friends1 thanks for sharing knowledge to me

It is true that it is the Seller's decision what offers to submit to the bank. I'll use one real current Here is a current Los Angeles scenario of why Seller's have a right as to which offer(s) to submit to the bank.

The seller has a home worth 1.8M at the peak of the market. That house is now only able to be sold for about 1.1M. The sellers had refinanced the loan a few years back and now have a first loan at 1.4M and a second loan at $250,000. They now are in jeopardy of being sued by the 1st for a large sum if they walk from the home and sued by the 2nd for $250,000. To make matters worse, the seller may also have to answer to Uncle Sam for taxes owed due to the defaults.

Of course the Seller would like to short sell and of course the Seller would like to only submit offers to the bank which are the best and highest offers. The Seller needs be choosy, as he doesn't want a Buyer to back out at the end. The Seller's ENTIRE financial future is at stake.

That is enlightening information there on the part of the seller and the owner. There are important aspects pointed out for the buyer and seller.
.-= greg s´s last blog ..Contact Us Now =-.

This one is actually pretty simple. Not sure why anyone would think the seller has to submit offers to the bank when it was the seller's choice to short sell it to begin with. He is absolutely right that the bank will have final say on accepting the offer or not, but the bank has no right whatsoever to demand that the seller try their best to short sell it. The bank's only legal right is to foreclose on the owner if the owner does not perform and all proper notices are issues. That's it...period.

Note to readers... Jay's article and comments are spot on.

I've had plenty of short sale approvals that specifically state it must be an arm's length transaction.

There is also a particular lender that occasionally has sent approvals specifically stating the home must be vacant and there can be no agreements between the seller and the buyer such as a rental agreement. (Along with the arm's length transaction specifics.)

One thing to point out I don't see mentioned: Even if the lender approves the short sale -- most of the time (if not all of the time) there are going to be a list of conditions and the seller has to sign off and agree to the actual short sale approval conditions from the lender which is in itself another contract. Occasionally... these conditions are actually going to be to the detriment of the seller and the seller does NOT have to accept these conditions. They can back out of the deal...

And before somebody starts up on the ramifications of a seller backing out of a short sale approved by the lender... I already (and any short sale agent) should already have this covered.

Some of the comments above are a perfect example of why a seller or a buyer should only use real estate agents that have actually done several short sales...

Unfortunately... it seems that the more common place short sales become, the misinformation is even greater as some agents who specifically used to say that short sales were a waste of time are now realizing that short sales are going to be with us for a long, long time. (Whatever the flavor of the month is, that's what they specialize in..)

For a perfect example, Just look at all of the people out there running around stating that the new HAFA program is going to solve the short sale mess for a good laugh.

Some of the comments above are specifically why I now offer free consultation with a specific Attorney who actually does short sales (after listening to several Attorneys who would rather get paid to do Loan Modifications or BK's) for clients who have specific legal questions concerning the ramifications of doing a short sale.... Especially when they ask questions and tell me they "heard from a friend" this and that (wrong) information.

I agree with "Frankly." If you have a mortgage, you don't own your home, your mortgage lender does. If you don't pay your mortgage, you lose your house. Simple. DUH! Today's climate of short sales and REOs is ripe for those looking for the loopholes...which invites mortgage fraud and worse. I know of buyers submitting strong offers for short sales (by strong I mean offers that will come close to paying off the original mortgage, thereby lessening the banks' potential for loss) only to learn that the "seller" has gotten their friend, family, business partner, granny, whoever, to also submit an offer (lowball) and then only submit that offer to the bank, thereby allowing the slacker to stay in the house AND get out from under their loan!! In my opinion, all offers on short sales should bypass the seller entirely and be submitted DIRECTLY to the bank. Keep the "seller" out of it. Unfortunately in AZ, banks are overwhelmed and not equipped to manage the short sale process, that is why we have these shenanigans going on. In the end, banks lose big time, then have to be bailed out by the honest tax payers. Hopefully the AZ Attorney General's Office new Mortgage Fraud Task Force will catch up with these thieves. One can only hope.

