How can you tell when a short sale buyer is serious about his offer?

Real Estate Agent with Alain Pinel BRE 01367196

How can you tell when a short sale buyer is serious about his offer?

ContractBeing both a listing and selling agent for short sales, I’ve had my share of buyers backing away from a short sale, and having to start all over again.

I’ve even had buyers who wanted to write multiple offers wanting to see which one will stick. Not only is doing that a lot of work, it also describes what kind of buyers they are. When writing an offer, one is expected to write in good faith.

Writing multiple offers is hardly that.

What is good faith?

Wikipedia describes it as

“In philosophy, the concept of Good faithLatin bona fides “good faith”, bona fide “in good faith”—denotes sincere,honest intention or belief, regardless of the outcome of an action; the opposed concepts are bad faith, mala fides (duplicity) and perfidy (pretense).


In law, bona fides denotes the mental and moral states of honesty and conviction regarding either the truth or the falsity of a proposition, or of a body of opinion; likewise regarding either the rectitude or the depravity of a line of conduct.”

So how do we make sure a buyer is serious, i.e., submitting an offer in good faith  on a short sale?


Buyer will open escrow upon acceptance by the seller,

before receipt of short sale approval from the short sale lender.

Buyer’s initial deposit is 1-3% of offer price

Buyer’s  terms and conditions are acceptable to short sale lender (For example: offer is reasonable, i.e. no low-ball offer, AS IS, no credits, no request for repairs, no request for lender to pay Buyer's closing costs)

  • From the listing agent’s and the seller’s point of view, such a buyer shows total commitment when the buyer is willing to have his initial deposit cashed into an escrow account. As long as the waiting period for approval is within the 45 days per our short sale addendum, this is do-able.


  • From the buyer’s agent’s and buyer’s point of view, this strengthens the offer and thus has a very good chance of being approved. It also puts the onus on the listing agent to get the answer within a specific period of time, or the buyer walks.

If the buyer is unwilling to open escrow, then the buyer probably doesn’t want the property that much and may signal to the agent that Buyer has a lot more looking to do before he totally commits.

It all boils down to this: TRUST

Trust is defined as:

  • reliance on the integrity, strength, ability, surety, etc., of a person or thing; confidence.
  • confident expectation of something; hope.
  • confidence in the certainty of future payment for property or goods received; credit: to sell merchandise on trust.


So in this case:

  • The seller trusts that the agent will work towards getting the short sale approved
  • The buyer trusts that his agent found him a property that has a high likelihood of getting approved
  • The buyer’s agent trusts that the listing agent is experienced in short sales
  • The listing agent trusts that the seller, the buyer and the buyer’s agent will all work together in getting him all the information and documents that he needs to negotiate from a position of strength with the the short sale negotiator
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Anne M. Costello
Weidel Realtors - Yardley, PA

Pacita: Opening escrow is a really good sign that the buyers are in. How do you feel about inspections before bank approval?

Jan 30, 2012 09:32 PM #6
John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!

Pacita I have buyers that have good offers on 5 yes 5 short sale homes now.  They found their dream home and are in hopes it comes through for them but went ahead and found 4 others as back ups.  You're right it's a lot of work!

Jan 31, 2012 12:39 AM #7
Former Agent
None - Adak, AK

Honestly, I don't think there is anything wrong with Buyers continuing their search while waiting for bank approval.  There is always the possibility that the bank will not approve of the terms and the buyers could potentially miss out on other desirable properties.

Jan 31, 2012 02:26 AM #8
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Anne ---- if buyers get inspections before receipt of short sale approval, that's further evidence of their commitment. Their inspections may provide justification for a lower offer. But if the bank refuses to reduce the price, or does not approve the short sale, buyers should know they won't be reimbursed.

John --- the danger with that is if the buyer wrote offers on all 5 --- the primary and the back up --- the listing agent and their sellers are operating under the idea of a promise on your buyer to fulfill their obligations if/when the short sale approval is granted. What if ALL of them are approved?

Aimee --- it's okay to continue search for comparison purposes. But if they find something else, then they should withdraw their offer on the first one and let that one go back to market in case someone else wants it more than your buyers do. Not fair to have the sellers think that your buyers want to go through with the contract.

Jan 31, 2012 04:31 AM #9
Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad

Very good points, if I were the buyer agent however my interview of the listing agent would be extensive because if the buyer were to open escrow before SS approval I would want to know this deal has a very very good chance of closing.  On the other side of the coin, if I'm the listing agent and I get short sale approval and the buyer walks, getting a new one with that approval with be a whole lot easier.  Thanks for the informative post.

Jan 31, 2012 05:07 AM #10
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Michael --- absolutely true. Before I write an offer on a short sale, I ask a lot of questions and do a little research:

  • Does listing agent have short sale experience (closed transactions)
  • Do they have their short sale package ready to go once offer is received, or if they applied for HAFA, do they have HAFA approval
  • How many lenders, and who
  • I look at the balance(s) owed, what the market value would be today
  • Then I write offer based on what I think the short sale lender may approve
Jan 31, 2012 05:52 AM #11
John Juarez
The Medford Real Estate Team - Fremont, CA


I don’t trust the short sale lenders! They are in charge. The seller and listing agent can have the best intentions in the world as far as delivering an approval in 45 days but that is out of their control. If the lenders will GUARANTEE an approval decision within the 45 day period, the buyer would know what to expect. As it stands now, the lenders do whatever they want whenever they want and they keep changing what they want.

