So I’ve finally made a short sale offer (informal, no binding agreements yet) on a property, but the owners won’t authorise me to speak directly to the banks - I have to go through their realtor. I know this guy is pretty sleazy - he has been suspended as an attorney for commingling and incompetence, and he asked me for $$$ for details of the auction for this property that he didn’t even have (the auction never happened). The owners say, though, that they don’t want anybody else involved in their financial affairs, so I have no choice.
If the owners do accept the offer (should know very soon), can anyone tell me what kind of tricks this guy could potentially pull? Of course I will get everything reviewed by an attorney before I sign, but could he reach some kind of agreement with the banks behind my back? I have no idea what, I just want to be alert to any possibilities, so any advice would be great!
Keep this in mind with your short sale - no matter how sleezy this agent may be, that even though the owner agrees to the sales price and the bank “approves” the short sale, if the bank gets a better offer before you close, they can kill your deal and accept the better one. And you can’t do a thing about it as your contract will be subject to the bank’s approval. The bank is not on the contract you signed, so the bank is not bound to the terms of that contract. Most people don’t realize this!
Vegas A, that is a really good point. Tell me, how does it work for the buyer then? If the banks are not bound by the purchase agreement until the point of closing, then are we? What if in that time we see a more attractive property?
Unfortunately as you are in contract with the owner you are bound by the terms of the contract. The bank really controls the deal - not the owner, the agents or the buyers.
Thanks. But if I have a contract with the owner, the owner also has a contract with me, which would prevent her from accepting any other offer presumably. Given that the owner first has to approve any offer before it is submitted to the banks, then how could a higher offer happen? Could she authorize anyone else to speak to the banks if she has a purchase agreement with me?
The banks have to approve any short sale. If a better offer comes in they have the right to “unapprove” yours and approve the higher one. The sellers contract with you will be subject to this approval and if the banks “unapprove” it you are out of contract with the seller.
And in the state of Nevada at least, by law all offers must be presented even if there is another offer already in place. My guess is your state is probably the same? You will have to check. Anyway you look at it, you really don’t have a valid contract on a short sale until it closes.
If you put the right contingencies in your contract, the bank can’t sale to someone else. since the property doesn’t belong to them.
I had that same problem. The homeowner tried to juggle me and another buyer. I called the bank and they said, my offer was denied because the seller was working with someone else. I told them, thats bull. I am the only buyer.
The bank told me to call the homeowner. I told the homeowner, she is obligated to sale to me and me only. Or else i will make sure the property go to foreclosure. I recorded my contract, so no one else can buy the property unless they buy from me.
Thanks to both of you because this is really important stuff I need to be aware of. To me, it does not seem reasonable that a purchase agreement on a foreclosure property would be any less binding than on any other property - at least in our case where we are normal home buyers who have put in a good offer and are not looking to flip for a profit. We will definitely be getting plenty of legal advice if this moves forward.
But in the meantime, CharlottePlayer, how do you record a contract?
The document you record at your local county recorders office is called Memorandum of Agreement. This document let title companies know that a potential purchaser has an interest in the property. So before they can issue title insurance, they have to contact you, and try to get you to cancel it out.
Please be careful recording contracts against a property! If you cloud a title so a property cannot be sold and later you go to court because the seller sues you and the court decides against you, you could be liable for HUGE damages!!! Better to not record and then sue in court later.
If you do find a seller that was dumb enough to remove the bank approval contingency on a short sale (you would probably have to make that an actual condition of the contract) you are lucky. But most sellers will not sign that (what if the bank did not approve the short sale - they would have to come out of pocket. If they had the money in the first place, they would not be selling.)
Well none of my contracts have a purchase price on them, when dealing with short sales. One of the contingencies in my contract, is that the can approve any deal that is acceptable by the bank.
Using contracts like this, have the broadest language. It was made for the purpose of dealing with sellers in distress.
My contracts allow me to purchase the property or assign the contract. So if the homeowner contracts with another buyer. Thats fine. But that buyer has to buy from me. So i can add whatever fee, that i like.
