Should We Submit an "Offer" on A Short Sale Just to Start Negotiations?

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

http://brokerbryant.comHi Folks. We had one of our members over at post an article wanting to know if it was normal for Short Sale Agents to submit "offers" on their Short Sale listings just to get the ball rolling. The idea of course is to start negotiations with the lender by submitting an offer that may not be real, or it could just be a very low offer from an investor and, then substituting a real contract once a legitimate Buyer is found. In theory, this speeds up the process.

She used this Internet ad that she found as an example:


  • Most banks will not stop the foreclosure process and start the short sale process until you have an offer on your home. We start the process by making an offer on your home. The key to a successful short sale is the BPO or Appraisal. The bank will determine what it will accept based on this number. Our team includes an appraiser and an experienced BPO agent that will provide the bank with this information and get the deal done." END OF AD

My opinion is:

There are many companies out there that do this. My opinion is that if you are a licensed agent then this may very well be illegal according to your State's licensing laws. If you are a REALTOR(R) then it is also my opinion that this is against the CoE. While this practice may work it is not one I condone. Why not just price the property right and get a valid offer from a legit buyer? Then get the deal approved and closed. We don't need to play games.

What say you?

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

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***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas


 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Dawn Houlf 05/14/2010 10:49 AM
  2. Adam F 05/14/2010 02:05 PM
  3. Mark Rienzie 05/15/2010 07:32 AM
  4. Bill Buettner 05/17/2010 03:07 AM
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Bill Travis
Captain Bill Realty, LLC - Gilbert, AZ

The listing agent has the duty to get the best price for his/her client, the seller. By attenpting to get the best price for the seller, then the amount of debt forgiven should be less, therefore, reducing the possibility that the bank will come after the seller for some out of pocket money in order to close.

May 17, 2010 02:15 AM #157
Terry Hughes

Pricing and waiting for a legit offer is the best course of action. (Ethics 101)

My opinion is the other represents a fraudulent act. (unethical).

May 17, 2010 02:46 AM #158
Bill Buettner
Keller Williams Greater Columbus - New Albany, OH
Your Real Estate Connection

This seems alot like fraud to me. Fake offers??? Really??? How / when is that in the best interest of your client?

Price it correctly & wait for legitimate offers from Real Buyers.

May 17, 2010 03:07 AM #159
Robert Taylor

There is no reason to do anything that can be perceived as illegal or unethical. We as agents are held to a high standard of honesty and integrity and we must do everything we can to ensure that those things are not jeopardized. There are far too many legitimate ways to conduct business than to do anything that is questionable. Value that that you have earned {Your Real Estate Liscense} and let's not do anything that may cause you to loose it. "If in doubt, throw it out" 

May 17, 2010 03:32 AM #160
Joel Jadofsky
Keller Williams - homes for sale - Florida - Gulf - Beach - Panama City Beach, FL
One of the Top Realtors in Panama City Beach Area

Sounds like a sure way to get bars on your windows to me

May 17, 2010 04:05 AM #161
Marisa Hunter

I didn't read all the comments, but it looks like most agents feel the same.... that is just unethical and fraud. Like many, I agree, if you price the property correctly, you'll get multiple offers especially in the IE where I am. We have an agent that does that and he ends up getting tons of offers, because the property is sitting for two months while they work on the "phony" one he submitted prior. In the meantime, buyers all want his homes (which are always priced 20% or so under market value) and he doesn't even have the decency to return calls, etc. He takes a ton of listings that very way and I'm surprised Seller's haven't caught on by now. Needless to say, he double ends all his listings as well. I KNOW this will come back to bite him in the butt sooner or later. Oh well, to each his own. :-)

May 17, 2010 04:53 AM #162
Dennis Erickson
Berkshire Hathaway Home Services Montana Properties - Bozeman, MT
My Best..., Always!

OK, first, I dislike people who think in these terms,as in, let's work the system, circumvent the law, play around the fringes of the legal system.  It's because of them we have a 3-inch stack of papers to sign when we go to a closing.

That being said, let me play devils advocate for a minute.  Why is this offering different from several major franchise operations that tell the public:  "List your home with us, if we can't sell it, we'll buy it!" when the franchisor knows 1. They rarely, if ever buy a home because 2. They offer the homeseller 70-80% of the homes value based on an appraisal DONE BY THE COMPANY!  Both offerings are deceptive at best and downright dishonest at their core. 

In Montana false contracting is fraud.  You will be fitted with an orange jumpsuit if caught.  No one will weep.

May 17, 2010 05:57 AM #163
Barbara Le Pine
Advantage Real Estate, serving Lincoln County - Newport, OR
Your agent for the Central Oregon Coast!

Great post!......We Realtors try to be careful with our wording on listings so we don't offend or break any discrimination laws, and here is an ad blantantly advertising fraud?! Wait -  What's that sound? I can hear the sirens in the distance....

May 17, 2010 06:18 AM #164
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

It is obvious from every ones comments that most of them were made without reading all the comments.  This short sale stuff is a mess.  We have a duty to do what is in the best interest of our clients.  Get it sold as quick as possible and eliminate a deficiency judgment whenever possible.  Fake offers are illegal.  But, if I can get an investor to make an offer right away, that will speed up the process.  If he can buy it at a price that is acceptable to him, then great.  If not, then the next buyer should be able to close in a normal time frame.  Either way my seller wins.

May 17, 2010 07:19 AM #165
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Great comments from all.

