Buying Short Sell - What document is really signed When? (contingencies, appraisal)

[mmyk72]

Looks like a lot of you have done SS (whether deal closed or not). Please help clarify things for me - getting a little confused with which document is called what - not just me, the sellers too and we both have agents.

Here is my situation:
Sunday: At Open House, the Listing agent say they have not submitted application for SS to the bank yet but waiting on an offer.

Monday: I put in an offer using a written document titled "Contract to Purchase Real Estate". This is where I put in the price, dates, things to be included with the sale (appliances, shed, etc), and contingencies for inspection, bank approval, etc. We have always called this the "Offer".

Wednesday: The Listing agent countered and said if I go up a little in $, then we'll immediately sign the "P&S". They want to submit the "P&S" to the bank.

Question to you guys: I've always thought the process goes like this - see my list below. Let me know if I'm on the right track.

Right now, it sounds like the listing agent wants me to sign a P&S when we are only at Step 1. This means I lose my inspection period and have to tie up a substantial amount in earnest money while waiting for them to contact the bank. Is this normal? I don't think it is thus I'm wondering if we just have the names of the document confused.

Please advise.
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Step 1) Buyer makes an written Offer with copy of $1000 check deposit and awaits Seller to accept. This Offer contains the price, dates and terms like: sale includes the refrigerator and all fixtures, contingent upon satisfactory home inspection and bank approval....

Step 2) Once Sellers accept, they submit SS application with the written Offer to the bank. The wait begins.......

Step 3) Bank reviews and decides to approve or counter with a higher $.

Step 4) If Bank approves right off the bat or If Buyer agrees with the Bank's counter, then a new P&S is drawn up. In the P&S, all contingencies are removed and all terms are final. Buyer also pays a substantial $ amount into escrow as additional deposit when P&S is signed.

Also, the buyer has an inspection period before signing P&S but after bank approval.

[byoak]

Not sure about your state as far as how offers and purchase contracts go, but here is how I do it(remeber this also depends on what bank and kind of loan it is) Here is a conventional loan.

1) Buyer puts in a regular offer with a earnest deposit.
2) The seller signs off on the offer and it is submitted to the bank along with at least ten other documents.
3) All of the inspection and mortgage contingencies should be taken care of as a regular purchase.( When banks respond some want closing in two weeks and refuse to push the date)
4) While the bank is reviewing the offer. Submit the response to the inspection to them also.
5) The bank sends out for a BPO(appraisal)
6) The bank takes into consideration all of the factors, price, condition, second liens, amount they are looking to lose, etc.
7) They accept or counter.
8) THe bank accepts and puts in for a quick closing date.

All offers need a deposit and the bank takes this amaount into consideration also. The more you put down the more it shows how serious you are.

[mmyk72]

Thanks Byoak. Your timeline is exactly what I thought too. If we have a #9, it would be "P&S agreement signed by seller & buyer to specify closing date, purchase amount, etc."

2) The seller signs off on the offer and it is submitted to the bank along with at least ten other documents.

This is the stage I'm at (waiting for seller to sign offer). The Listing Agent is using the term P&S here which confused me.

3) All of the inspection and mortgage contingencies should be taken care of as a regular purchase.( When banks respond some want closing in two weeks and refuse to push the date)
You mean I've to do the inspection right after the seller accept? My concern is that the low chance that the bank will approve and even if they do, it could be months until they even respond.

[rjrcm]

The offer becomes a P&S contract when both the buyer and seller sign. Prior to the seller signing, you just have an offer. It is the same document (at least here it is). It might help if you say where you are buying. In other states, particularly working with attorneys, there may be two documents, and offer and a purchase contract.

In our state, we have a special short sale addendum that is included with the offer (and final signed contract). Our short sale addendum does not require earnest money to be deposited or inspections to begin until we have bank approval. Basically, nothing happens until approval. The buyer can cancel anytime up until approval is received. This may be changed by agreement between buyer and seller. Again, this varies by location.

[mmyk72]

rjrcm - I'm in MA and it is customary to have an offer, both parties sign, then when all conditions are satisified, a Purchase & Sale contract (P&S) executed. In fact, this is written in the Offer.

At the Offer stage, Buyer (me) only makes a $1000 deposit (and I've only gave the sellers a copy of the check, not even the check itself). At P&S, typically buyer provides 5% earnest money put into escrow. That's why I don't want to sign a P&S when the deal is so early (without bank approval, inspection, etc.).

Good idea about Short Sell Addendum. If they insist I sign a P&S, I can have my attorney draw up one that says no additional earnest money and no inspection until bank approval. However, this is then no different than the 'Offer' I already presented to the sellers in the first place.