Q&A: Active Short Sale Contingent. My Realtor said I couldn’t write an offer?? It’s due to foreclose on 6/21/2010..?

Question by Awesome Nana: Active Short Sale Contingent. My Realtor said I couldn’t write an offer?? It’s due to foreclose on 6/21/2010..?
I am in California and trying to buy a home.

Regarding the term “Active-Contingent”; I thought it meant no contract has been accepted.

I was told that the current offer was accepted by the seller but the bank has yet to approve it. I wanted to put in an offer for the price that is listed on the “pre-foreclosure” list that my Realtor provided- which has a foreclosure date of June 21, 2010. The home is totally empty so I know that the owner’s have no intentions of squatting. Besides, I was told that one of the agents knows the sellers and they have walked away for sure.

So two questions:

Why can’t I make an offer? And…

If you say that I can (meaning my agent is wrong with her advice) what happens to my offer at time of foreclosure if my contract is not accepted during the short sale process?

Will I need to write a new offer at that time?

I am pre-approved Conventional- or FHA. Have letter for both. In California. Thanks for your help!
I do appreciate your advise but I have already chosen 8 other homes that are “short sales” or in foreclosure and every one of them has been spoken for. It would seem the activity in my area is running rampant, especially with investors who are picking them up with all cash. So since I have time, I thought I would put in an offer on every house I like and worst case is I finally find something “available” and I can back out of a contract that hasn’t been accepted yet or the bank likes my offer better or if it goes into foreclosure, I could write an offer again. So It sounds like you are saying that if I am ready to accept reality, I could do the back up on an ASC?
FrouFrou: “This is a risk people take when they lowball a bid”. Where did I say that I lowballed a bid??? You read my post wrong. I have yet to place a bid and was hoping to bid what price the bank has already listed on the pre-foreclosure list. That is what they will be asking so in no way am I low balling anything. AND the reason I ask is because it is my understanding that banks must approve a “short sale” listing- meaning the bank has a contract or instructions with the seller that must be met. I also know that if a contract is “contingent” technically it doesn’t matter that the seller liked it or accepted it because it is the sellers responsibility to get the bank as much money back in their pocket as possible. I was hoping someone could explain, with all this in consideration, if my Realtor is just being lazy???

Best answer:

Answer by bull_rooster_aardvark
You can write an offer, the real estate agent is just being lazy as they don’t want to go thru the hassle of writing an offer on a house that already has one and is being foreclosed on so soon.

Still, it sounds like the bank already has one offer that is ahead of your and since there are probably thousands of other houses available, why not just go look for a house without any offers? Also if you did get your offer accepted, somehow, the foreclosure would cancel the contract if ti went thru (unless the bank help off doing the foreclosure) and you’d have to start over with a bank that may not be ready to sell for sometime. I’d just go look for another house if I were you.

What do you think? Answer below!

3 Comments/Reviews

  • Landlord says:

    The sellers have already accepted an offer, the house is sold contingent on that offer being accepted by the bank. The sellers can only accept one offer at a time, you can submit a back up offer, but it will just sit there until the other active offer has been processed and declined.

    Tell your agent to stop showing you houses you can’t put offers on, a total waste of time.

  • Lizard1 says:

    Since the title is still held by the buyer and the buyer accepted, the contract is legally binding between buyer and seller. The contingency simply means that there are certain conditions that must be met for the sale to finalize; i.e. the lender must accept from the seller less dollar amount which means that the lender will come out on the “short” end for the money they loaned the seller when he/she purchased the home and took out the loan. Sometimes seller’s will enter into a “short-sale” agreement but never asked the bank if they would be willing to consider. Bank’s do have rules on the short sale and sometimes it is a specific percentage of the amount owed- that they will not accept any less than. The short sale is to benefit the seller so that they don’t have a foreclosure on their record. It doesn’t benefit the lender and the lender could care less if the seller goes into foreclosure once the situation has gone this bad.

    Also, short sale rules for the seller have to be met. Specifically, they have to prove a hardship. Did they lose their job; did an elderly parent move in or have special needs that affect the seller financially; did the seller have unexpected medical bills, etc. As you can see, if you as a seller have a job and just ran up debt that made it impossible to make your mortgage- well then the bank will probably say “too bad-so sad” and let the house foreclose.

    The house is scheduled to foreclose on a specific date and that is when it then becomes free game for anyone to make an offer. That also means that the current potential buyer will need to place another offer on the property directly to the bank (via a real estate agent or the banks chosen representative). They will consider all offers at that time. Also, once it forecloses the house has to be “re-keyed” to prevent entry by anyone who might have a key. That can be immediate or 5 days. The house cannot be seen until such time as it is re-keyed.

    In addition, most foreclosures must remain on the market for a full 3 days once it starts to “show”. This gives buyers ample time to look at the home and submit bids. So you could be faced with a bidding war if a bunch of other buyers are in the market. Then it would be best to have a “better” loan and not necessarily a better price. For example if the house is listed for $ 200K and a person with an FHA loan offers $ 205,000 with 3.5% down plus closing costs and another buyer offers $ 195K with a Conventional loan that requires a wopping 20% down (near $ 40K!); the bank is more inclined to go with the conventional because in this current market so many people have given their homes back that the bank’s are more interested in security over a bigger purchase price. The conventional buyer will end up with a balance of only 145K and will be less inclined to walk away or even have a need to if the market goes south again.

    So keep an eye on your house you like and if the bank doesn’t accept the offer by the foreclosure date, you will be back in the game!

    Good luck!

  • Froufrou says:

    “I was told that the current offer was accepted by the seller but the bank has yet to approve it.”

    That seems to explain the active (contract) contingent (upon lender approval.) Why would you not think the place is under contract, when you were told that it is? Technically, the property is still the sellers, and they accepted an offer, so unless lender rejects it and it goes to foreclosure, it’s off the market.

    When a buyer’s contract is not accepted, you are out of the picture. Neither sellers nor lenders have to accept your (buyer’s) offer. If they don’t come back with a counter-offer, you are not invited to submit a new offer. This is a risk people take when they lowball a bid.

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