An angry, frustrated San Mateo home buyer wrote in this question:
My agent tells me he cannot demand that my short sale offer be presented to the home owner’s lender. I thought all offers have to be presented.
Do All Offers Have to Be Presented?
That’s a great question and it reflects a widespread misunderstanding held by the public in general and many real estate practitioners as well. While contract law and agency law overlap in this area, there are general legal principles and certain practices applicable to this question. Here are the basics:
- The Listing Agent for the property owes their fiduciary duties to the home owner (borrower)…Not the lender.
- All offers must be presented to the home owner (borrower)…Not the lender.
- The decision to accept, reject or counter a buyer’s offer is the sole and exclusive right of the home owner (borrower)…Not the lender.
Home Owner Chooses Which Offer to Submit to their Lender
Once the home owner elects to accept an offer, only then is the accepted offer forwarded to the lender. The lender is merely a 3rd party “approver” of the contract and it is not a party to the contract. The lender simply has the right to reject or accept the offers that the home owner brings forward, and has no obligation to agree to accept a reduced pay off. The lender’s decision is a voluntary effort to mitigate their potential losses. The lender answers a business decision: Where will we lose less money; short sale or foreclosure sale?
What is a Short Sale?
A short sale is the home owner’s voluntary attempt to avoid a foreclosure. The home owner has the option – if not the ability – to sell the property and pay off the debt in full as agreed; then the lender would have no right to approve the sale.
Listing Agent Does Not Work for the Lender
The Listing Agents must act in the best interest of their client only, and the client is the home owner (borrower)…Not the lender. It’s simply not possible for the agent of the home owner to be compelled to work for the lender who is not the agent’s client.
Looks Like We Have a Bit of a Conflict of Interest
Does the phrase conflict of interest come to mind? Remember, the lender is acting in its own self interest, and not those of the home owner. Clearly, the lender’s interests are obviously adverse to the home owner because the lender is in the process of or threatening to foreclose on the home owner. You can’t get more adverse than attempting to take away the borrower’s home.
What is a Short Sale Listing Agent’s Job?
The Listing Agent must do everything legally possible to protect the borrower and advocate for the borrower’s position.
Buyer’s Agent Can Only Demand Offer Be Presented to Home Owner
Forcing an agent to present all offers to the home owner’s lender would constitute a breach of the agent’s fiduciary duty to the home owner. The Buyer’s Agent has absolutely no right to demand that the buyer’s short sale offer be presented to the lender. The Buyer’s Agent does, however, have the right to demand that the short sale offer be presented to the owner of the property.
Home Owner Not Obligated to Present Any Offers to their Lender
And, the home owner has no obligation to present all short sale offers to the lender which means the Listing Agent has no obligation to present the short sale offer to the lender either.
Short Sales are Complex and Legally Fraught with Pitfalls
A short sale is simply a negotiated, arm’s length, fair market value sale in which the lender agrees to accept less money than the outstanding balance of the home owner’s loan. Confusion about the roles and responsibilities of the parties to each other can lead to wrong headed decision making and costly legal problems. Short sales are complex, complicated and legally fraught with pitfalls. Be careful who you choose to represent you.
Considering Purchasing a Short Sale?
Call us at (650) 655-2500 or email us at info@LivingWellinSanMateo.com to schedule a no obligation consultation. We’ll help you decide whether or not short sales will fit in your home buying plan.
Search San Mateo Short Sales for Sale
Enjoyed this Post? Why Not Subscribe?
If you have enjoyed Living Well in San Mateo – san mateo real estate, please subscribe to our RSS feed.
Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.
Raymond Stoklosa, Broker/Co-Owner
Chela Stoklosa, Realtor/Co-Owner
