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My husband and I are trying to buy a home, and it's proving to be one of the most difficult hurdles I've ever endured. Both of us have owned before, but now we're renting do to divorce. Anyways..
We looked at a house on Sunday (first day on the market), made an offer on Monday, $1000 above list with partial closing to be paid by seller. The house is DIRTY, garbage, belongings, dead birds, yard is up to my hips (it's been vacant for 3 years, winterized in 2008). But it's a gorgeous home underneath all of that.
The agent emailed our agent back with these exact words:
"Thank you so much for the offer. The sellers appreciate it. Their are two other offers that are considerably higher on the property. The owner is accepting one and taking the other offer in a back up position. Is your client willing to increase their offer significantly and be in a back up position on the property or is this their highest and best offer?"
No we can't, we offered our top amount. But I checked the MLS and they also increased the the $31,000 today.
So my question is this, is that legal? Can they actually start it out low, get supposed offers, try to get the original offer increased then jack the listing price up? Seems like bait and switch to me.
It's a short sale. The asking price is meaningless. The bank will determine what kind of loss they are wiling to take. It helps the listing agent to go to the bank and say "look, see, we had three offers, and so this really is what the market will bear." So take this offer on behalf of my client. The fact that you think that the list price has some meaning in short sale means that your agent didn't explain how they work to you very well.
Maybe the top offer was $31,000 over asking and they don't want to deal with a bunch of lower offers at this point. Makes sense to me that they would raise it. If they get a higher offer than the top offer, then that is good for the seller.
I don't see anything unethical about this, let alone illegal. This is basically how short sales work. The agent makes an educated guess as to what they think the market will bear and what the bank will accept. They don't have to accept your offer just because it was over the full asking price. They got more than one offer, so they can choose the best one.
And even if you make a full priced offer, and are the only one, and the seller accepts your offer, that doesn't mean that the bank will approve the short sale. In fact, in my experience, most banks are countering short sale offers these days, even if they come in at a price they had previously accepted from another buyer (ie if a prior buyer walked away, and a new buyer comes in with the exact same price and terms, they will still counter).
Talk to your agent. If they can't explain these things to you, find another agent.
I am aware of this practice, it's happened to quite a few other homes we've offered on. Just doesn't seem right to list it at one price then up it when you have some activity.
Part of the reason realtors do this is due to the bank process for short sales. Simply put, the banks will not even begin to look at a request for a short sale until an offer has been accepted by the seller. So price it low, get a quick offer, get the bank moving, get a clear price the bank is willing to accept, and either get that price from the buyer or change the price to the bank's required price and show it as an "approved short sale".
I know it's frustrating for buyers, but a good realtor will tell you this is how it works and make sure you're prepared to handle it. Short sales are frustrating for everyone, including the realtors on both side of the sale. But they can also be very good buys and they are a high percentage of what's out there, so they have to be dealt with.
My husband and I are trying to buy a home, and it's proving to be one of the most difficult hurdles I've ever endured. Both of us have owned before, but now we're renting do to divorce. Anyways..
We looked at a house on Sunday (first day on the market), made an offer on Monday, $1000 above list with partial closing to be paid by seller. The house is DIRTY, garbage, belongings, dead birds, yard is up to my hips (it's been vacant for 3 years, winterized in 2008). But it's a gorgeous home underneath all of that.
The agent emailed our agent back with these exact words:
"Thank you so much for the offer. The sellers appreciate it. Their are two other offers that are considerably higher on the property. The owner is accepting one and taking the other offer in a back up position. Is your client willing to increase their offer significantly and be in a back up position on the property or is this their highest and best offer?"
No we can't, we offered our top amount. But I checked the MLS and they also increased the the $31,000 today.
So my question is this, is that legal? Can they actually start it out low, get supposed offers, try to get the original offer increased then jack the listing price up? Seems like bait and switch to me.
Short sales are a ngihtmare. Often times they will drastically drop the price just to get a bunch of bids and start a bidding war. It's as strategy I started seeing about 2 years ago in my area. Was all high priced short sales and reo that nobody paid any attention to. They drop the price 70k overnight and suddenly there's a ton of interest and they wind up getting more than they would having lowballs come in offering 70k less as there wasnt much intreest to begin with.
If you want a smooth sale dont buy a short sale, if you want a short sale expect wierd rules, expect to put in an offer and ernest money and then not hear naything back for 6 months all the while the bank will continue accepting other offers as well as yours. A cash buyer can also come in at the last minute offer 10k or 15k less than you and get the house after your the one pushing the banks to figure out a price.
Dont waste your time with short sales, buy a foreclosure if your looking for a deal or fixer upper. After 6 or 8 short sales falling through I put an offer on a foreclosur nad heard back in 6 hours.
I am aware of this practice, it's happened to quite a few other homes we've offered on. Just doesn't seem right to list it at one price then up it when you have some activity.
This generally doesn't happen with regular sales, if you dont like it buy a regular sale. Short sales are a bargain for a reason.
Thanks. That's why we've stopped looking until all the short sales have cleared out of our area. For every 15 short sales there is 1 bank owned and one regular owner selling. I refuse to play the game and really think somebody needs to regulate this, it is absolutely unethical.
I don't think you understand how short sales work. I don't think it is unethical at all. It is just the way it works - houses are sold for what the market will bear. If you came up in price, you could be in contract - your choice - I don't think you understand that the list price in a short sale can be arbitrary and that the bank has to approve the short sale and the price has to make sense to the bank. There could be one, two or even three loans on the house . . .It is complicated.
If you are going to wait till short sales clear out of your area, you might be waiting for a LONG TIME. I know there are REO's (much more straight-forward process) so I question your numbers.
Short sales are a ngihtmare. Often times they will drastically drop the price just to get a bunch of bids and start a bidding war. It's as strategy I started seeing about 2 years ago in my area. Was all high priced short sales and reo that nobody paid any attention to. They drop the price 70k overnight and suddenly there's a ton of interest and they wind up getting more than they would having lowballs come in offering 70k less as there wasnt much intreest to begin with.
If you want a smooth sale dont buy a short sale, if you want a short sale expect wierd rules, expect to put in an offer and ernest money and then not hear naything back for 6 months all the while the bank will continue accepting other offers as well as yours. A cash buyer can also come in at the last minute offer 10k or 15k less than you and get the house after your the one pushing the banks to figure out a price.
Dont waste your time with short sales, buy a foreclosure if your looking for a deal or fixer upper. After 6 or 8 short sales falling through I put an offer on a foreclosur nad heard back in 6 hours.
This is completely wrong. Once you make an offer on a short sale you sign a contract signing up to your offer in which it gets sent to your attorney if you have one first to check everything over. Then it goes to the seller in which they have 3 days (called attorney review) for them to accept and go over and sign the contract. Once you're out of attorney review the listing is removed from the MLS database and the seller cannot entertain anymore offers. The sellers bank who does the approval looks at the short sale package provided to them which has the ONE offer for them to agree on the price which is the part that takes forever.
A cash buyer or any buyer cannot just come in at the "last minute". First off the house listing shouldn't be listed anymore which means its not being advertised. Secondly the seller has to go through the whole bank approval process again with a new buyer should the original buyer cancel.
The only time any type of bidding war would exist is is before attorney review is completed the seller can entertain all offers which is well before all this bank approval process.
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