[Scott456]

Originally Posted by bmw335xi

...I ended up offering $251k. My offer was accepted and I waited 4 months and still didn't hear from the bank. I ended up giving up and bought a REO property instead. It's a LONG process and many deals don't go through. However, this is in San Francisco, the market might be completely different in Vegas. ...

251K in San Francisco?! Are you buying a studio condo?

[bmw335xi]

Originally Posted by Tires

I understand that, but how can that be done legally?
How can they "take" more than one offer? The seller would make their acceptance contingent on the lender approving the shortsale, but the seller is the one accepting the buyer's offer since the property is not bank owned.

The seller doesn't submit multiple offers to the bank. The price of the short sale is determined by the listing agent. All offers on the property will be submitted to the listing agent. The listing agent will then say, we have received multiple offers, please submit your highest bid. At that point, the listing agent will take the best offer and present it to the seller. If the seller accepts the offer, the listing agent will present the offer to the lien holder. The lien holder could still reject the offer even if it's 100% cash and for the asking price because the lien holder doesn't choose the listing price. It takes months in most cases to get sale approval. However, the good news is you are not obligated by any contract. You can back out anytime, if the lien holder hasn't approved the sale. That's what I ended up doing because I found an REO that I liked. The lien holder is doing the seller a favor by not foreclosing, so you need to think of it as the bank is the owner of the property, even though it's technically not true. The reason why most short sales don't go through is because of the long waiting period. Banks have hundreds/thousands of short sales waiting to be approved and only a handful of people review them. Banks aren't in a hurry to approve them because once a short sale is completed it becomes a loss in their books and hurts the company's image during earnings report.

[bmw335xi]

Originally Posted by Scott456

251K in San Francisco?! Are you buying a studio condo?

lol the $251k property was 807 sq ft 1 bedroom. That was a short sale, which I canceled my offer after waiting over 4 months. The place I'm buying now is in the same development and also same size, but it has a partial bay view for $253k. It also has granite counters, wood floors, etc which is surprising considering the price. It sold for $472k in 2006. It's about a 7-10 minute drive to downtown SF.

[olecapt]

Originally Posted by Tires

I understand that, but how can that be done legally?
How can they "take" more than one offer? The seller would make their acceptance contingent on the lender approving the shortsale, but the seller is the one accepting the buyer's offer since the property is not bank owned.

Take a look at this video.

In the normal arrangement the listing agent controls the relationship with the bank. The seller basically signs an agreement providing full access and authority to enter stuff to the agent. The system is set up to be run by the agent not the seller.

The contractural arrangement is between the seller and the buyer with a right of approval upon the part of the lender. So generally only one contract exists at any time as the purported agreement between the buyer and seller.

There is however nothing that prevents the sharing of other information with the lender about most anything that the seller's agent might feel would be of interest to the lender. The Agent needs permission from the seller but generally has that in a blanket format.

Note that in general the seller has little interest in the terms and conditions other than getting out from underneath cleanly. Contrary to the views of the babe in the video the seller almost never has any particular interest in the outcome other than coming out as clean as possible.. The lender however may have lots of interest in such things as other offers.

So basically the seller's agent cooperates with the lender. With some significant exceptions this involves only a single offer and pursuing it to an end. It is actually quite rare to show a second offer to the lender while one is in play as the systems used would require a lot of trouble to do it. But if, for instance, a negotiator has told you that certain conditions required by a buyer are likely unacceptable it is time to start finding a new offer with different terms.

Note that offers shown to a lender don't have to be accepted. I have never come across anyone actually shoving all offers to the lender though it could happen I suppose. And there is no rule or law against it.

There is a law about tortuous interference with a contract. But it is difficult to see that being applied to a lender with approval rights or the seller's agent dealing with that lender.

Multiple offers on a short are handled exactly the same way as they would be on any other type of transaction. The lender could get into the act I suppose but I don't know of that actually occurring. Note that such things go on before any offer is accepted. That phase is also normally before the lender knows the short sale is proposed.

[Tires]

Originally Posted by bmw335xi

Banks aren't in a hurry to approve them because once a short sale is completed it becomes a loss in their books and hurts the company's image during earnings report.

Isn't there a imminent foreclosure countdown clock ticking since a short sale is a pre-foreclosure sale? Doesn't number of foreclosures look worse than number of short sales on their loan portfolio reports and cost the bank more money to process which will net them less money even if the were to do a foreclosure sale for the same selling price?

[olecapt]

Originally Posted by Tires

Isn't there a imminent foreclosure countdown clock ticking since a short sale is a pre-foreclosure sale? Doesn't number of foreclosures look worse than number of short sales on their loan portfolio reports and cost the bank more money to process which will net them less money even if the were to do a foreclosure sale for the same selling price?

Generally does not go on the banks books. Goes on the books of the investment trust that actually owns the asset. Often Fannie or Freddie.

The foreclosure clock is generally stopped by a short in process. Sometimes used to get foreclosed from under the short sale...but I have not heard of one of those in a while. So I think most servicers have the processes coordinated.

In general a lot less money is lost on a short than a foreclosure. The question though is does anyone care? Or do the people running the process care as they don't take the loss.

Note that there are some really big issues buried under all this. Lenders really have no interest in making shorts work quickly and well as it would tend to encourage shorts...And there are a lot of people who probably should go short.

[Oldwestgambler]

I personally would avoid buying short sale. Man, what a headache. We were in escrow for 7+ months waiting for the bank. The condo ended up being foreclosed on in the end and all that time and effort was wasted. We recently found a great deal on a REO (bank owned) property, put in an offer and got an answer back in 3 days and now we're closing escrow ahead of schedule. Everything works for the best and I'm happier with the one we got over the one we lost. If I buy other condos for investment, I'm not even going to consider short sales.

[olecapt]

Originally Posted by Oldwestgambler

I personally would avoid buying short sale. Man, what a headache. We were in escrow for 7+ months waiting for the bank. The condo ended up being foreclosed on in the end and all that time and effort was wasted. We recently found a great deal on a REO (bank owned) property, put in an offer and got an answer back in 3 days and now we're closing escrow ahead of schedule. Everything works for the best and I'm happier with the one we got over the one we lost. If I buy other condos for investment, I'm not even going to consider short sales.

That is not how you buy a short for the reasons you demonstrated. You go after multiple and take the one that comes up real first. Most shorts fail. So you don't go for a single short and then wait.

[Tires]

Originally Posted by olecapt

That is not how you buy a short for the reasons you demonstrated. You go after multiple and take the one that comes up real first. Most shorts fail. So you don't go for a single short and then wait.

Unless the selling agent demand buyers make earnest deposists and wait for some minimum number of weeks.

[olecapt]

Originally Posted by Tires

Unless the selling agent demand buyers make earnest deposists and wait for some minimum number of weeks.

If you have an agent that does not know how to manage a transaction there are all sorts of ways to get screwed. That is one.