This is a common question from homebuyers. Because it takes so long to get a response from the seller’s lender after submitting an offer, many buyers are reluctant to just sit around and wait for 3-4 months. Some buyers choose to make offers on several different short sale listings, and then when they get a response on one, they terminate the other transactions. This was the topic in this month’s Legal Hotline FAQ in the Oregon Association of Realtors monthly newsletter so I though I would share their answer.
Q: I have a buyer that would like to make offers on multiple short sale properties. Is the language in the Short Sale Addendum strong enough to protect their interest and allow them to do this?
A: When submitting an offer to purchase property, the buyer is representing to the seller that they have the ability to close the transaction pursuant to the terms thereof. If a buyer is submitting offers on multiple properties, with the financial ability to purchase just one, then the buyer would arguably be misrepresenting their ability to close each transaction.
Although a buyer may be entitled to terminate a transaction based on the lender’s consent, a seller may consider a buyer’s termination to be in bad faith if the buyer’s reason for termination is actually due to acceptance of an offer on another short sale property.
You may wish to advise the buyer in writing that the buyer may be misrepresenting their ability to close each transaction, and that such a practice could result in loss of earnest money if the seller can successfully argue that the buyer made misrepresentations in the sale agreement the seller relied upon.
When I am representing the seller in a short sale transaction, I always ask about the buyer’s intentions and then I relay that information to the seller. If the seller knows that the buyer is making offers on multiple properties, they might just want to reject the offer. Another option is to make the buyer’s earnest money non-refundable for a 90 day period to prevent the buyer from backing out as easily. We want to know that the buyer is committed if we’re going to spend months negotiating the transaction.
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