Should a listing have a pending sale sign in the yard? It depends. We have a Sacramento listing that recently had five offers. We are pending sale and have two back up offers. One of these two buyers signed a back up addendum and a multiple counter offer form. This buyer is ready to go into a sales contract if the first offer fails for any reason. In this case, the seller wants a pending sale sign in the front yard as soon as possible. The home sold in 5 days, so sellers are thrilled and want the neighbors to know how fast it sold.
It’s often difficult to buy another home when you have a home to sell. Making an offer contingent on selling doesn’t always go over well. Especially if the home you want to buy is desired by so many other buyers who do not have a home to sell and hence no contingency. These others buyers can waltz in, plop down an offer that says: here’s your cash, I’ll get a loan and close. Easy peasy. So, contingent buyers are forced to compete with non-contingent buyers and, in hot seller’s markets, that puts a contingent buyer at a huge disadvantage. What’s a seller gonna do when she’s looking at Offer A at the same price as Offer B except Offer B has a contingency? She’s gonna take Offer A.
But the Sacramento real estate market shifted a bit over the summer. We have more inventory now. Interest rates are edging up, which puts downward pressure on prices. I get a kick out of the way our N.A.R. chief economist Lawrence Yun spins it as: rising interest rates gives us a smaller pool of buyers — the pool of buyers remains the same, it’s the price of the home those buyers can purchase that declines. This market is more conducive to an offer contingent on selling.
It’s like a domino effect, though. If the buyer for the buyer’s home can’t close, then the buyer can’t close. Underwriting conditions are stricter, too.
However, the revised 11/12 C.A.R. Contingency of Sale or Purchase of Other Property offers sellers by default the right to continue to market the home for sale and to accept backup offers. If the seller accepts a backup offer, the seller is free to give the contingent buyer 3 days notice to remove the contingency to sell her home. In other words, the seller can pretty much kick out the contingent buyer if the buyer doesn’t release the contingency.
It’s no skin off the seller’s nose to accept an offer contingent on selling. Because you know what normally happens when a listing is sitting in MLS in active status with a pending rescission modifier? Other buyers see it and realize somebody else wants that house, and the desirability shoots way up. I know it’s odd but that’s the way it works. Some Sacramento listing agents might not know that they are no longer forced to change the status to pending with a contingent offer.
Call Elizabeth Weintraub, Lyon RE, to buy or sell a home in the Sacramento four-county area at 916.233.6759. I’ve been at this for almost 40 years now.
Moreover, some people erroneously describe a foreclosure as the home “going back to the bank.” The home doesn’t “go back” because the bank never owned it. The bank has a security interest in the home but not a real property interest. The home is owned by the homeowner. It is still owned by the homeowner during a short sale.
Second, banks must approve a short sale and agree or counter the terms in the accepted offer. This does not make the bank a party to the real estate transaction, however. It makes bank approval of the short sale a contingency of the purchase contract.
The only offer that should go to the bank is the accepted offer. If the seller wants to accept a backup offer and send the backup offer to the bank, the seller is generally free to do so. In that event, the bank will ask the seller which offer the seller wants to accept. At that point, the seller can certainly point to the backup offer. It is not customary for the seller to send a backup offer to the bank. As long as the submitted offer is reasonable — an offer the bank is likely to accept because it is at or near the comparable sales — that’s the offer that is likely to win approval. That’s the offer a Sacramento short sale agent submits at the seller’s direction for approval.
Banks don’t want to be in the real estate business, too. They have a hard enough time determining fair market value without us Sacramento short sale agents giving the banks the right to weigh the merits of each individual offer. But that’s not stopping a few enterprising entrepreneurs from starting up high-tech platforms that allow banks to receive all offers ever submitted by nitwits. I won’t do them any favors by naming those companies because I just hope in all that is halfway sane in a short sale that it never happens. For everybody’s sake.