Lately I have been working with buyer’s that are looking at Short Sales, as a result, a lot of my recent posts have focused on this topic. Today will be more of the same!
I am starting to see more and more short sale listing agents respond to buyers offers with a counter offer asking the buyer to deposit a portion of their earnest money for a specified period of time. A typical counter offer will look something like this: ”Buyer agrees to deposit $ _____ of their total earnest money as stated in Line 9 of the Purchase Contract within 2 business days of the execution of this Counter Offer. This initial deposit is non-refundable for ____ days (typically 60-90 days) from the execution of this Counter Offer. If ___ days from execution has passed, and the Agreement Notice has not been issued, earnest money is fully refundable. Once Agreement Notice has been issued the remainder of the earnest money shall be deposited in accordance with Line 26 of the Short Sale Addendum. Line 13-15 of the Short Sale Addendum to be removed. Multiple offers will not be submitted to the short sale lenders.”
Why are listing agents asking for this? The answer is pretty simple. They ask for the non-refundable deposit as assurance the buyer is committed to that particular property. In return they are only submitting that buyers offer to the bank or banks for review. Any other offer they may receive from another potential buyer is held in back-up position.
Why do sellers and listing agents feel this necessary? A lot of investors are back in the Arizona market looking for “deals”. It is a known fact that they will submit offers on multiple bank owned and/or short sale properties to see who responds first. Traditional buyers have been known to do this as well.
It can be frustrating for both the seller that is facing loosing their home and the listing agent that puts A LOT of time and effort into trying to push a short sale deal thru the banks process only to find out when they get acceptance, that the buyer moved on to another property and no one bothered to let them know.
To date I have not been the listing agent on any short sale properties so I will look at this from a buyer’s agent point of view. I think that buyers may pass on a property if they are asked for this by the seller/listing agent. A lot of buyer’s will not be that excited the seller is asking them to tie up a portion of their earnest money and their time while they wait for the bank.
My personal opinion is that if a buyer is truly committed to the property, 60 days is not that long in the short sale world. Especially when you take into account that it can take up to 2 weeks just to get a buyer’s offer assigned to a negotiator at the bank. Asking for a minimal deposit to allow the bank to get the file started seems nominal and insignificant to me if the buyer is really committed to the property in question…just my thoughts!
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