It’s been 8 weeks since we last reported on short sales, and we’re happy to report short sale activity is up as we’d hoped it would be. Short sales make much more sense to all involved over a foreclosure as it helps preserve the sellers credit better, minimizes losses to the lender, and keeps the neighborhood in better condition.
I recently heard a funny quote “Why do they call it a short sale if it takes so long?” While I can’t remember who said it, it’s funny because it’s so sad. Hopefully with new initiatives in place we’ll see quicker turn-around times for short sales. As a CDPE (Certified Distressed Property Expert) we thought we’d share a few tips to help agents navigate this short sale process and make your deals quicker and smoother.
There is a clause in the Short Sale Addendum to Purchase and Sale Contract entitled #5; Multiple Offers which reads “Unless otherwise agreed by Buyer and Seller in writing, Seller may continue to market the Property for sale and accept other offers and submit those accepted offers to the lender.” We are not attorneys and we are not giving legal advice. This clause seems suspect though and we encourage listing and selling agents to amend or supersede this clause.
A purchase and sale contract is between one buyer and one seller, and once accepted you can request the lender to take less than what is owed via a short sale. In a normal transaction a seller wouldn’t enter into multiple contracts with multiple buyers, so why would you muddy the waters and try that on a short sale? Selling the property to multiple people just seems unethical and one buyer may have legal remedies against a seller for employing such a tactic.
Quite often we see sellers accepting any offer that comes down the road, but the lender certainly would not agree to the short sale because it is so far below market value. The lender wants to minimize their loss, and only agree to short sales if it makes sense. Sellers would be far better off negotiating or waiting for a reasonable offer than to accept any old offer.
When you submit multiple contracts to a lender they mistakenly think it must be a hot property and hold out for more, and many times each new offer starts the process all over again, further delaying approvals. And keep in mind when you submit more than one contract, the seller may be legally liable to more than one buyer.
You don’t submit offers to the lender, only accepted contracts. A seller should really only enter into one accepted contract. A lender cannot do anything without an accepted contract between buyer and seller as the lender is not a party to the transaction and can’t sell to anybody. This could change if they foreclose, but until then they are just the lender.
If you’re a buyer the last thing you want is the seller sending in other accepted contracts. It would be far better to move on and go buy another home and not waste any time waiting or investing in inspections, etc. As a seller, it should also be the last thing you want as well as it can hold-up or kill your sale. From a practical standpoint we don’t even know why this clause is in the addendum, or why agents or sellers would employ this tactic.
The other advice we would give is to have the sellers completely fill out a financial questionnaire upfront before taking the listing. There is no sense wasting buyers and sellers time if the seller isn’t going to qualify for hardship with their lender. You’ll need all this information with the accepted contract anyway, so it’s best to do it upfront and save everybody time. Not only will this speed up your short sale, but it will also help you skip doing deals that should never be attempted in the first place. Buyers are skittish enough on short sales anyway, so why attempt one if it has no shot at success? We’ll bring you more tips on short sales in upcoming articles. By educating the market on what works and what doesn’t, everybody wins. Good luck buying and selling. We’re all in this market together, for better or worse, and it pays to work together for success.