California Short Sale-Agent wants deposit?

Question

Hey all-
My husband and I are currently trying to buy our first home in Southern California. We found a short sale and put in an offer at asking price. The sellers accepted our offer. I'm assuming the offer is now on its way to a negotiator or bank (hopefully). The thing is that the seller's agent is now asking for a deposit. He claims that if we give the deposit he will list the property as pending. He says that even though the sellers have accepted our offer, if another offer comes in he must submit it to the bank also. I guess he will list the property as pending on the MLS to detour others? Our agent was not too sure about this which makes me nervous. My questions are: Is this something that occurs often? Also, even though the sellers have accepted our offer, they can accept another offer to be submitted to the bank after ours?
Any insight or advice would be very helpful. Thanks

Jon Holdman · Answer

I had a similar situation and gave the agent a deposit. The bank never approved the sale and took the house to foreclosure. It took several weeks and numerous calls to the listing agent to get my money back. I would not give any earnest money until the BANK approves the deal. Put in your contract "earnest money to be provided via certified funds within 72 hours of lender approval of short sale."

At this point you're months away from closing a deal. You may never close this deal because the bank may never approve it. Put an acceptance deadline in your contract that's relatively short. A week maybe. Then, keep looking at other houses and making other offers if you don't hear anything before the deadline. The bank may eventually respond with an approval, and if you've found nothing else and still like the deal, you can accept it. But the deadline kills your contract, freeing you to say no if the bank does eventually respond and you've found something else.

Felix Liusky · Answer

If a Notice of Default has been filed, NO DEPOSIT IS REQUIRED or DEPOSIT NEEDS to RETURN TO BUYER IMMEDIATELY.

The realtor is trying to tide up your money and string you alone.

I have purchased 20 shortsale properties since 2007, NO DEPOSIT has "I given" to the Seller / Listing Agent / Escrow before short-sale approval. DEPOSIT is REQUIRED to "effect legal consideration of the buyer" only when the Short-sale IS APPROVED by the BANK and PAY-OFF DEMAND IS ISSUED.

If in a case of Short-sale Offers, agent is ONLY required to submit one offer that is ACCEPTED and SIGNED by the BORROWER and "NOT" one that has the HIGHEST SHORT-SALE OFFERING PRICE and "NOT" AFTER your contract acceptance.

Bank will accept a lower price. Reason: it is due to the fact that higher price always has a higher probaility of cancellation than one that has a lower price.

Sincerely,

Felix Liusky, former Bank Vice President
Wellsfargo, Bank of America, citibank and Summit National Bank Corp.

Matt Mathews · Answer

Couple things I read here that needs to be addressed. First of all, if a deposit is given by the buyer, the Listing Broker keeps those monies (uncashed check) in a Broker Trust Account. The Escrow isn't opened until the Investor/Bank approves the short sale. The other thing to keep in mind is the fact that even though the seller accepted your offer-that price was determined by the listing agent/broker not the Bank/lender who owns the 1st TD note. Before a price is set and accepted by the bank, another appraisal will be required. The highest offer that comes close or at that price will get accepted. Then Escrow opens and all deposits etc will be required.

Moe M. · Answer

Alisha what everyone suggested is right on. To answer your question if this happens often the answer is oh yeah. Short Sale listing agents in our area (Inland Empire) are trying to get bidding wars and they absolutely can because there's a shortage of REOs on the market. That's why we like dealing with the homeowner directly and getting the property under contract or working with agents who let us put the property under contract and then we'll do all the negotiation.

Like Tony asked, are you specifically attached to this house? If not, what area are you looking to buy? Besides short sales, we also have a couple of direct lines on REOs which are great for end buyers. Most do not have enough spread for us.

Moe

Larry Moore · Answer

Sounds like the realtor is just trying to keep you from walking if the short sale takes too long by requiring a deposit. Since short sale offers don't require earnest money, just proof of funds, I would ask the realtor point blank if the bank requires it, or is he requiring it. If he said the bank, I would ask for proof. If he requires it, I would remind him that he now has a full asking price offer, and that I require that he submit it with no earnest money, just proof of funds. Maybe the market is different where you are, but realtors are hurting here and are not inclinded to chase away business. From what I understand (never have gone through a realtor on a short sale), realtors are required to submit all offers to the bank on a short sale, so there may not be anything you can do to discourage other offers anyway. Having my money tied up in escrow for who knows how long is not worth a "pending" on the listing.

Dory Peters · Answer

I agree 100% with Jon's advice.

Additionally, I assert that one should always make offers with a clause stating that the EMD will be deposited into escrow within a certain period of time after having received a copy of the fully executed P&S. Keep in mind that the EMD is a form of consideration, and there can be none without the fully executed agreement.

Jennifer B. · Answer

Hi All,

I am a realtor and in our contracts the short sale is a contingency for the seller. When that contingency is in place, it means the contract is contingent upon the seller being granted the short sale.. and the terms that comes with it.

The realtor is actually not supposed to collect earnest money until the short sale is approved. It is correct that even if you had deposited the earnest money, it would go into an escrow or trust account and refunded to you at any time before the short sale was approved, or after if you inserted a contingency as the buyer due to financing or inspections ect.

In addition, any time an offer is signed by the seller and the buyer (considered a mutually accepted offer) the listing agent is required to change the property to pending. They can put pending back up requested should the bank want multiple offers. Any agent that has a mutually agreed upon offer and keeps the property listed as active is probably in violation of the local multiple listing service rules... so if they told you they needed the deposit to change it from active to pending then I would run.. and run quickly because this agent does not know what they are doing!

Susan Suarez · Answer

The realtor should have known that you write on the check "escrow to be determined". I wouldn't write a check..that would cause some problems. Source: [LINK REMOVED]

Maryann L. · Answer

My disclosure states the homeowner must request the Realtor put the property contingent. If the homeowner signs my disclosures, that dictates what their Realtor should do.

I thought all offers led way to a Realtor putting an offer contingent. http://seattlebubble.com/blog/2009/05/31/nwmls-mark-any-accepted-offer-on-a-short-sale-as-pending/

I think unless the homeowner asks for backup offers the listing SHOULD go contingent. Where we live though the homes that are short sales go contingent with a line in MLS that states "Backup offers are being accepted", but the listing does go contingent.

Tony Lessan · Answer

Hey guys, when I'm placing a short sale purchase offer and I state the acceptance deadline for one week does that in any way discourage the lender from responding with a counter or otherwise?

Also, what kind of proof of funds will banks generally accept and favor (hard money letter, bank statement, etc)?

Appreciate the input,

Tony

California Short Sale-Agent wants deposit?

California Short Sale-Agent wants deposit?

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