumped up defects, and there can be no argument with the contract language. It doesn't leave a resolution for the seller. Because of that, Earnest Money is practically meaningless with the as-is close, the buyer can always jump. It is unfortunate for our Florida sellers.

DEC

2008

I recently came across buyers who wanted to do something similar, between foreclosures and short sales,and I cautioned them they could get caught. They had strategized based on the REO addendum language, that simply failing to put up the deposit would effectively "cancel" their offer. We all agreed NOT to proceed this way, but I think some agents and buyers just want to see what they can accomplish with no regard to the proper way to proceed.

I had a situation on one of my short sales that the buyer was going to put up a deposit 2 days after acceptance by the lien holder. We got lien holder approval and the buyer backed out and said she couldn't come up with her deposit. You can't take a binder that was never turned in. For now on, we won't accept contracts without the binder being turned in.

DEC

2008

Carol - Devious! If a way around the system can be construed, they'll do. Kudos to you for showing them the right way!

Pam - Yup. We've got to start insisting on the deposit.

FEB

I had a short sale under a couple of months ago. When we called the other agent to tell him we had approval from the first lender, he informed us that his buyers had already closed on a foreclosure that he had gotten them under contract on as well. I looked it up, same neighborhood, same floor plan. We were never given a release to sign and never released the binder. I'm afraid that there may be a lot of that going on around here.

Stephanie - Nice of him to let you continue to work on the sale. Nice.

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