The Northeast Florida Association of Realtors seems to believe that our sellers MUST present ALL, yes, ALL offers to their lenders in a short sale transaction. Regardless of where they are in the approval process, even if the lender has already approved a current buyers offer, even after the SELLER has signed off and agreed to sell the property to a buyer. ALL offers.
Here is an item from our short sale addendum, which says:
"(b) Unless otherwise directed in writing by SELLER’s encumbrance holder(s), SELLER has an obligation to present to encumbrance holder(s) any accepted back-up offers and all subsequent offers. THIS SUBPARAGRAPH MAY NOT BE DELETED OR MODIFIED".
According to an attorney for our board, this was recently inserted into our short sale addendum because a NAR attorney said that sellers COULD be guilty of mortgage fraud if they withhold offers from their lender that would net their lender more money. This is NOT good in many different ways, as I'm sure you would agree.
What are your feelings on this?
Does YOUR board have something similar?
Is this practice EVER in a buyer or sellers best interests in a transaction?
Attached is our short sale addendum for review, the paragraph above is at the end of the addendum.
How could that possibly be done? You know Equator - it's a challenge to get one offer submitted, an even bigger challenge when we have to switch buyers, and now...present all offers? What are they thinking?
I pray, yes pray, our Board sees the insanity of such a requirement!
Simple solution. The key word here is 'Accepted". The seller should sign only 1 offer at a time!
In this scenario, what do you do with backup offers? I hate to put all my eggs in one basket, since most of the time your buyer isn't still around once the bank gets around to actually approving their offer.
Would an accepted offer with a backup/secondary contract addendum also pass this requirement?
First of all, take into consideration how many months the buyer is not paying the mortgage and add that to the delay in getting another approval. In most cases it becomes a wash.... Is it really the same or even less??? All things considered keep going with what you have when you do the math! Most times you are ahead. (When you do the math don't forget the taxes and insuance per month.) In most cases, these are the attorney with tunnel vision...
This would absolutely be horrible. Short lenders have enough problems deciphering one offer. if they have to review all of them...it would kill the system. In a seller agency state (not transaction broker) in Colorado we have to work in the sellers best interest. Submitting all offers to the bank would be against that and violate the agency agreement. I am assuming that FL is now going to assume that all realtors have to work as a dual agent or transaction broker in a short sale scenario?...not sure of your broker roles there. I believe that loan fraud is a priority, but to submit all offers is a step back...i think their should still be an emphasis on not allowing double closings or land trust closings as potential loan fraud, but i think it is our role as the realtor to protect the seller and not the bank (but obviously work in conjuction with the banks). The other major problem is 90% of the servicors do not allow multiple offers to be reviewed. Good luck Mike.
I disagree completely with your board and with the Attorney's assertation.
The seller can't be guilty of Fraud unless he makes a misrepresentation. If the bank never asks for the highest netting offer, failing to present it is not a misrepresentation. The ONLY way your seller would ever have a potential issue is if the bank requires an addendum which stipulates that they must be given the highest net offer.
I couldn't agree with you more John. Good point I haven't heard yet!
I don't understand how they can require that since the sellers lender is not party to the transaction at all. And as far as the banks I have worked with go, do not even look at multiple offers and cant even take them if you have an executed contract that you have submitted to them for approval. Here in TX we have a simple, 1 pg SS addendum which is pretty strait forward and simply protects buyers EM and allows them to cancel by a certain date if approval is not received. It also puts all the contract time frames on hold until approval is received. How can it be mortgage fraud? A seller can accept any offer they want. Its not up to the bank to decide what offer to choose, it is only their job to approve or deny a short sale request. The banks will even tell you this. I just came from a Res.Net conference with the big guns such as Boa, Chase and they even stated as such in our short sale forum.
Another attorney representing a real estate organization that knows little about real estate, and nothing about the short sale process. It's always in the attorney's best interest, no one else's, to go into a knife fight with a shot gun, resulting in a lot of innocent people getting hurt.
How do you enter two offers into Equator?
Thomas is absolutely correct, key word...."Accepted". Therefore, it really doesn't change anything as long as your seller isn't signing multiple offers.
I have seen many third parties do this in a "FLOP."
In several cases, the lender, the owner/seller, and potential buyers were all hurt.
The Realtor Boards, etc; did not sem to care.