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The Short Sale Losertery

By
Services for Real Estate Pros with The Real Estate Investment Institute 1retiredsage

It's not a lottery it's a losetery! In a lottery the first tickets sold have as much chance of winning as the last one sold.

Short sale sellers and there listing agents are being advised to submit multiple offers to the bank being shorted! This advice in itself is questionable with at least two major companies discouraging them. I'm not at this time considering the seller's position, which may included throwing as much... at the wall as possible while praying that some thing sticks.

See a great if lopsided discussion at: The real top reasons that short sales are not approved or do not close  Ken Lawson JD explains that multiple offers are legal if the buyers and the seller agreed. I agree if each of the accepted offers contains a provision allowing it! My problem is if any one buyer's contract doesn't contain such an agreement!

If a buyer didn't agree to such nonsense and the seller signed or had signed another contract they're guilty of "bad faith" this is not a crime, but they may well be subject to a tort action for damages by all, but the winning buyer. Then there is the listing agent! The listing agent is not a party to the offer & acceptance, purchase agreement, purchase offer or what ever you chose to call the agreement between the buyer and the seller. If the agent encouraged and participated in submitting multiple offers they could and should be pursued for interfering with a contract! Possibly even conspiracy to defraud, which could be the basics for both civil and criminal damages. Assuming of course that you are a looser and that you, the buyer didn't agree to let the seller accept and submit multiple offers.

The logic offered by those advocating that the buyer should agree to this is that with more offers that bank is more likely to accept one, it may be true! But, what about your offer? Your offer if it's not the highest offer will be used to justify the higher offer, but are you willing to post a deposit and tie up your life and finances for months to justify some one else's offer? If your offer comes in late and low why would the sellers accept it? They'd counter because every dollar over the existing offers would mean the bank being shorted gets more of their money back and is more likely to accept the smallest loss!

So unlike a lottery where every ticket has the same chance, the last offer submitted is likely to be the highest, if countered and the most acceptable to the bank. The other offers made in good faith are not being accepted in good faith, but rather to justify the last offer. I know of only one other similar situation where such thing occurs, buying from the FHA.

I am not an attorney, but for many years I was a true buyer's broker, contracted with and paid by my fiduciary, and many more years as a teacher and real estate author and I could never in good faith advise my clients or students to accept such a clause allowing their time and money to be so abused.

I do also teach selling and listing and if my fiduciary were on the other side, I might selectively feel different. Provided every accepted offer included the right to accept and submit more than one offer.

Posted by

Bill

William J Archambault Jr

The Real Estate Investment Institute

wja@reii.org      Cell 832-259-7078,      Houston 832-582-8415,       Las vegas 702-516-1569

     http://www.reii.org  Back Cover One House At A Time http:www//reii.orghttp://www.flippingforfunandprofit.info/ http://www.billarchambault.com   

From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.

http://www.reii.org

©William J Archambault Jr   ©The Real Estate Investment Institute   ©REII

Comments(21)

William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Ralph,

"it's taking too much of my time and has started to hurt my business due to the time commitment." That's a painfully wise observation.

I think the problem is that to many people have jumped in with out brothering to learn their craft.

Consider your next step thoroughly, the consumers need component experienced and wise help, no matter which side of the table you're on.

Bill

Aug 24, 2009 07:18 AM
Tracy Lee Parker
RE/MAX DFW Associates - Royse City, TX
Buy*Sell*Rent

Thanks Bill , great info. I have been doing short sales awhile, Wrong!

Aug 24, 2009 09:32 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Good question Bill "are you willing to post a deposit and tie up your life and finances for months to justify some one else's offer?"  I would say the answer would be clearly NO.  The problem is that I do not think that it is explained them as clearly as you just did.

Aug 24, 2009 10:02 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Bill, Submitting multiple offers to the lender is a practice that I whole heartedly disagree with. I read Ken's post and don't understand where he gets this from. Now I haven't dealt with ALL of the lenders but do know that:

BofA. GMAC, Citi, Chase, Suntrust, Wells Fargo, Fifth Third, Wachovia, GreenTree and ING Bank do NOT want to see multiple offers. They want to see an accepted and signed purchase contract. Or at least they did as of last week when I spoke to all of them and asked the question.

Aug 24, 2009 10:04 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Bryant,

I'm not suprised! That's the reason I've been recomending your class!

Ken is using court room lodgic, repeating over and over what's leagal when no one is arguing with him. I've gone to court over bad faith contracts for myself and by taking my clients and students to an attorney you don't want to sit at the other table!

