Short Sales are called that for a reason: somebody is going to take it in the shorts! Just be darn careful it’s not you (the agent).
In California, the fiduciary duties create almost impossible barriers for risk avoidance. If you represent the seller, you have duties to present ALL offers to the seller – but not the bank. If the seller doesn’t present the alternate offers to the Bank, the Bank can have a claim against the seller — especially if the second offer was for more.
Then there are the duties owed to a buyer. If you represent the first buyer, do you use CAR’s, SSA (Short Sale Addendum) – which (arguably) gives the seller the right to back out if the Bank doesn’t waive any potential deficiency? That’s “bad” for your buyer.
What if you represent a second buyer who has an offer, which is for more money than the first? Do you push to bump the first buyer out of place? The SSA implies you can, if you can get the Bank’s attention. Do you force the listing agent to present? The seller?
What if you represent that first buyer, and there is a second buyer with a better offer? Do you try to keep them at bay?
Then – what if you are a dual agent? For the seller and first buyer? Or, even worse, for the seller and the second buyer with a better offer!
Real Estate today sure is FUN!
Is there going to be more info with this article, It doesn’t answer any questions?
Each situation is different, so the Blog posting can’t (or doesn’t) answer any specific question. It’s meant to trigger awareness of some of the many pitfalls of a Short Sale. What did you have in mind?
negotiating the short sale is a long frustrating task. we take offers and select the offer that is the best business offer for the seller which can then be also the best for the lenders. the idea of shot gunning many offers to the negotiator is counter productive to getting a decision from the lender. we take the position that our fudiacary duty is to the seller
and the sellers interests not the lenders. we believe we are not obligate to serve the lender who is foreclosing on the seller. is there any implied
agency from the realtor to the lender. a all cash or conventional offer is better then a higher FHA offer. why would the lender have rights to that determination? what services would you offer to realtors for short sale and loan negotiations on residential?? jf
Excellent observations. The agent/broker’s duty IS to the seller not the bank. However (there is always a however…) the seller has a duty to the bank to take the highest value offer. The bank has to net as much as possible on a short sale – that is what reduces the deficiency. So, if you have two offers, and one is for more money – but lesser terms (i.e. more contingencies, etc, etc) it is the latter (weaker but higher value) offer that the seller’s bank is likely to accept. Counterintuitive? You bet. Economics are not intuitive.
All this is based on a premise that you can get the bank’s attention in the first place.
There is an excellent White Paper by the Atlanta Federal Reserve in the “Library” section (beware – its over 100 pages long) that talks about why banks don’t “do” short sales or loan mods. Interesting reading!