Investor · Asheville, NC · Member since 2012 · 184 posts · 76 votes
I currently have the capacity to do one or two deals at a time. For various reasons, I won't be ready to expand that for about a year. I'd like to offer on short sales, but I'm wondering about my obligations.
1. If I make an offer, what are my legal obligations- if I offer and they accept months later- is it a legal contract just like a regular offer? Or if they accept- is there some step where I need to reaffirm?
2. What are my "reputational"/moral obligations- What if I make an offer and then they accept months later and I cannot perform? Each large bank gives all their short sales to one attorney and re agent. I'd hate to get a bad rep.
All real estate is local, in that what is customary for an area will prevail. State law and presidence will determine when an offer is no longer valid if a time to perform it is not stated in the offer.
Short sales linger on and go beyond what is considered reasonable (30 days) in my area to hold an offer open and enforceable.
Keep in mind that a short sale is sold by the owner not the lendder and even if the seller agrees and it is an impossibility for the seller to perform due to the existing loan and a reasonable time passes that seller won't have much recourse IMO. Now, I have heard of investors being held to old offers and IMO they may have simply suffered some arm twisting by those involved and caved in but it is beyound reason to expect a potential buyer to make an offer and put life on hold for months due to a lender dragging their feet.
So my opinion is that by statute and local custom your offer expires.
As to the moral issue, to me, the lender's time or that attorney's time is no more valuable than mine! I would have no problem calling a seller, lender or any attorney and telling them that if they can't get their act togther by a certain date to color me gone.
Depending on the area and those you are dealing with, one good way to head these issues off is to put an acceptance date in the offer. SImply say that this offer expires unless extended by written consent on June 30, 2012. If they reject it, move on. My business would not be on hold for any deal and an expiration date is good practice when contracting.
Some SS investors may have other opinions as to what they have found that flies but I'd look to local customs.
Thanks Bill for the tips. I will check into the culture/laws of short sales here more deeply and put an expiration in my offers as well. That should make it work for me.
You are in a legal contract as soon as its signed and accepted by all parties. We have a short sale addendum to the contract in my state and the buyer and seller have the option to cancel the contract before short sale approval. If you want to cancel after short sale acceptance you will need to have outs in the contract.
Reputation and moral- I would not write an offer on a house if you can't perform. Yes you can loose your reputation among the realtors. Also the seller risks loosing their house to foreclosure. They are relying on you to purchase the house. The seller has usually one chance and you might ruin that for them. By the time the bank counters the bank may have been postponing the foreclosure. The second you say no they can foreclose not giving the seller enough time to find another buyer.