Short Sale Snake Pit: Multiple Ratified Contracts?

By
Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

In Northern Virginia, our third party approval clause in a contract is actually a contingency.  Just like a home inspection or sale of home.  It has a certain of number of days that is in place from the date of ratification, and if it expires without the written disapproval by the 3rd party in question, the contract is assumed to be in place and moves forward.  In other words, if this contingency expires, then the seller is on the hook to sell the house no matter what the bank says.  Here's what is says, word for word:

THIRD PARTY APPROVAL.  This Contract is contingent upon the approval of  (insert bank name here) by 9pm (insert number of days here) Days after the Date of Ratification ("Deadline").  If Notice of disapproval is not Delivered to the other party by the Deadline, this contingency will terminate and this Contract will remain in full force and effect.  No Notice of approval is required.  If Notice of disapproval is Delivered by the Deadline, this Contract will become void.

Why then, when calling to find out the status of several short sale homes in my marketplace, to set up some showings, did I find out that some listings had MULITPLE, RATIFIED CONTRACT?.  To add insult to injury, they were still listed as ACTIVE in our local MLS.

Banks will usually not look at a contract for approval of short sale unless it is ratified (accepted by the seller and buyer in writing).  Lisitng agents seem to be putting all the power on the bank.  But in the meantime, they are clogging an already JAMMED system with multiple, ratified contracts.  And I would hate to see the buyer that decides that they will sue on the grounds of specific performance for a contract that is denied AFTER the contingency has expired and the seller and/or bank has chosen to move forward with another offer.  No legislation that Congress passes can help a seller in that scenario.

As a listing agent, please understand that, at least in Northern Virginia, RATIFIED still means RATIFIED...even with that 3rd party approval contingency.  There should be no such thing as MULTIPLE, RATIFIED CONTRACTS in any scenario.

If you are listing a short sale, your seller(s) still have the power to counter offer BEFORE an offer is submitted to the bank.  Try that instead of this multiple offer craziness which will only end up costing you and your E & O Insurance Company money.  Just think of it this way, would you RATIFY mulitple offers with a HOME INSPECTION contingency?  3rd Party Approval is just a CONTINGENCY.

As a selling agent, make sure to add that question to your ever growing list of short sale listing questions.  Do you have any offers?  Are any of them ratified?  And if you get lucky enough to have a contract ratified by a short sale listing agent, please make sure you are the ONLY ratified contract.

 

 

 

 

 

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Real Estate General Information
Groups:
ETHICS and the REALTOR
Long & Foster Northern Virginia
Realtors®
Tags:
short sale
prince william county
virginia
northern virginia
listing
selling
braemar
morris farm
regency

Spam prevention
Show All Comments
Rainer
54,025
Bobbie Files
Success Real Estate - Taunton, MA
Realtor, Berkley, Greater Taunton Homes for Sale

Hi Chris Ann,

As an agent in Massachusetts who handles many short sales for sellers, I would never allow that contingency in a contract.  Maybe I am misunderstanding it, but it says that the seller must sell at the end of the contingency period without an extension EVEN WITHOUT bank approval of the short sale?!?! That serves ONLY to protect the buyer, not the seller in any way, shape or form.

When I proceed with an offer I insert the disclosure:

"Offer and acceptance is subject to the Sellers Bank approval of price, terms, conditions and commissions and the Sellers Bank reserves the right to cancel or modify any and or all of the terms, conditions, commissions and price."

I also demand that all prospective purchasers sign a short sale disclosure which says that plus many other disclosures including possible delays.

 Bobbie Files
REALTOR
Keller Williams Realty

Feb 27, 2008 05:50 AM #1
Ambassador
3,244,864
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Bobbie:

Since writing this, the contingency noted above has changed, but the new ones express the same idea.  In our marketplace, 3rd party approval is just a contingency.  Unfortunately, listing agents treat the banks like they are the ones selling the house.  Not so.  The sellers still are signing the contract.

 

Chris Ann

 

Feb 27, 2008 07:04 AM #2
Rainer
1,895
Peter McCormack
RE/MAX Classic - Falmouth, MA

Chris Ann,

I'm also a MA agent concerned as you are about sellers signing multiple offers. The attorneys I've spoken with really don't have any experience under these situations and can only tell me "grey area" which to me means "get sued and find out". I'm using a very similar disclosure as Bobbi Files but am still not very comfortable. I'd like to hear more comments regarding the issue.

Thanks,

Peter McCormack

RE?MAX Classic

Falmouth, MA

 

 

Apr 27, 2008 08:22 AM #3
Rainmaker
284,867
Gene Allen
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate
It is still so confusing to me.  Evertime I think I have it figured another monkey wrench shows up.
Apr 27, 2008 08:33 AM #4
Ambassador
3,244,864
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Peter:  I've spoken with attorneys in the State of VA and they insist that mulitple ratified contracts are bad.  It's so important to remember in a short sale, we work for the sellers.  When someone representing the bank signs your listing agreement, like in an REO situation, then you must present all offers to the bank because the bank is your client.  Short sales, the bank is an entity that the sellers must deal with regarding the short fall, but we do not owe them anything other than one ratified offer.

Gene:  I still learn things everyday about short sales, but am so glad to have a network of agents here on AR to get the latest from.

Apr 27, 2008 10:57 AM #5
Anonymous
vanessa

What I have realized (as a buyer) is that short sale simply means SILENT AUCTION.

May 22, 2009 07:29 AM #6
Ambassador
3,244,864
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Vanessa:  Not exactly true.  Especially not if you are dealing with reputable agents who know how to run them.  Most contracts aresubject to appraisals....which means there is a ceiling to how high the properties will sell.

May 22, 2009 07:57 AM #7
Rainmaker
117,877
Anne Clark
Metro Referrals - Gainesville, VA

Until they changed that contingency, this was a nightmare scenario.  Still, even as poor a business practice as it is, listing agents are still throwing ratified contracts at the banks like mardi gras beads.

Jul 26, 2010 09:33 AM #8
Ambassador
3,244,864
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Very poor business practice indeed, Anne.

Jul 26, 2010 09:58 AM #9
Rainmaker
100,441
Stephanie McCarty
McCarty Homes - Canton, GA
REALTOR

an attorney told agents in my office that here in Georgia we should only be sending one contract to the bank, agreed and accepted by both parties.   To send multiple contracts to the bank is a liability for the listing agent and a violation of our standards of practice and ethics - at least that's what we were told in a meeting with our firm attorney.   Makes sense to me, and, from a common sense point of view, if you send multiple accepted contracts to a bank wouldn't the seller be in breach anyway?

Oct 07, 2010 05:48 AM #10
Ambassador
3,244,864
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Stephanie:  I have to agree with that attorney.

Oct 07, 2010 05:50 AM #11
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
3,244,864

Chris Ann Cleland

Associate Broker, Bristow, VA
Email Me For a Free CMA of Your Home's Value
*
*
*
*