Jan 31, 2012 09:20 AM #12
Marge Piwowarski
Phoenix AZ Horse Property - Phoenix, AZ
Phoenix AZ Horse Property, LLC

Pacita, I think that is asking too much of the buyers.  You want all that commitment from them and then the lender takes months?  I would not advise my buyers to do that.  I have yet to have one of my buyers back out (and I don't let then do multiple offers) but I have had deals sit at a bank for months and be turned down.  The reason buyers walk is that the banks take too long.  That isn't the buyer's responsibility. 

Jan 31, 2012 11:31 AM #13
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

John --- yep, we can trust each other and our clients, but the big unknown is the lender. So I didn't say we trust them.

Marge --- the last two escrows I completed, as the listing agent, I asked buyers to commit to the short sale process by opening escrow. It helped that both were competitive situations, so the winning buyers acquiesced. I don't think it's asking too much. Listing agents and their sellers go through so much work to get to the point of approval, and when buyers walk, it turns everything upside down.

As a buyer's agent, though, I would research the situation (see my response #11) before having the buyer agree to open escrow.

Guess it will depend on the situation -- just how committed is the buyer to the property? My biggest short sale is my buyers waited 45 days to get approval, another 45 days to get the escrow closed. But they didn't mind waiting. They got a $1.4M house for $1 M. They're happy.

Jan 31, 2012 02:04 PM #14
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Pacita,  Add to that the deposit stays in escrow for 90 days.  Buyers can cancel before 90 days but their deposit stays in escrow.  I place trust with buyers where their money is - in escrow for 90 days. 

Jan 31, 2012 03:02 PM #15
Florida Tolbert Team Keller Williams Advantage
Keller Williams Advantage III Realty in Lake Nona - Orlando, FL
Keller Williams Land Division Specialist

Very simply it boils down to the short sale agent and how well trained and confident they are and how they instill into their client they are the professional in charge and if the client listens, they will own this home.

I always get ESCROW with contract.  NoT upon acceptence.  They always sign a 90 days to commitment, and 120 days to close. 

No seller concessions as most lenders like this. 

You have to take control and contractually lock them in up front.  You do this, and all parties win.

Jan 31, 2012 03:07 PM #16
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Kathleen --- tough cookie!

Kevin --- and so we shall!

Jan 31, 2012 03:46 PM #17
Kathryn Acciari
Century 21 Real Estate - Shrewsbury, MA
Brand Ambassador and Business Coach

Well said, Pacita.  Regardless of the short sale status of the property, there always has to be some risk on both the buying and selling side.  If the buyer is not 100% committed, the deal is doomed.

Jan 31, 2012 11:24 PM #18
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA


Experienced agents will know enough about the situation to determine if the short sale has a chance ot getting approved based on the offer, the lender, how much is owed, the market, the hardship and the agent's knowledge of the short sale process. What is scary is property that is just days of being auctioned. It can be done, but it's hairy.

Feb 01, 2012 04:52 AM #19
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Yeah I am in total agreement with the whole definition on good faith and trust but dont agree that all those items need to be in an offer to make it legit. Sure in a perfect world the buyer asks for nothing and offers list but in todays reality they want deals to jump back into the market that spanked most of America in the recent past. I see lots fo weird offers and lots of seller concessions and low credit or income challenged borrowers and get a lot of them approived and closed!

Dont look for perfection make what you have perfect

Feb 01, 2012 06:08 PM #20
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

David --- no, not everything has to be on the contract, especially if inspections reveal serious issues that can be negotiated. All contracts at the outset are AS IS anyway, until and unless there are requests for repairs and contract addenda down the line.  But the most important piece is to get that solid commitment: open escrow upon acceptance.

Love the last line :)

Feb 01, 2012 06:23 PM #21
Marcia Kramarz
Re/Max Executive Realty - Medway, MA

You certainly hit a chord here, Pacita - I don't usually read all the comments but they were compelling as I'm starting a short sale this week - I will definitely talk to buyer's agent to be sure s/he is not putting offers on 5 other homes - I agree with your approach... Thanks so much for the initial post AND for you following the thread and making your thoughts known!   I'm subsrcibing to your blog - GOOD STUFF!

Feb 02, 2012 12:30 AM #22
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Marcia --- thanks. It helps to have so many experienced agents give us their thoughts. We all learn from each other.

Feb 02, 2012 04:02 AM #23
Susan Goulding
Crown Key Realty, Tracy & Mountain House Real Estate - Tracy, CA
Northern CA - Tracy & Mountain House Real Estate

If only it was THAT easy.  6 years 100+ short sales, and still no good way to keep a buyer in a transaction.  You are correct though ANY kind of a deposit into escrow is a good sign.  However, andy good buyer's agent is going to let their buyer know that money HAS to be returned upon request.  Even if less than the 45 days.  

Feb 02, 2012 06:12 PM #24
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Susan --- anything to ease the burden on all of us: seller and agents. It's tough enough doing short sales, so we don't need buyers sho throw everything against the wall to see what would stick.

And any deposit regardless of type of sale may be returned to buyer within a certain period of time during the contingency period, anyway.

Feb 03, 2012 04:15 AM #25
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Alameda/Contra Costa Counties CA
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