As I walk through the wacky world of short sales (and boy do I do a lot of walking), I have all sorts of experiences with short sale purchase contracts. I’ve seen listing agents who send all the contracts to the short sale lender for review, and I’ve seen buyers use letters of intent as opposed to state contracts. I’ve even seen real estate agents submit the incorrect contract documents without even realizing their error.
With respect to short sale purchase contracts, the most important thing to remember is that a purchase contract on a pre-foreclosure or on a short sale (which may not be pending foreclosure) is a contract made between the buyer and the current borrower on the property. It is not a contract with the bank. Because of this, the seller will need to sign and accept the terms of the contract before the contract is submitted to the short sale lender.
The short sale lender approves the terms of the contract and creates a short sale approval letter. Because the bank accepts less than the full amount due on the note in a short sale transaction, this short sale approval letter is required at closing.
When a property is being sold as a foreclosure, the bank owns it. Under those circumstances, the bank will decide which offer to approve and the bank will sign the contract.
I hear all sorts of stories about agents who submit all offers to the bank and then wait to hear back on what the bank will decide. Having closed hundreds of short sales, I can say that I have never seen the bank do anything but tell me to have the seller make a decision and submit only one offer (generally the highest one) for their review. Oh… make sure that your buyer does not sign with electronic signatures or you will be getting another call back to fix that little problem as well.
Photo: flickr creative commons by taberandrew