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Multiple offers, short sales, and traditional sales with equity


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CA Association of Realtors presentation on Short Sales and Multiple offers by CA real estate attorney and Realtor John McConnin. this is the slideshow which went with the presentation at the …

CA Association of Realtors presentation on Short Sales and Multiple offers by CA real estate attorney and Realtor John McConnin. this is the slideshow which went with the presentation at the California Association of Realtors Conference in Anaheim California.

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  • 1. Multiple offers and Short sales Presented at CA Assoc of Realtors Expo in Anaheim CA McConnin & Company Realty Attorney and Real Estate Broker
  • 2. 1. Equity Sales (traditional)  Equity Sales  A - Simultaneous  B – Sequential  Review the contract clauses word by word. A clean read usually ends the conversation with brokers and lawyers.
  • 3. Simultaneous Offers Counter Offer No. _________  3. ……  4. __ (If checked:) MULTIPLE COUNTER OFFER: Seller is making a Counter Offer(s) to another prospective buyer(s) on terms that may or may not be the same as this Counter Offer. Acceptance of this Counter Offer by Buyer shall not be binding unless and until is subsequently re-Signed by Seller in paragraph 7 below and a Copy of the Counter Offer Signed in paragraph 7 is personally received by Buyer or by _______________________, who is authorized to receive it by 5:00 PM on the Third Day After this Counter Offer is made or, (if checked) by ___ (date), at _______ AM/PM. Prior to the completion of all these events, Buyer and Seller shall have no duties or obligations for the purchase or sale of the property.
  • 4. Sequential Offers Counter Offer No. _________  2. RIGHT TO ACCEPT OTHER OFFERS: Seller has the right to continue the Property for sale or for other transaction, and to accept any other offer at any time prior to notification of acceptance, as described in paragraph 3. If this is a seller Counter Offer, Seller’s acceptance of another offer prior to Buyer’s acceptance and communication of notification of this Counter Offer, shall revoke this counter offer.
  • 5. Multiple offers - short sales  A. Multiple  B. Sequential  Buyer  D. MLS rules vs. Fiduciary duty – read the rules very carefully  Consider finding a way to send offers unsigned  HAFA
  • 6. SSA  E. OTHER OFFERS. Unless otherwise agreed in writing, Seller may continue to market the Property despite acceptance of Buyer’s offer, and to present Short – Sale lender(s) any additional offers that are received on the Property.
  • 7. SSA  B Time Periods: Buyer’s Deposit Check  1. Time periods in the Agreement for inspections, contingencies, covenants, and other obligations (i) shall begin as specified in the Agreement: or (ii) (if checked) _ shall begin the Day After Seller delivers to Buyer written notice of Short Sale Lenders’ consent.  However, even if Paragraph B1 (ii) is checked, time periods for providing pre-approval pre-qualification letters and verification of down payment and closing costs shall nonetheless begin as otherwise specified in the agreement.  What type of contract is this
  • 8. Illusory Contract?  illusory promise A promise that pledges nothing, because it is vague or because the promisor can choose whether or not to honor it. Such promises do not create contracts and are not legally binding. 
  • 9. Contingent Contract  To agree to do or not do something if something or some event does or does not occur. (Jm)  For instance if buyer sells home.  For instance if you made a contract which states that if seller receives a short sale approval from lender by the end of next month then seller must sell the home.
  • 10. SSA  CREDIT LEGAL AND TAX ADVICE. Seller is informed that a short-sale may have credit or legal consequences and may result in taxable income to Seller. Seller is advised to seek advice from an attorney , certified public accountant or other expert regarding such potential consequences of a short sale.
  • 11. Discretion  Do not get too aggressive with argument as a court might imply terms into the “contract” which could eliminate its illusory nature.  A court might imply a term that if lender releases the deficiency then seller must sell.
  • 12. MLS Rules - Foreclosure Roulette  10.1.1 CONTINGENT STATUS. To better serve the membership and the public a contingent status has been added. This will help alleviate the frustration and better communicate the status of a property when the lender or REO are reviewing offers. Here is the rule in its entirety:  10.1.1. Contingent Status. The Mandatory Remarks field in the MLS must be modified if any one or a combination of circumstances listed in (a) through (f ) are in effect and meet the criteria below:  (a) Offer accepted contingent on court approval  (b) Offer accepted pending lender approval of Short Sale  (c) Offer(s) submitted awaiting lender approval of Short Sale  (d) Offer(s) submitted awaiting REO approval  (e) Offer accepted with __ hour first right of refusal  Offers submitted to parties other than the seller as described in (c), (d) and (e) are under review and are not considered accepted offers. Once the Mandatory Remarks has been modified the listing shall be moved into a Contingent status. Listings in a Contingent status are considered to be on-market and under a valid listing contract.
  • 13. Keeping Agents Happy  Offer too low – but in tough markets  Perhaps set up a two week intake period.  Plus we do not know what the banks will be accepting in a few months  Offer too high  Offer just right but needs concessions  Offer from an agent who does not understand the SSA and starts making demands or insists on escrow  Offer from FHA or VA vs. Cash  Sometimes your clients take a while and you get many offers  Should you ever send more than one to lender
  • 14. Keeping Sellers Happy  Concerns about price  Take highest? Maybe not  Counter highest and best? Maybe not  Taxes?  Capital gains  Pride  Explain deficiency negotiations  Perhaps send them out with electronic signatures  Perhaps have them do the SS Package upfront  They seem to love buyer feedback  Some want to keep the deposit and can be difficult.
  • 15. Keeping the banks Happy  How do they handle low medium or high offers  Can you trust that the banks will handle your offers intelligently  Why might you have a few offers in the hopper  What if second wants 10000 to release deficiency  What if you do not have your client sign offer? Or you attach an addendum.  How do you get buyers to stay locked in on the deal and still have an offer which will appraise?
  • 16. Buyer Strategies  Quid Pro Quo  Right of first refusal  Client’s only offer in exchange for info  Send emails saying you have qualifed buyer to short sales which have been on the market for a while.  Early inspection  Deposit  Maybe get approved by sellers senior lender with a mortgage guy or gal who has some pull.  Provide DU  FHA buyers can be better than cash offer  Giving seller and agent comfort you will close if seller gets approval
  • 17. McConnin & Company Realty  