Not only have I gotten phone calls about short sales this week but I find myself struggling over interpretation of short sale protocol. So many questions and so many varying answers it is hard to determine what the exact course of action should be. A customer called me tonight concerned that her short sale offer was going to be bumped by a higher offer, but according to all that I am reading and studying her offer should be the only offer on the table at the time. Any other offers that come in should be considered back up offers and will only be addressed when the first signed offer is disposed of. This week I am going to answer some pressing questions that I have been presented with and will do so with the help of our good ole FAR guidelines and MLS rules which I need to add are still our benchmark.
Q. What is the short sale addendum and what is the ruling force? And, furthermore, this form or our MLS and FAR guidelines?
A. If you have done a short sale or if you know someone who has then you know you will be asked to sign a FAR Short Sale Addendum that says the seller may “accept other offers and submit them to the lender.” This does not mean that all offers are presented at the same time and the bank chooses the best one. According to FAR the addendum is designed so that the seller may continue to solicit offers and hold them in a a back-up position. The contract on the table is considered complete other than the contingency of lender approval with seller acceptance. Another important protection in the addendum is the pronouncement that the sale is contingent on the seller agreeing to the lenders conditions.
Q. Why does a potential sale show up as contingent instead of pending in the MLS?
A. Although the contract has been signed by the seller and the buyer it is considered contingent upon lender approval. It will become pending once the bank has accepted the short sale and the usual closing procedures such as appraisals and inspections begin. Our MLS rules and not the addendum give us Realtors our direction in this matter. There is still debate among Realtor sometimes on how to apply this rule.
Q. What is the purpose of a back up offer and are they worthwhile?
A. There was a time in the market that people would fight over a property so back up offers were used quite frequently and now they are used again but with a different end in mind. Because of the precarious nature of short sales a back up is a great idea because many times the buyer gets leery of waiting and decides to move on to something more reliable. I have had more sales fall out in the last 2 months than I have had in all my years of being a realtor. For this reason I love a back up offer and so does your seller and the new buyer is delighted as well.
Q. How reliable are the Realtor Remarks in determining what a lender will take for a short sale?
A. I will say a big hardy NO to that one. Keep in mind that Realtor remarks are put in when the listing was taken and many things can change in the course of a listing especially a short sale listing. It is almost impossible to know up front what a bank will take until they have already gone through the process with another offer. Your best bet is to call the Realtor and ask her questions about her ideas of what a reasonable offer would be based on offers turned down and her assessment of the market value. Many times you do not have a handle on the price that a bank will take until they do their own BPO (brokers price opinion). Many times prices on Short sales are really abstract in that no one really knows what the “loss mitigation “department will take.
I love how real life keeps throwing me curve balls and challenges to be met each week. Please be patient with your Realtor as she helps you wade these waters for they are uncharted for all of us and we are learning as we GROW!!! I am grateful that I am surrounded by some really smart Realtors that keep me on my toes so know that we are NO experts….. just hard working folks looking for the best way to serve our community and each other.Print Story