Great article and something I completely agree with you on Jay.

I do quite a few short sale investment flips and my offers are always the ONLY offer on the table for the A-B side. 99% of my deals on the A-B side are not even listed on the MLS simply because I get them before they are 'advertised' on the MLS.

I think its different with REO's of course where the bank is the seller but I don't mess with that stuff. If I can't help a homeowner out in the course of my investing, I'm not interested so I've never been interested in REO's.

I have to question a couple facts in this scenario. If the Seller signed the offer it is a contract and the standard AZ Short Sale Addendum specifically requires the Seller to submit the offer to his creditor(s). Period. (Line 17, SSA) The email states "offer" multiple times but clients are often not versed in the precise meaning of different terms. So we have a question of whether he meant an offer or a contract.

Initially I would say it is an offer but if this Buyer/emailer's agent forced the listing agent to place the property pending, I have to wonder if it wasn't a contract. (Of course, perhaps the Seller DOES have a contract with someone else and this Buyer's agent forced him to finally place the property pending rather than leave it active.)

So while I agree with your central point that the Seller does not HAVE to accept an offer, I think there are more facts required in this scenario.

BTW, if the Buyer REALLY wants the house he can contact the bank directly and tell them he has a superior offer. Good luck wading through that bureaucracy but you can sidestep the Seller if you're really determined. That's why some listing agents will not reveal the lender to prospective buyers before receiving an offer.

Maybe things are different in Virginia Frank, but here in Arizona, I've never seen a bank require all offers to be submitted, and I've never seen any sort of contract between the seller and the bank occur while the home is listed. Guidelines, yes, but not contracts and I've never seen lender guidelines specify that all offers have to be submitted to them.

The lender has to approve any offer of course, but they aren't in any position to dictate what the owner of the home does with regard to offers received. The bank doesn't own the home.

"ALSO, if you put that in the offer and the bank sees it, they will likely reject it."

I've had several short sale offers accepted by the lender that have precisely that clause in the offer.

In my experience, there is a significantly greater possibility of a short sale actually closing if the lender isn't buried in offers, many of which will be ridiculous low ball offers.

Heck, I've had loss mitigation officers tell me to only submit the "highest and best" offer.

Seller's "cherry picking" offers doesn't make a lot of sense as the seller can't net a dime. What is there to cherry pick? And there are plenty of ways to make sure the transaction is at a arm's length without submitting every offer

I love to see the contractual language that has a lender requiring the owner to submit every offer on a short sale.

Sorry, I disagree.

The bank is the one deciding whether or not to proceed and eat $50,000+. They oftentimes stipulate effectively "We will consider eating $50,000 IF, and only if, you show us every contract as it comes in."

The banks are too used to shenanigans and sellers trying to cherry pick an offers, or selling to friends etc.

If the buyer agent writes up a contract in conflict with this, then the seller needs to say "no, my agreement with the bank is to show all offers"

ALSO, if you put that in the offer and the bank sees it, they will likely reject it. Unless you did that as a separate contract that is not sent to the bank. (which is questionable)

Frank
.-= Frankly´s last blog ..Sellers Should Pay All Closing Costs =-.

Frank it is not fraud because the bank does now own the property and is not a party to the deal. And if it is written into the contract that the seller will submit only one offer to the bank (as I always do when I have a buyer) then it reinforces this.
.-= Dean Ouellette´s last blog ..Arizona Short Sales Sellers Advisory – Good and the bad =-.

Oftentimes a bank will only consider the short sale route if the seller signs a contract with the bank to promise to show ALL offers. So it might depend how far along the seller got in the process. (they can decide to show none and not start the process)

The bank might consider it fraud if a seller holds back other offers. This can put the listing agent in an odd place since sometimes the strategy is to not overwhelm the bank and just show them one offer.

Thanks for discussing the topic.

Frank
.-= Frankly´s last blog ..Sellers Should Pay All Closing Costs =-.

