Short sales questions

[Chrys Steele]

I am new to this, so please bear with me. I live in Rochester New York and put an offer in on a home that was listed as "short Sale, bank wants an offer " last week. The seller accepted my offer and then it was sent on to the bank. The sellers bank sent an appraiser out to appraise within a few days, and I have yet to hear if the bank has accepted my offer. The Bank is ESL, which I was told they are usually quick to act on short sales. My realtor is away on vacation for a week, and I have some questions! Does anyone have experience working with ESL and how long they usually take to accept an offer once the appraiser looks at the house? Also, if other offers come in, does the bank automatically accept them? Sorry, these may be ridiculous questions, but I would love to know the answers! I am fine with a long wait......as long as I know the bank has accepted my offer. I'm in no big hurry to move, just anxious to hear from the bank! Thank you in advance for your response!

[Doug Heise]

Chrys, the term you are looking for is called "Tortious Interference". If you have an offer ie; A Fully Bilateral Contract with the seller and subsequent offers that come in should be held by the listing agent. If it were forwarded to the lender it would constitute Tortious Interference of an existing contract that could potentially cause you economic harm.
See http://en.wikipedia.org/wiki/Tortious_interference.

Now on a side note:
The latest GSE Arms Length Affidavits are including language that states that "The Highest and Best Offer has been submitted to the lender for review and that there are no other offers other than this offer that has been made on the property. There are no other offers either written or verbal that have not been submitted too, reviewed by and either accepted or rejected by the servicer. All fee's paid in relationship to this transaction have been approved by and appear on the HUD-1".

Even though this language constitutes Tortious Interference they are still sneaking it into the ALA which is a legally binding affidavit that they are now requiring all parties to sign including the agents involved.

If you have set you transaction up correctly you will have a listing addendum in place that signed by both you and the seller "Owner of Record" that directs all back-up offers to you.

If a higher subsequent offer comes in (Say you are currently marketing the property for sale ie; a flip) they should be directed to you as your are now the seller having an equitable interest in the property.

Knowing that these affidavits exist (especially if it is GSE backed) you will need to set the transaction up differently by selling your equitable interest rather than buying and flipping the property.

You simply enter into a three party agreement with the OOR, the new buyer and yourself that states that you agree to release your contract for a fee but only in the event that the higher subsequent offer is accepted by the lender. The agreement should state that you contract stays in full force and effect until the newer higher offer is approved by the lender and that you will be paid for releasing your equitable interest in a separate personal property transaction.

You will want to submit this agreement along with the newer higher offer so that it has been fully disclosed to the lender that you are being compensated for stepping aside and releasing your interest. This way it has been fully disclosed to the lender that should they decide to accept the higher offer they are doing so with the understanding that your are being paid to release your equitable interest.

By setting up the transaction this way all of the parties who are required to sign the ALA can do so honestly and truthfully because the higher subsequent offer was submitted to the lender and the lender was made aware of the fact that you are being compensated for stepping aside since it was you that did all of the work to get the short sale approved in the first place.

Of course you will want to record your equitable interest in the very beginning placing a cloud on title that must be released before the property can be transferred. That way it will show up on the title search and the lender understands that the only way that the only way that the title can be transferred is by clearing up the cloud on title ie; paying your fee for releasing your equitable interest.

Doing it this way keeps everyone safe as the lender can not come back later and say they didn't know that you were being compensated. Of course they could say that they can't read but that is another story all together.

It really comes down to understanding contract law and how equitable interest is a tangible thing that can be bought and sold.

Hope this helps.