In a short sale situation there has been a lot of confusion as to whether or not more than one offer should be submitted to the bank.  Ultimately that decision is the property owner’s decision alone.  All we can do as real estate agents is advise our seller clients of the ramifications of submitting more than one offer to a lender.  In my experience, (successfully closed 26 in the past 18 months), it is in the Sellers’ best interests not to submit more than one offer at a time to a lender.  Due to the overwhelming workloads at the banks in handling short sales when an additional offer is submitted it tends to bog the process down and can even in most instances start the whole thing over from scratch!  It’s important to have a discussion with your seller clients as to the possibility of this happening.  In most instances my sellers have decided to hold additional offers as back-up offers if the buyers are willing to agree to this situation. 

If the seller has asked his bank, the bank more than likely will tell the seller that they want to see all offers.  In this case they have no choice but to do so.  Only in that instance is it recommended that multiple offers be submitted.  Be prepared for further delays and fits and starts in the process should you be forced by the seller clients or the bank to submit additional offers.  The other thing to keep in mind with your seller clients and to relay to them is that if they submit an additional offer, the 2nd buyer may not stay in the deal whereas the first buyer has already been there for a length of time.  There is no guarantee that second buyer will stay on board so there is a huge risk that your seller client is taking on.  Bear in mind the one downside to a seller not submitting a higher offer would be the potential of a deficiency judgment being more if the lesser offer is the only one put through.  My favorite line when dealing with this sticky issue is to suggest that my seller client consult with an attorney in dealing with all the ramifications.  Most of the time the Sellers simply tumble to the idea that they would prefer to only take back-up offers and not submit additional offers.

One Response to “Short Sales: Multiple Offers or Backup Offers?”

1. 1
   Gabby Said: @3:53 am 
   

   Hello Kim,

   I read some of your articles on About.com.

   I am a potential buyer. We have bought several properties in the past but are very inexperienced with short sales. We have been looking for a home for a long time and have not been able to find what we are looking for until now, except that the property is a short sale and an offer has already been submitted to the lender. So, instead of just walking away, I am hoping to learn a little more about how short sales work in the hope that we may have a chance at purchasing this house if we approach it in the right way.

   The seller agent has submitted an offer to the lender but the lender has not accepted it yet (I have a feeling that the seller agent is not very experienced with short sales either and just sent it to a department and has not had much communication with the lender). We are strong buyers with 60% down, a three figure salary, and pre-approved loan, but I don’t know if this is even considered in a short sale. We want to make a competing offer and would have done so via the seller’s agent, but the seller’s agent will not submit our offer to the bank because she already has an offer she submitted and says it may seat at someone’s desk for months before she hears back from them. The lender still has not accepted/approved this offer, but the seller agent will only accept our offer as a backup offer and will not submit it to the lender unless the first offer made is declined. She tells me that you cannot submit two offers to a lender. Is this so?

   Prior to this conversation with the seller’s agent it was my understanding that until the offer is accepted by the lender, multiple offers can be made and presented to the lender. I would imagine that lenders actually like and prefer receiving competing offers, is this not so? If so, I am wondering why this agent will not submit our full price offer to the lender. Is she right to do this? Is there anything we can do about it?

   Do you have any other advice for us? We would normally not try to pursue something like this, but this home is exactly what we have been looking for for months and we have not seen anything else that meets all our criterias. The lender is GMAC.

   I thank you for your time and attention and very much look forward to hearing back from you.

   Gabby

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