I had a similar situation a few months ago. The Seller took a lower offer than my client's offer. She was steaming mad and was convinced the other Realtor was acting unethical. She just wouldn't believe it was the Seller's right to choose any offer they want. In this case, the Seller thought he was "punishing" the bank by submitting a lower offer. He thought the bank would end up with less money. Whole situation was ridiculous. One of the many many reasons, foreclosures are often better.
.-= Marc Brodeur´s last blog ..Scottsdale Office Buildings Prepare for Foreclosure =-.

You are 100% correct in your analysis of the situation. Here's an article on the subject that I wrote a few months ago for Broker Agent News . . .

http://www.brokeragentsocial.com/article/564/agen...

Thank you Jay this was a discussion a few of us agents had on Twitter a few weeks ago and I did a video on the subject. A short sale house is NOT owned by the bank. It is owned by the home owner, they can accept, reject or whatever any offer they want. When they do submit an offer the ONLY thing the bank has the right to legally do is approve or not approve the final number on the HUD. All other factions of the deal are of contract and between the home owner, the buyer and the agent. The bank IS NOT a party to the contract at all.

I have a video on this I shot for tomorrow too, about a bank that tried to go to far, way to far. So that is a long way of saying yea, what Jay said, the owner can do whatever they want.
.-= Dean Ouellette´s last blog ..Arizona Short Sales Sellers Advisory – Good and the bad =-.

Just like a lower offer is not always the worst, the highest is not always the best. I hope the seller's plan does not backfire . . . and the investor will not eventually 'bump' HIM for a higher paying tenant! All's fair in love, war and real estate sometimes! :)

It is true that it is the Seller's decision what offers to submit to the bank. I'll use one real current Here is a current Los Angeles scenario of why Seller's have a right as to which offer(s) to submit to the bank.

The seller has a home worth 1.8M at the peak of the market. That house is now only able to be sold for about 1.1M. The sellers had refinanced the loan a few years back and now have a first loan at 1.4M and a second loan at $250,000. They now are in jeopardy of being sued by the 1st for a large sum if they walk from the home and sued by the 2nd for $250,000. To make matters worse, the seller may also have to answer to Uncle Sam for taxes owed due to the defaults.

Of course the Seller would like to short sell and of course the Seller would like to only submit offers to the bank which are the best and highest offers. The Seller needs be choosy, as he doesn't want a Buyer to back out at the end. The Seller's ENTIRE financial future is at stake.

That is enlightening information there on the part of the seller and the owner. There are important aspects pointed out for the buyer and seller.
.-= greg su00c2u00b4s last blog ..Contact Us Now =-.

This one is actually pretty simple. Not sure why anyone would think the seller has to submit offers to the bank when it was the seller's choice to short sell it to begin with. He is absolutely right that the bank will have final say on accepting the offer or not, but the bank has no right whatsoever to demand that the seller try their best to short sell it. The bank's only legal right is to foreclose on the owner if the owner does not perform and all proper notices are issues. That's it...period.

Note to readers... Jay's article and comments are spot on.

I've had plenty of short sale approvals that specifically state it must be an arm's length transaction.

There is also a particular lender that occasionally has sent approvals specifically stating the home must be vacant and there can be no agreements between the seller and the buyer such as a rental agreement. (Along with the arm's length transaction specifics.)

One thing to point out I don't see mentioned: Even if the lender approves the short sale -- most of the time (if not all of the time) there are going to be a list of conditions and the seller has to sign off and agree to the actual short sale approval conditions from the lender which is in itself another contract. Occasionally... these conditions are actually going to be to the detriment of the seller and the seller does NOT have to accept these conditions. They can back out of the deal...

And before somebody starts up on the ramifications of a seller backing out of a short sale approved by the lender... I already (and any short sale agent) should already have this covered.

Some of the comments above are a perfect example of why a seller or a buyer should only use real estate agents that have actually done several short sales...

