BUYERS DO NOT LET THIS HAPPEN TO YOU!
As a broker, I am sometimes called to resolve disputes between agents. When this happens the two brokers examine the contract and try to resolve the issue. I want to share with you a recent dispute and the sad story of a buyer who lost their first position on a short sale contract.
If you are looking to understand the short sale process a little better, please visit my post on the Utah’s Short Sale Disclosure. Some KEY sections of Utah’s Short Sale Addendum are listed at the end of this post for your ease of reference.
Buyer 1 submitted an offer to purchase a property on the condition of short sale approval from the bank (AKA Third Party). The buyer’s agent included the short sale addendum and in section 4 (see below) gave the bank 60 days to approve this offer. As part of the contract, the seller was allowed the opportunity to continue to market the property and accept back-up offers. A few days before the offer was set to expire (per the terms of section 4, the 60 days to get approval) the selling agent negotiated a second, better offer, in back up position for Buyer 2.
The 60 days came and went without the buyer’s agent extending the “Third Party Approval Deadline”. This failure to extend the deadline resulted in the automatic cancellation of the contract. It then moved the back-up offer from Buyer 2 into first position. Fast forward another 60 days and the agent for Buyer 1 calls me upset that his buyer has lost their position! I sadly had to explain the contract in detail to this agent and help them understand that by not extending the “Third Party Approval Deadline” they had lost their buyer’s position in the contract.
BUYERS – Be aware of the date in section 4 of the Short Sale Addendum. CALL your agent well before this date and extend it if you are still interested in the property and you haven’t received “Third Party Approval”. Sadly the buyer in the story above found themselves wasting 120 days with nothing to show for it, all because their agent didn’t pay attention to this simple deadline…
4. FAILURE TO OBTAIN THIRD PARTY APPROVAL. Seller and Buyer shall have until mm/dd/yyyy (“Third Party Approval Deadline”) to obtain Third Party Approval. If by the Third Party Approval Deadline, Third Party Approval has not been obtained, the REPC shall automatically be deemed cancelled whereupon any Earnest Money Deposit shall be released to Buyer without the requirement of further written authorization from Seller.
6. SELLER’S RIGHT TO ACCEPT BACK-UP OFFERS. Buyer agrees that at any time prior to Third Party Approval as defined in Section 2 above, Seller may: (a) continue to market the Property to other interested buyers; (b) continue to advertise the Property through the MLS showing any MLS status category (the MLS will allow) deemed necessary and appropriate by the Seller and/or the Third Parties; (c) accept additional backup offers for the purchase of the Property (“Backup Contracts”) subject to the rights of Buyer under this contract; and (d) Seller may or may not submit any such Backup Contracts to the Third Parties for review.
7. BUYER & SELLER’S RIGHT TO CANCEL REPC. Seller and Buyer acknowledge that there will be significant time delays in obtaining any response from the Third Parties to the terms of this proposed Short Sale; and because this is a Short Sale, Seller will need to obtain the highest and best terms for the sale of the Property. During this significant time delay, circumstances may change for both Seller and Buyer. The changes in circumstances may include, but are not limited to: (a) adjustments in available mortgage financing rates and terms; (b) modifications in the financial circumstances of Seller or Buyer; (c) the timing of the transaction may no longer meet Buyer or Seller’s needs; (d) Buyer may find another property that better suits Buyer’s needs; and (e) Seller may receive additional offers for the purchase of the Property that better address Seller’s legal and financial needs. Based on the above, if at any time prior to Third Party Approval, or the Third Party Approval Deadline, whichever occurs first, the Buyer or Seller determines that their circumstances have changed and it is no longer in their best interest to pursue the sale/purchase of the Property, either Buyer or Seller may cancel the REPC by providing written notice to the other party. In such instance, the Earnest Money Deposit, if any, shall be returned to the Buyer without the requirement of further written authorization from Seller. Buyer and Seller acknowledge and agree that this mutual right of cancellation is fair and reasonable to both parties.