The key to controlling short sales, is about using the right contracts. Even the bank backed off, once i started to explain my contract. Even though, the buyer before me offered more, the bank could not accept their offer. Since i am the sole buyer.
The bank, knows it. The seller knows it. Then they tried to work a deal out with me. But their buyer didn’t want to pay me $15k, so they lost out.
Anytime i am dealing with a seller that is giving me a clue that they are about to back out of the contract. I go downtown and record my contract and flip out.
This is a business, and you have to treat it as such. This is some peoples livelyhood, if you don’t protect your food. The other dogs will eat from your bowl. If you are going to be a cat then go play in the kitty litter, if you are a dog, then you need to bark.
If you are an agent, you know the golden rule. The first to record the contract is the first to have an interest. If you let the other buyer record first. Then you will surely lose if you go to court. That is the first come first serve rule. Besides how on earth can you lose in court, if you have a contract?
So if you don’t like someone’s answer you try insulting them?
Yes, I do know how to negotiate short sales (closed over 280 sales last year - verifiable -about 25 of them were short sales) and I think that it is dangerous to offer advice on property in another state other than in the most general terms. I have seen many people cloud a title in just the manner you have described only to wind up in court and paying a lot of fees.
If you are a rightful buyer, then what is the problem? There are contracts for a reason. Thats why, verbal agreements don’t fly anymore, unless both parties willfully admit that there was a verbal agreement. Otherwise it would be considered he say she say.
Contracts are binding, and not only that. Contracts make people keep to their words. Also my contracts have stated that, if any party take this agreement to court. The prevailing party has recourse for fees associated with such action.
Now why cloud a title over a short sale? Simple, to protect my interest. I don’t represent anybody but myself. So that is why i cloud the title. So you must be an advocate against taking the deed at the same time as signing the contract.
Sellers often change their minds during negotiating short sales. You are an agent so you don’t care if the homeowner choses buyer a or buyer b. So that is the difference, either way you will get yours. But what about the investor that has negotiated a short sale, to find out that once the bank accepts. The seller tries to bring in a friend or family member.
All that hard work would be wasted. Your listing agreement is a cloud as well. Just worded differently. What would you do, if you negotiated a short sale, and at the last minute the seller says, " great job, now you can take your agreement and shove it."
You like most people would take the deal to court. Which is a cloud. The reason that come up with these type of agreement, is to keep everyone honest. Without them, sellers would run wild, and back out of most deals.
But you don’t agree with clouding a title. Good. If i am ever in your town, and you have a deal that you are thinking about a purchase. I will tell the seller, to go with me over you. And see how you feel.
Sorry, CharlottePlayer, I disagree with you on many of the things you have said and I do not want to be dragged into a debate about contract law, especially as it varies widely from state to state. In our respective arenas we may both be right. I am not an attorney and by your comments I can tell you are not either, so how about neither one of us gives legal advice? Fair enough? I think the idea of the forum is just to give each other ideas on where to go to get the information.
I don’t debate, i spew facts. If anyone has concerns about real estate law, contact an attorney. But if your pockets are slim, then go to your local community college and take the real estate agents course. In my area it cost 60 dollars. If you can’t afford that. Then go to the local community college bookstore and purchase the book they use to teach the course with.
Also vegasagent, i disagree with your comments as well. If you have passed any real estate course that requires you to be licensed, then all laws are basically the same. Plus all laws stem from common law. Common comes from England and since then few things have changed as far as the basics are concerned. I have passed the NC Real Estate Course for Agents and Brokers.
I speak on what i learned in the course. The first day we learned that the first one to record the contract is the first one with recourse.
That is the fact maam. Like Friday said on Dragnet. You can debate all you want. But i am stating the facts. Why in the world do they issue a form if it is against the law?
You are an agent, full time that is why you feel the way you do. You prove not to be a full time investor.
Well, Charlotteplayer, I can agree with you on something - you certainly do spew.
But I do not understand why we can’t have an exchange of opinion without getting insulting. You have no idea what kind of an investor I am. You have no idea how large my portfolio is or how much real estate I purchase personally each year. Each person’s methods are different and the idea here is to help each other, not tear each other down.
So if you don’t like someone’s answer you try insulting them?