What is your Opinion on this Situation

[rmasse10]

In a short sale transaction, the buyer and seller sign the contract and the offer goes to the bank for final approval. In my association, when the buyer and seller sign the contract, it is a legally binding executable contract and must be moved into Pending status within 2 days. Ok here is where it gets dicey...

the listing agent does not put it pending because "Noone else is doing it"...so it is left active for 2.5 weeks. We force her to put it pending and then we get a call that she has a new offer that she is submitting although we did not sign any documents allowing her to do so. The bank comes back with our offer with an acceptance except for some minor changes which we make and resubmit. Mind you that the original offer is still signed by the seller. The 2nd offer is submitted to the bank and they begin to negotiate that deal as well.

Here is my question, as I understand it from many discussions with other agents and board members, if the buyer and seller sign the contract and it is executable and the bank is merely a contingency, then by coming back with a change to the contingency, the original contract is still place and cannot be superseded. The broker is under the impression that when the bank countered, the other offer was able to be slipped in. In addition, the listing was never put in pending status as outlined in our MLS rules which is another violation.

What is your opinion on this situation. I am currently on hold with the RE Legal hotline to see what their take is.

Let me know

[DMG]

This is what's great about this forum, we get to se everyday things that happen and get different views and learn.

In my area anyway here is the norm and I believe the rules etc. Short sale are always subject to bank approval as you stated also. The buyer and seller signing means nothing more than "lets see what the bank says" but during this time in my area what is typically done is the home goes into a "temp with-hold from the MLS" so we don't keep showing and get it mudded up with more offers etc.

Once the bank made a counter however to your buyer that opens the deal, under normal practice that is just brought to you for approval, rejection or counter though not really to slip something else in as you are in negotiations already. Offers here do not have to be disclosed however and sellers have the right to keep other offers hush hush if they wish buyers not to know there are multiples. That being said I would say the original contract is not enforceable as it was not accepted by the contingency (the bank) the seller really has no right as it was (or should have been) subject to bank approval so if they countered the original is not fulfilled and therefore open.

Why a listing agent would want to slow the system with multiples in a short sale is beyond me anyway, short sales are tough enough without being sneaky and tossing in more offers on top of ones already in the works, I think more than anything you have an agent who is running a little to fast with it.

I think based on what you said the offer can be opened for others being that is was countered but if anything the agent should have possibly been a little more up front and paid closer attention to some due diligence.

Let us know what the RE hotline's take is.

[RonnieG]

... The broker is under the impression that when the bank countered, the other offer was able to be slipped in.

Here is my take:
In a short sale situation, since the offer does not satisfy the bank's lien, and just as in a divorce or other two-party seller situation, there are really two sellers who must agree to all offer terms, not just one, and the bank's acceptance is more than just a contingency. An offer is not fully "accepted" and binding until it has signatures of both sellers. Therefore, it is not "Pending" or "Under Contract" until that happens. If either seller, the owner or the bank, comes back with a counter of any kind, be it price or terms, then it opens the door to other offers in the wings, especially if the other offer(s) are better than the first. And, until both sellers sign their acceptance of an offer, with no counter or changes in terms, any new offer can also be presented for consideration, and it turns into a multiple offer situation, subject to both seller's decisions on which is the best offer, including whatever considerations the bank may have.

As far as the buyers thinking they are "under contract": As a listing agent, I would have told them that their offer had been signed by the sellers and forwarded to the bank for their acceptance, and would NOT have provided a seller-signed copy back to the buyers. Think about it. If the buyers see a home they like better, and the bank has not returned a signed and accepted contract, with no counter and no change in terms, then the buyers should be free to terminate their original offer and pursue the other property.

[Discover Davis Homes]

Our MLS has devised new categories for short sales. There is an active short sale category that all contracts subject to bank approval are supposed to be listed, there is also a short sale contingent category, meaning there is an accepted offer between buyer and seller but does not yet have bank approval. These properties do not get marked as pending until after bank approval. You could check to see if your local MLS committee is addressing the issue, I think the new categories have made things clearer here, it also helps me sort through listings as I typically do not show short sale properties to clients because of the headaches involved. In most of my market area, there are plenty of REO properties with prices just as low to choose from.

[rmasse10]

Our MLS has devised new categories for short sales. There is an active short sale category that all contracts subject to bank approval are supposed to be listed, there is also a short sale contingent category, meaning there is an accepted offer between buyer and seller but does not yet have bank approval. These properties do not get marked as pending until after bank approval. You could check to see if your local MLS committee is addressing the issue, I think the new categories have made things clearer here, it also helps me sort through listings as I typically do not show short sale properties to clients because of the headaches involved. In most of my market area, there are plenty of REO properties with prices just as low to choose from.

