Sellers Must Present ALL Short Sale Offers to their Lender!

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.

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well I guess its like 'depends on what the meaning of 'is' is". Define Highest and Best.

We do not have this language in addendum in Mid West Florida, this is that particular NE Board and NAR Attorneys that have drafted this language in an addendum to be implimented into the short sale belonging to that board. Sometimes it may be politically motivated, in my opinion when it doesn't make sense. Most agents are smart and know what is appropriate to do handling short sales, and are quite competent. I wouldn't worry to much, the key word is "accepted", if a Realtor has questions, or is uncomfortable.. seek your broker and/or a competent real estate attorney in your back pocket to cya, should have one anyway to go to for advice, or thereof, next 2 cents.

What I see is a fight between law and reality.


Law:  A short sale seller accepts an offer that is subject to the short sale lender’s approval. This is a contingency, like any other contingency, and refusal to release the contingency can prevent the sale from taking place. The short sale lender releases the contingency by issuing an approval. If no approval is granted, the contingency prevents the sale from taking place. We are used to contingencies protecting the buyer or seller but this contingency protects the short sale lender. It is theoretically possible that the short sale lender may look at an accepted offer, accepted backup offers and any subsequent unaccepted offer that might come in, at any time that they are submitted, and decide to provide approval on the offer of their choice and none other. This could force cancellation of the accepted offer and backups and acceptance of the offer that the bank is willing to approve.


Reality: Short sale lenders are not on board with that process. Submitting more than one offer to the short sale lender confuses the lender. Their systems and procedures are not set up to cope with more than one offer at a time.


The result of following the suggested path by the NFAOR attorney would be chaos! Short sale transactions would become even less predictable than they are now and whole lot less attractive for buyers. The concept that a seller can sell a property to only one buyer would be negated if the process changed into one in which the short sale lender got to pick over offers as they were submitted until they got to pick that one they liked the best.


Would not a seller’s agent be guilty of malfeasance by not continuing to market the property for an even better offer long after the buyer and seller have reached an agreement?

What everyone is not understanding is that as an agent or attorney, our sole duty is to the seller, not the bank. If a particular offer promises a better outcome for the seller, you are under no obligation to get a higher offer or disclose such an offer to the bank. Period. Full stop. End of story.

Yes. Thank you :)

lol...sometimes its like boxing in the dark, too

So does the state of Oregon



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