Unfortunately... it seems that the more common place short sales become, the misinformation is even greater as some agents who specifically used to say that short sales were a waste of time are now realizing that short sales are going to be with us for a long, long time. (Whatever the flavor of the month is, that's what they specialize in..)

For a perfect example, Just look at all of the people out there running around stating that the new HAFA program is going to solve the short sale mess for a good laugh.

Some of the comments above are specifically why I now offer free consultation with a specific Attorney who actually does short sales (after listening to several Attorneys who would rather get paid to do Loan Modifications or BK's) for clients who have specific legal questions concerning the ramifications of doing a short sale.... Especially when they ask questions and tell me they "heard from a friend" this and that (wrong) information.

I agree with "Frankly." If you have a mortgage, you don't own your home, your mortgage lender does. If you don't pay your mortgage, you lose your house. Simple. DUH! Today's climate of short sales and REOs is ripe for those looking for the loopholes...which invites mortgage fraud and worse. I know of buyers submitting strong offers for short sales (by strong I mean offers that will come close to paying off the original mortgage, thereby lessening the banks' potential for loss) only to learn that the "seller" has gotten their friend, family, business partner, granny, whoever, to also submit an offer (lowball) and then only submit that offer to the bank, thereby allowing the slacker to stay in the house AND get out from under their loan!! In my opinion, all offers on short sales should bypass the seller entirely and be submitted DIRECTLY to the bank. Keep the "seller" out of it. Unfortunately in AZ, banks are overwhelmed and not equipped to manage the short sale process, that is why we have these shenanigans going on. In the end, banks lose big time, then have to be bailed out by the honest tax payers. Hopefully the AZ Attorney General's Office new Mortgage Fraud Task Force will catch up with these thieves. One can only hope.

Great article and something I completely agree with you on Jay.

I do quite a few short sale investment flips and my offers are always the ONLY offer on the table for the A-B side. 99% of my deals on the A-B side are not even listed on the MLS simply because I get them before they are 'advertised' on the MLS.

I think its different with REO's of course where the bank is the seller but I don't mess with that stuff. If I can't help a homeowner out in the course of my investing, I'm not interested so I've never been interested in REO's.

So hard to juggle and iron out the interplay between buyer, banker, and seller.

I have to question a couple facts in this scenario. If the Seller signed the offer it is a contract and the standard AZ Short Sale Addendum specifically requires the Seller to submit the offer to his creditor(s). Period. (Line 17, SSA) The email states "offer" multiple times but clients are often not versed in the precise meaning of different terms. So we have a question of whether he meant an offer or a contract.

Initially I would say it is an offer but if this Buyer/emailer's agent forced the listing agent to place the property pending, I have to wonder if it wasn't a contract. (Of course, perhaps the Seller DOES have a contract with someone else and this Buyer's agent forced him to finally place the property pending rather than leave it active.)

So while I agree with your central point that the Seller does not HAVE to accept an offer, I think there are more facts required in this scenario.

BTW, if the Buyer REALLY wants the house he can contact the bank directly and tell them he has a superior offer. Good luck wading through that bureaucracy but you can sidestep the Seller if you're really determined. That's why some listing agents will not reveal the lender to prospective buyers before receiving an offer.

There are more shenanigans going on on the bank side of short sales than by the seller. I had a situation where a bank asked the seller to sign a document to accept responsibility for the deficiency between the sale and the mortgage. This document was presented to the Seller the day before closing as a nice little surprise. Of course the Seller refused to sign it (why would they?) and the whole deal crumbled after 6 months of work. The bank ended up foreclosing and ended up with far less than if they had just sold it as a short sale.

Maybe things are different in Virginia Frank, but here in Arizona, I've never seen a bank require all offers to be submitted, and I've never seen any sort of contract between the seller and the bank occur while the home is listed. Guidelines, yes, but not contracts and I've never seen lender guidelines specify that all offers have to be submitted to them.

The lender has to approve any offer of course, but they aren't in any position to dictate what the owner of the home does with regard to offers received. The bank doesn't own the home.

