A home buyer and contributer to the forums and blog comments, sent over a handful of questions this morning about the short sale he has under contract (not with Redfin). These are some really good questions, so I’d like to share the answers with everyone.
#1. In this business, is it customary for listing agents to accept back-up offers only equal and/or higher in value than the single offer under contract(my offer), or do they take some offers that are less as well?
When a listing agent gets a short sale under contract they are concerned about two things. First, the buyer could have offers on multiple short sales and the buyer won’t be interested in this home when the approval letter is issued. Second, the listing agent is concerned if the banks want the buyer to increase their purchase price they buyer will bail.
For those reasons, listing agents will take as many backup offers as they can get. They want to have a laundry list of people to call up in the event you bail on buying the home.
However, when they accept an offer they change the status of the home from Active to Active with Contingencies (AWC), which is essentially saying the home is “Pending” or under contract. This change in the MLS status drives most home buyers away because they don’t want to waste their time being a backup offer. Why? Because most short sales get approved and buyers will normally buy the home.
Last year, the best move was to get in the back up position on the home you loved. Being the back up almost guaranteed you would get the home. In today’s market you are just waisting your time being the backup.
#2. Is it customary or possible to ask your agent to request information from the seller’s agent of whether or not other offers have come in?
Customary and possible, yes. Necessary, no. As the buyer’s agent I find it interesting to know how many backup offers are on the table. It tells me how much competition is out and maybe gives me an idea of how much leverage I have.
In reality almost all short sales will have backup offers. But the number of offers and the terms of the offers don’t matter because most of those buyers (if not all) will have already moved on to another home before they get the chance to step up to first position. The listing agents are also well aware of this.
Something else to keep in mind, once the bank approvals have been issued its not easy getting the banks to accept an offer with a new buyer. Even if the terms are exactly the same, it can still be a nightmare getting the banks to sign off on what they perceive as a brand new contract with a brand new buyer.
#3. Is it true that lenders only review one package at a time or do they review and compare multiple package offers for one property during a single short sale transaction?
Yes, lenders only review one package at a time. Once they start work on the contract they have in front of them they don’t want to consider any other offers. If the listing agent receives a higher offer they most likely won’t submit the offer to the lenders/banks. Doing so would cause the banks to start the entire process over and it would only delay the approval process.
Essentially once the train is set in motion, you don’t want to do anything to derail it.
#4. If we are being told that my offer is at the bank awaiting review, could there be others already under contract and in the same review process as mine, or is the seller only allowed to sign one contract at a time? The standard real estate contract seems to read one contract at a time.
As noted in answer #3, the listing agent isn’t crazy enough to submit a new offer. The listing agent’s goal is to get the approval letter as quickly as possible.
The standard real estate contract does operate with the emphasis of just one offer, but it also assumes a traditional sale. Carefully read the short sale addendum and you’ll see a clause that allows the seller to accept and submit the backup offers to the lenders. Lines 13-15. Depending on how your contract is written will determine the listing agent’s ability to submit the back up offers. Assuming of course they want to deal with that headache. Its not something I would be too concerned with.
Once you are in under contract on a short sale, its not worth worrying about other backup offers or other buyers. The best thing you can do is let the listing agent know periodically that you are still interested in the home, you aren’t looking for more homes and you are willing to wait for the bank’s approval. That lets them know you are serious and they will be more likely to fight for you when the time comes.
Thank you RJ/Justdoit for the great questions!
Author of this Post
If you have questions or comments just leave them below or get in touch.
Serving East Valley, Cave Creek and Scottsdale
Homes Closed: 60+