In our board, a contract between the buyer and seller constitutes an accepted contract and the bank is considered a contingency (this is just how it is currently worded). The property must go into pending status like any other accepted contract. Since the bank does not own the property, they are only a contingency to the contract however, the contract cannot proceed if the bank does not approve the offer.

The problem here is the fact that the other agent took additional offers without the proper paperwork in place and submitted them to the bank so now the seller basically has 2 signed offers of acceptance that the bank is looking over. According to my mls board, she is in the wrong regarding some issues and is going to get fined, in addition, the real estate board has issues with her ethically as well that she will have to answer to as well. My main concern is getting the home for my clients as they are first time home buyers, a disabled vet, and a wife going thru chemo...if they don't get it due to some agent being unethical, how do you tell them...I need to fight until I have nothing left to fight for...but it shouldnt be this way!

[rmasse10]

On another note, the RE hotline basically said it is a crap shoot...it is a gray area and they are not sure what the answer is (this is an atty speaking)...nice huh...

[jamesww]

On another note, the RE hotline basically said it is a crap shoot...it is a gray area and they are not sure what the answer is (this is an atty speaking)...nice huh...

Sounds to me like it is something that is going to have to be run through the courts before anyone can answer this question. Right now anything one says or believes is just hearsay.

[John Allen]

A wise man once told me for all legal questions - "Consult a real estate attorney." The FAR hotline is a good place to start. I just can't stand the long hold times. Personally, I use real estate attorneys to close transactions instead of Title companies. That way when I have a question like this, they are willing to give me an opinion free of charge.

As far as the "pending" issue, a call to your board should clear things up.

[rmasse10]

Here is my take:
In a short sale situation, since the offer does not satisfy the bank's lien, and just as in a divorce or other two-party seller situation, there are really two sellers who must agree to all offer terms, not just one, and the bank's acceptance is more than just a contingency. An offer is not fully "accepted" and binding until it has signatures of both sellers. Therefore, it is not "Pending" or "Under Contract" until that happens. If either seller, the owner or the bank, comes back with a counter of any kind, be it price or terms, then it opens the door to other offers in the wings, especially if the other offer(s) are better than the first. And, until both sellers sign their acceptance of an offer, with no counter or changes in terms, any new offer can also be presented for consideration, and it turns into a multiple offer situation, subject to both seller's decisions on which is the best offer, including whatever considerations the bank may have.

As far as the buyers thinking they are "under contract": As a listing agent, I would have told them that their offer had been signed by the sellers and forwarded to the bank for their acceptance, and would NOT have provided a seller-signed copy back to the buyers. Think about it. If the buyers see a home they like better, and the bank has not returned a signed and accepted contract, with no counter and no change in terms, then the buyers should be free to terminate their original offer and pursue the other property.

Our board sees it a little different although the rules change all the time. But the buyers...this is their, as far as I can tell, dream home and the whole idea of not following these ideas of terminating contract to pursue other homes is for the people that abuse it. We were having clients submit offers on 20 homes (not me, I dont have time for that crap) to see which one makes it thru which was causing all sorts of issues. Now if they get a signed contract from the seller, they are in a legally binding contract and can't just walk off to pursue another home.

[rmasse10]

A wise man once told me for all legal questions - "Consult a real estate attorney." The FAR hotline is a good place to start. I just can't stand the long hold times. Personally, I use real estate attorneys to close transactions instead of Title companies. That way when I have a question like this, they are willing to give me an opinion free of charge.

As far as the "pending" issue, a call to your board should clear things up.

The pending issue was already resolved...that is not the problem. The problem is that the property was continually shown as act and was still being shown by other agents which in turn generated another offer. My offer is at full asking price...but here is where the problem comes in. Our board states that commission is non-negotiable. If you state that you are paying 3%, then you had better pay 3%. There were many other offers that fell thru and the listing stated that the short sale and conditions are already approved. So when we got acceptance from the bank except for the commission and another minor thing, we bascially told them commision is non negotiable...which in turn would have yielded the listing broker about $500 on the deal. I think she found someone herself so that she could get the money since she was making nothing on our deal but hey, she put in the commission, she had spoken to the bank and knew what they were willing to pay...she was actually deciptive in the listing as some agents are putting riduclous commissions to get an offer and then saying that the bank is only paying x amount so lets say we split it...that is why the board said that you must pay out what you offer regardless of what the bank says.