Short Sale - What do banks require regarding offers

I recently submitted an offer on a short sale property. The owner owes the bank approximately $360K on a home that they have listed as a short sale for $299K. I offered $300k and was told by my real estate agent that my offer was being kept as a “back-up”. The first offer on the property was submitted 1 day prior to my offer and come to find out my offer is more money than the offer that is being submitted to the bank. In my mind this does not seem right that the seller has the option as to what offers are and are not submitted to the bank. My question is, are sellers that are in a short sale situation obligated to submit all legitimate offers to the bank? I would think that the bank would want the deal that nets them the most cash and thus minimizes their loss. Do different banks have different requirements on how offers are handled?

Hi, I got this from an old article, I hope this can help.

Cye Soriano
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Keith Hastedt

In a short sale situation you are working directly with the loss mitigation department at the back. The sellers have no say on the offer and/or what they can accept.

In the state of CA a real estate agent is REQUIRED by law to submit any and all offers within 24 hours. If your agent hasn’t done so yet then they are not on your side. Get rid of that agent. Report to your state Dept of RE and to the agents broker.

If you really want the house get another agent to submit for you. The banks hold Short sale offers for a while. If it has only been a few days then they probably haven’t even looked at the first offer.

I think the last 2 answers miss the point of the OP.

A realtor is required to submit any offer to the SELLER, not the bank. The seller can decide which offer to accept (for submission to the lender). One would think they would accept the highest but not always.

However, you were 1 day too late. The seller probably agreed to the first offer and already had a contract. Depending on the language of the sales contract, he can’t accept and sign another sales contract until the first falls apart for some reason. If it were possible to break the first contract, they might do that to accept yours but it is rarely that easy. Timing is everything.

Would the bank prefer the higher offer? Probably but it isn’t the bank’s choice which offer the seller accepts and submits. Once the seller submits the accepted contract to the lender, then it is the lender’s sole choice whether to approve that contract.

If the lender doesn’t approve, then they can submit your higher offer but it could take weeks.

You’re absolutely correct. I must not have had my thinking cap on.

Okay, I’ll throw in my 2 cents.

Banks are in the business of making money. Let’s take a look at what the bank gets in foreclosure:

  1. All of the money that the current SELLER has given them, including (probably) tens of thousands in down payment money.

  2. All of the money that the next BUYER is going to give them, including (probably) tens of thousands in down payment money.

  3. The building. Instant wealth, tax free.

  4. Bailout money to the tune of whatever 100 cents on the dollar figure they can come up with that they allegedly “lost”

  5. Mortgage insurance settlement money to the tune of 100 cents on the dollar figure they can come up with that they allegedly “lost.” The premiums, of course, were added to the interest rate when they qualified the current owner.

Why on earth would these folks sell a building for less than what it’s worth? The motive that banks have right now is to withhold inventory from the market, and jerk people around to get the highest price that they can for the buildings. The more the better.

Your real estate agent is in the business of selling houses for the highest price that they can possibly command, whether the building is worth that price or not. With banks dragging their heels and making everyone go through the gauntlet in the name of paying full market value for a house, your real estate agent is not going to make up for smaller commissions by increasing his volume. He or she needs to wring every penny out of every sale.

The seller is losing everything:

All of the money and time they put into their house.

The equity that they thought they had and didn’t.

The ability to sell the building in the event that they couldn’t continue to afford it.

Most importantly, they have lost any reason to pay twice what the building is worth over the next 30 years. Why should they be the lone sucker in the wilderness that keeps an inflated mortgage? In all likelihood, the seller is living in the building for free at this point, and will have a foreclosure on their credit for the next seven years. Aside from a mild improvement to their credit rating, they have no reason to see a short sale go thorough.

“Short sales” are the market bone that is being thrown to starving real estate agents. There is nothing about these deals that is worth pursuing unless you are willing to waste your time and most likely lose the deal.

banks need to move the REO’s because they need to get the bad loans off of their books, when they sell they are in better shape “on paper” than when they have just a bad loan costing them money every month on the books.

Short Sales have a bad reputation, but the banks are, in some cases, getting serious about short sales, they realize the cost to actually foreclose, plus the condition of the house will go down by the time spent getting it on the market as a foreclosure (stolen AC’s, vandalism, etc) plus the additional holding cost.

Some of the REO’s are overpriced because the BPO was too high,and the broker doesn’t want to look dumb by having to dump the price too fast,which they will have to do anywaya

I now someone in the loan modification department at a major bank, they said if you knew the backlog they have of loans working on modification, it would scare you,they keep adding people and can’t keep up, because the banks want to try to keep from owning any more houses than they do

I’d first find out if its legal in your state. If it isn’t, let your agent know that you are aware of this and if he doesn’t fix things you will be reporting him to the proper authority.

I’ll bet he’d bend over backwards to keep from going through that.

There is a lot of greed going on. What I often find is that I lose out on an REO or Short Sale by pennies or my offer is higher and I find out the listing agent also represented the buyer. A lot of investors I know only submit offers with listing agents and they significantly improve their chances because the listing agent gets a double commission and will push your offer. Lots of shady and unethical agents, hope this helps.