In the June 2008 issue of Southern Nevada Realtor, GLVAR attorney, Deanne Rymarowicz, addresses the subject of managing short sales. In this article she answers some very specific questions real estate agents are currently dealing with in our market. I recently addressed Common Questions and Answers on Short Sales and want to expand on the discussion regarding multiple offers and best practices.
Deanne answers the question "Can the seller refuse to respond to all offers, and finally accept only the one the bank approves?"
To summarize her answer:
- "If the licensee is advising the seller to refuse to respond, there could be legal and ethical consequences."
- NAC 645.632 ,"Notification of rejection of offer or counteroffer," requires the licensee representing a seller to provide the buyer or buyer's agent written notice signed by the seller informing the buyer that the offer has not been accepted and "within a reasonable time after the offer has been presented to the seller."
- Of course, the argument could now become what is the definition of "reasonable time" in our current market where it is sometimes taking weeks or months to get a lender approval of a short sale?
- Are you acting in the best interest of the seller when you handle the multiple offers in this way? There is no legally-binding contract, earnest money, or escrow opened. The lender approval is simply a contingency of the offer. Will the lender even review an unsigned contract? What guarantee does the lender have that all parties are acting in good faith?
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In my opinion, the best practice in a multiple offer short sale situation is to ...
- review all the offers with the seller
- either have the seller accept or counter the best offer or alternatively
- counter all of the offers using a proper multiple offer form which puts all parties on notice of the multiple offers and contains contract language that states the offer is not valid until re-signed by the seller (this step allows all prospective buyers to present their final and best offer or withdraw their offer)
- use the GLVAR Short Sale Addendum to Purchase Agreement which contains key clauses and disclosures about the short sale process
- submit the fully executed best offer to the lender for approval
- keep all parties informed of status as appropriate; notify respective agents if any offers have been rejected by seller
- in the event another offer is subsequently received the Short Sale Addendum contains language which states: "The Parties understand that additional offers may be received by the Seller's Agent, which must be presented to the Seller pursuant to Nevada law. Such offers may be accepted by the Seller and forwarded to Lender for review and approval."