Short sale questions and answers: What is the priority of offers? Must knows for buyers.
I found this article today regarding how realtor's handle offers in short-sale situations. There are many mis-conceptions and confusion about how short-sale protocol flows. Remember, there is a third party involved that requires "approval" outside of the two signing parties: the Lender. Banks often have addendum's and protocol that super cede your contract/offer and will pursue the best "net" offer. That means your contract is not approved until the lender signs off on it. Only then are you under contract.
"Ultimately, the short-sale addenda prevents the contract from being finalized so as to prohibit the seller from considering or accepting other offers until after the bank(s) and other lien holder(s), if any, agree to the terms of the transaction.
That is, when you are a short-sale buyer, you are notified upfront that the seller does not have the power to create a binding contract -- not unless and until the bank(s) and lien holder(s) sign off on the price and other terms of your offer, including your qualifications.
The short-sale addenda -- both the boilerplate forms brokers and agents use and the bank versions -- add in the banks' and lien holders' approval as a required condition of the contract. ... normally, the buyer's contingency periods for inspection and loan don't even begin running until after the bank(s) involved have approved the sale."
Educating consumers will diffuse many situations and often the realtor needs updating. This is a great article to hand out to buyers and sellers to explain how the short-sale process works. Short-sales are, and will be, a large part of the market for awhile.