I recently received this inquiry:
“Hi Walt,
I recently read your article titled "Short Sales - Hawaii Buyers Beware!" (HawaiiReporter.com, 8/1/2007) I did this because I recently made a short sale offer on a home here in Hawaii and wanted to become more familiar with the process. There's one disturbing question I have been researching online. That is, does the seller's agent in a short sale have to submit all offers to the seller? If I was a seller in a short sell I would want to know all the offers submitted. Another important question is, does the seller's agent have to submit all offers to the lender/bank? Again, if I was the bank I would want to know who was the highest bidder and what is the best offer.
It appears that dual agents in short sale have conflicting fiduciary responsibilities. Would a dual agent prefer a lower offer if he/she was representing the buyer as well? Other better offers may not be as appealing if there are buyers agent involved.
Am I correct about this or do I not understand dual agents in a short sale?
Thanks Walt, thanks for your time and consideration. Mike”
I responded:
“Hi Mike,
Thanks for your note. I assume you were not successful with your offer or are you still awaiting a response? I am not an attorney and cannot give you legal advice. Having disclosed that, I will attempt to answer your questions.
First of all, the seller's agent is required BY LAW to present all offers (unless they are patently frivolous) to the seller up to the date of close of escrow. Period! If the seller has already accepted another offer and the new offer is superior, the seller can only accept it as a 'back up' offer, subject to cancellation of the previously accepted offer. They can’t sell it twice. If the seller has accepted an offer, subject to lender approval, they cannot simply cancel unless the seller's lender disapproves the short sale.
Secondly, there is no legal requirement to present additional, subsequent offers to the seller's lender, even if they are superior. I'm sure the lender would like more money but they are not a party to the transaction, they are merely approving or disapproving a short payoff on their loan.
As a practical matter, lenders are being inundated with loan modification and short sale requests. I spoke with Citi Mortgage a couple of weeks ago and was told they are receiving 70,000 requests a month! It takes them 30+ days just to 'image' a short sale request package with a purchase offer into their system! After that, it takes weeks for a 'negotiator' to even look at the file. If a seller's agent were to send a new offer to the lender, it would take even more time to get it into their system and could create confusion.
If the seller's home is in foreclosure, the additional time could result in losing the home in a foreclosure action. Not all lenders will halt a foreclosure action while negotiating a short sale, especially if they aren’t even aware that a short sale is in the works because of the backlog in getting the request into the system. So the answer is, no. The seller's agent has no obligation to send additional offers to the seller's lender.
Finally, with respect to dual-agency: dual-agency is allowed in Hawaii, but only if disclosed and agreed to by both buyer and seller. The seller's agent is still required by law to present all offers to the seller, even if the offer is superior to one written by the seller's agent on behalf of a buyer they represent.
I hope my response was helpful. If you feel that you were not properly represented or that the seller's agent failed to submit your offer to the seller and you did not receive a written response from the seller, I strongly encourage you to file a complaint. Here are the contacts:
Hawaii Department of Commerce and Consumer Affairs, Hawaii Real Estate Commission: http://hawaii.gov/dcca/areas/rico/main/contact/
Honolulu Real Estate Board: http://www.hicentral.com/public_REALTOR_window_test.html#complaint
Walt Harvey is a real estate broker with East Oahu Realty and is a Certified Distressed Property Expert®. Walt partners with his wife Arla and together they specialize in residential, commercial and investment real estate. You can reach them on their website: http://www.coastalhawaii.com. Real estate question? E-mail them: walt@coastalhawaii.com or call 375-8959 or toll free at 866-773-3351.