If every one is agreed in writing so be it, but if just one contract doesn't contain such a provision the seller and his agent better hope it's the one the bank approves.

Bill

Aug 24, 2009 10:27 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Thanks George!

But, the answer is yes or no! It depends entirely on witch side you're on and if the listing agent was able to get permission in every accepted contract!

These buys go from good to great to increadable, some people are willing to take their chanchs being one of many. But, not my students!

Bill

Aug 24, 2009 10:33 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Tracy,

We've all made mistakes, I don't complain until they hurt my client! Today's a great day to start doing them right. Bryant has a cd or dvd of his and Wendy's seminar it's a good place to start. I wouldn't miss Bryant's blogs on the subject or mine, and nether would I miss Ken's he's not wrong he is one sided. You know we all take e-mails and we're available on a fee basics if needed.

I'm a people centric pragmatic fiduciary

Bryant is a transactional broker with a great attitude.

Ken's a knolageable attorney.

One of us should match your needs.

Bill

Aug 24, 2009 10:44 AM
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Bill - IF I changed my practice, and other agents in my area did, to encourage short sale sellers to accept multiple offers- we would get more buyers walking (no need to stick with it when they find something else), buyers writing multiple others on different properties with the right to "withdraw" at any time, risk of liability when contract precedence is not followed (i.e. primary offer, back up offer) and more.  It would be a free-for-all mess. 

Aug 24, 2009 10:44 AM
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

By the way, Bill, just saw your plug on our course, thank you, sir!

Aug 24, 2009 10:47 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Wendy,

If you and Bryant changed your practice I'd have to go into the studio and record a seminar, I'd rather consult. Hold your course, steady as she goes!

If you or Bryant want to post a link, please do.

Ken is a mediator if he wants to post a link I'd welcome it.

Bill

Aug 24, 2009 10:52 AM
Jeff Payne
The Payne Group at Keller Williams Success Realty - Panama City, FL
Panama City Real Estate

Wendy and Bryant PLUS one.  I would never suggest that my seller accept multiple offers on a regular sale so why would I on a short sale.  Bryant is right about the lenders, I have not talked to any that want us to send in all offers.  Get the best offer that you can, submit it to the seller for signatures and that is the offer that goes to the bank,  all else are back up offers that DO NOT go to the bank, no need, they are back ups

Aug 24, 2009 11:28 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

A kindred sprit!

Bill

Aug 24, 2009 11:48 AM
Daniel J. Hunter
REALTOR® - New Port Richey, FL

as always, very enlightening William.  Thanks for posting

Aug 24, 2009 01:44 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

You're welcome, Danial.

Bill

Aug 24, 2009 02:20 PM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Bill,

I think our Short Sale addendum is a disaster. It does not even ask whether the parties would agree to submit multiple offers or not. It just states it.

So, when we have a buyer, and he writes an offer, we suggest he makes one small change to the form saying that the Seller can keep marketing the property, and accept back up offers, BUT NOT submit them to the Lender. In a nutshell, we suggest that our client deal with the seller only if there is only one contract signed by the Seller and the Buyer.

When it is our listing, we tell our Sellers that they might open themselves for liability if they sign more than one offer on the property.

Aug 24, 2009 02:27 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jon,

"When it is our listing, we tell our Sellers that they might open themselves for liability if they sign more than one offer on the property."  That's my point!

We're not talking about "back up offers! We're talking about accepting more than one offer clandestinely!

Bill

Aug 24, 2009 02:33 PM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

I think it is becoming clear that the standard will be seller selection and negotiated acceptance of the offer best suited to make it to close of escrow.  The issue over submitting multiple offers to the banks and allowing the lender selection will become a thing of the past - as well it should.    

Unfortunately, we may see some actions against less knowledgeable agents for having allowed their sellers to sign and accept multiple offers.

Aug 24, 2009 05:48 PM
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Bill,

Short sales are a mess everywhere in the country.  I hope Cathy McAlister is right about multiple offers fading into the background. 

Haven't seen you for awhile, and I expect it's because my photos have fallen off.  I'm about to fix that, just for you.

Mike in Tucson

Aug 24, 2009 11:28 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Cathy,

I do hope you're right!

Bill

Aug 24, 2009 11:46 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Mike,

It's not that I don't read all your post, it's just that some times I have nothing to say. :>)

Bill

Aug 24, 2009 11:49 PM