"ALSO, if you put that in the offer and the bank sees it, they will likely reject it."

I've had several short sale offers accepted by the lender that have precisely that clause in the offer.

In my experience, there is a significantly greater possibility of a short sale actually closing if the lender isn't buried in offers, many of which will be ridiculous low ball offers.

Heck, I've had loss mitigation officers tell me to only submit the "highest and best" offer.

Seller's "cherry picking" offers doesn't make a lot of sense as the seller can't net a dime. What is there to cherry pick? And there are plenty of ways to make sure the transaction is at a arm's length without submitting every offer

I love to see the contractual language that has a lender requiring the owner to submit every offer on a short sale.

Sorry, I disagree.

The bank is the one deciding whether or not to proceed and eat $50,000+. They oftentimes stipulate effectively "We will consider eating $50,000 IF, and only if, you show us every contract as it comes in."

The banks are too used to shenanigans and sellers trying to cherry pick an offers, or selling to friends etc.

If the buyer agent writes up a contract in conflict with this, then the seller needs to say "no, my agreement with the bank is to show all offers"

ALSO, if you put that in the offer and the bank sees it, they will likely reject it. Unless you did that as a separate contract that is not sent to the bank. (which is questionable)

Frank
.-= Franklyu00c2u00b4s last blog ..Sellers Should Pay All Closing Costs =-.

Thanks for clearing up some of the myths of a short sale transaction. I think many buyers have problems figuring out the difference between a short sale and a foreclosure. This post will be really helpful for them.

Frank it is not fraud because the bank does now own the property and is not a party to the deal. And if it is written into the contract that the seller will submit only one offer to the bank (as I always do when I have a buyer) then it reinforces this.
.-= Dean Ouelletteu00c2u00b4s last blog ..Arizona Short Sales Sellers Advisory u00e2u0080u0093 Good and the bad =-.

Oftentimes a bank will only consider the short sale route if the seller signs a contract with the bank to promise to show ALL offers. So it might depend how far along the seller got in the process. (they can decide to show none and not start the process)

The bank might consider it fraud if a seller holds back other offers. This can put the listing agent in an odd place since sometimes the strategy is to not overwhelm the bank and just show them one offer.

Thanks for discussing the topic.

Frank
.-= Franklyu00c2u00b4s last blog ..Sellers Should Pay All Closing Costs =-.

I had a similar situation a few months ago. The Seller took a lower offer than my client's offer. She was steaming mad and was convinced the other Realtor was acting unethical. She just wouldn't believe it was the Seller's right to choose any offer they want. In this case, the Seller thought he was "punishing" the bank by submitting a lower offer. He thought the bank would end up with less money. Whole situation was ridiculous. One of the many many reasons, foreclosures are often better.
.-= Marc Brodeuru00c2u00b4s last blog ..Scottsdale Office Buildings Prepare for Foreclosure =-.

You are 100% correct in your analysis of the situation. Here's an article on the subject that I wrote a few months ago for Broker Agent News . . .

http://www.brokeragentsocial.com/article/564/agen...

Thank you Jay this was a discussion a few of us agents had on Twitter a few weeks ago and I did a video on the subject. A short sale house is NOT owned by the bank. It is owned by the home owner, they can accept, reject or whatever any offer they want. When they do submit an offer the ONLY thing the bank has the right to legally do is approve or not approve the final number on the HUD. All other factions of the deal are of contract and between the home owner, the buyer and the agent. The bank IS NOT a party to the contract at all.

I have a video on this I shot for tomorrow too, about a bank that tried to go to far, way to far. So that is a long way of saying yea, what Jay said, the owner can do whatever they want.
.-= Dean Ouelletteu00c2u00b4s last blog ..Arizona Short Sales Sellers Advisory u00e2u0080u0093 Good and the bad =-.

Just like a lower offer is not always the worst, the highest is not always the best. I hope the seller's plan does not backfire . . . and the investor will not eventually 'bump' HIM for a higher paying tenant! All's fair in love, war and real estate sometimes! :)