Short Seller Beware
These are crazy times. Seems we have fallen down the rabbit hole, and many of the old rules of real estate no longer apply. Unfortunately, most of us know by now what a short sale is. For those that don’t know, consider yourselves lucky. For many sellers facing the harsh reality of our economy, the decision to sell is no longer entirely theirs. Those of us you trust to complete the complicated short sale transaction have discovered a new animal preying on these misfortunes.
Sellers are presented with an offer which falls (usually) well below your mortgage(s). You may be tired, resigned and inclined to accept the offer, but now we must add to the contract “contingent upon third party approval”. In other words, we must now submit this “agreement to sell” to our lender(s) for their approval. Now you wait (usually months) for an answer. Anything can happen; yes, no, maybe, try again or no answer at all.
In the mean time, your property has been marked in our MLS system as “active contingent”. This tells all agents a contract has been signed and a contingency is waiting to be solved. In the past, only the buyer was seeking loan approval but now the seller is waiting for lender approval also. Once tagged “AC” future buyers and real estate agents may be more inclined to seek other properties instead of mixing it up with an existing “buyer”. It’s not like there are no other properties for sale.
But what if the buyer of your property knows how to work the system? What if that buyer knows where to look in the public records for upcoming foreclosures and wishes to keep other buyers away? Simply make an offer, and hope the seller is resigned to sell at any price to avoid foreclosure. This buyer may know the lender can not respond in a timely manner. So they sit back with the property tied up. Then show up at the court house sale. Everyone loses (the lender, the agent, the seller) except the buyer. Seller (and agents) beware.
Word to the wise, always seek the advice of an attorney specializing in foreclosure law when presented an offer to purchase on a short sale. Have your attorney contact the lender to slow the foreclosure process until an answer can be secured from your lender.