I guess the point of this post is to make sure we are doing things above board. if you do have investors who are willing to close on the transaction then so be it. Just make sure the offer is justifiable.

Most of the short sales i deal with are investor owned. Price matters because they have to deal with a possible deficiency judgment and tax consquences. The more money we can get for the lender the less liablity to my sellers. It's simple.

May 17, 2010 08:12 AM #166
Laura Sargent
Carolina One Real Estate - Mount Pleasant, SC

That's just drips of grease and screams run baby run

May 18, 2010 04:19 AM #167
Roger W. Herrick
California Mortgage and Real Estate Broker - Oak Glen, CA
Coast to Coast Lending Group Inc.

Have an real investor handy that does make the offer.  86% of the deals that are handled by a regular "non-experienced" 20+ closings in the past 6 months are not qualified.  Letting it go into foreclosure has more risk than being agressive.  Keep it real and have a real investor in you stable.  Tellng you are expert because you took a class on the weekend is what i see is really the issue. If you are not positioned with real investors.  DO NOT TAKE THE LISTING....  DO NOT WAIT AND HOPE... at the Sellers expense.

May 18, 2010 07:06 AM #168
Mark Gridley
eXp Realty, Reinventing the National Real Estate Office! - Fountain Hills, AZ
TecKnow Real Estate Agent, Fountain Hills, AZ

moonI'm Back!

May 18, 2010 09:29 AM #169
Lucien Vaillancourt
Native Sun Realty, Inc. - Jacksonville, FL
Jacksonville Florida Real Estate

This is no different than pricng a short sale listing way below market value in order to produce an offer designed to get the lender to respond with a counter offer.  This add was probably placed by a company that lists short sales with a title status of "Equitable Interest" which we are beginning to see more and more as the number of short sales skyrockets.  It would be interesting to see this tested in a court of law.  Here is an article that discusses "Listing Homes You Have Under Contract / Equitable Interest" .  I represented a buyer in this type of transaction and everything went quite smoothly.  The lien holder had already agreed to accept an offer (presumably less than what my buyer had agreed to) so things went quickly.  I think this process is similar to an option contract which to my knowledge is perfectly legal.  Who is the victim here?  Did the seller get his home sold and avoid foreclosure?  Did the buyer get to close on a home he wants to buy?  Did the bank avoid the expense and hassle of foreclosing?  Did the neighborhood where the home is located avoid having another abandoned foreclosure drag down surrounding property values?

As a community we REALTOR's are always quick to badmouth anyone who takes a creative approach to solving problems.  Personally I think that anything that can be legally done to reduce foreclosures is good for our business and the nations economy.  Let's try to be a little more open minded.

May 19, 2010 07:54 AM #171
George Burgess
RE/MAX Heritage - Pittsburgh, PA

If I have to ask myself, is this honest, illlegal, or ethical then I assume it is something I should not be doing. 

May 20, 2010 04:33 AM #172
Carol & Vince Ciroli - Columbus, OH

Lucien...well said.

I had to read 175 responses to finally get to one that made sense.

Those individuals selling short don't care what the price in the end actually is (except for investors)they still get nothing. They want their home sold, with no deficiency judgement and have it showing "as agreed" on their credit report. The listing agents should be doing all in their power, legally, to make that happen.

I would hate to be the listing agent that suggested that the seller turn down an offer only to have no more offers and the seller being foreclosed upon. It would be very hard for most anyone to prove (or defend) they knew what the "market price" was and advised their clients accordingly. All an attorney needs to show is the listing agent tried to get an extra $10,000 for the Bank rather than working in his clients best interest. All the good intentions of a "good price" goes out he window when you are on the stand trying to explain how you knew, more than an investor, what the property was worth.

Having been a banker for over 35 years I can tell you bankers would rather deal with a professional investor at a lower price than a retail buyer at a higher price.

Additionally, banks don't like dealing with agents that don't really know what they are doing. Almost All agents should use a third party to help in the process in dealing with the lender(s). Yes, you may have to give up 25% or so in the transaction but your close rate will go up, you will make more money and have few legal concerns.

May 20, 2010 06:17 AM #173
Dwight Avery

As an investor and buyer of short sale properties, even asking the question would eliminate my doing business with these folks.  We only deal with agents and associates that are interested in 1.) Working towards a solution that gets the owners home purchased, 2.) Getting to a number that the bank will accept and 3.) Arriving at a number that will allow us to make a profit on the resale of the property in a non-short sale environment. 

Submitting an offer from someone that is not in a position to close the transaction takes the lenders time, effort, and energy away from deals that should close.  Clogging up the system with bogus offers on contracts that may or may not be concluded does not service anyone.  Especially an agent that get's paid for performance.

If they are this ethically challenged, perhaps a living where they do not have a fiduciary responsibility would be more appropriate.

Lifeboat Investment Group

"Because we're all in this together."

May 21, 2010 06:08 AM #174
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Well stated Dwight. I work with investors every day. But only ones that close on transactions. Wasting everybodies time with fake offers is well......a waste.

May 21, 2010 06:33 AM #175
Sherry Davidson
Davidson Realty, Inc. - Saint Augustine, FL

I agree. The Equator system makes you close a file for one buyer and the process starts over with a new buyer. Equator is being used by Bank of America now and will be used by Wells Fargo in the near future. We only work with legitimate offers.

Sherry Davidson, President

May 25, 2010 09:13 AM #176
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Apex Foreclosure Solutions....they're coming to your town!

Jul 27, 2010 05:03 PM #177
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