The following is part two in a two-part series; you can read part one by clicking here.
Here are my last set of rules to live by, when working on foreclosures and short sales:
1. Cooperative Agents are Your Friend – Depending on the responsibilities and expectations mapped out in the beginning through disclosures, lien-holders and vendor requirements, cooperating agents can be a big help. But, you must make it clear in the beginning of the transaction what their role is to be. In our case, we include it in our disclosures and guides as part of our “buyer package.”
2. Every Lender Has Their Own Rules…and They Change – Get used to it! Lenders and the involved lien holders in a distressed sale are not likely to get satisfied in whole, or even in part, on their debt as a junior lien-holder. Therefore, not only the primary lien-holder deserves attention, but the junior lien-holders deserve as much if not more communication and attention. With little or no incentive to cooperate, the subordinate lien holders can stall or stop the sale without their full cooperation.
3. Their Rules, Their Way! – Buyers, buyer agents and buyer attorneys need to understand that besides different transaction processes, most lenders have their own contractual forms, terms and conditions that are spelled out in various addenda that supersedes any other appended documentation in conflict with it. Lenders want consistency and limited liability, and controlling language of the addenda almost always alters the intent of the original offer in favor the lender.
That’s why changes to such addenda are almost never allowed. We created several written guides mapping out the typical processes that tend to differ from the more traditional offer and separate purchase and sale agreement process in Massachusetts.
4. Treat All Buyers the Same – Cooperating agents bring most of the buyers today because of the success of MLS systems and the online marketing of the big box agencies. Treat all buyers the same. Some agents in the “real world” try to maneuver “their” buyers into position to be the most favorable in the eyes of the seller; while you might think this is a good idea, it is not.
Favoring your buyer over a cooperative agent’s buyer is contradictory to the Realtor Code of Ethics, and it also does a disservice to the client if all buyers have not been given the same opportunity to offer and counter-offer that an “in-house” buyer has had. It also could be deemed to be illegal and interpreted to be discriminatory under fair housing laws. Get legal advice when handling multiple offers. The buyer who closes the deal with the best price for your client is the one that counts.
5. Ask Permission to Disclose Multiple-Offers to All Buyers – If you can, get permission of the asset manager to require that you disclose all offers and terms to all buyers who make offers. Disclose that, and have the buyers agree as part of the offer process; it will save you LOTS of time and effort. It may also go a long way to limiting your liability from being accused of favoring one buyer over another.
Why does this work? Once buyers see that someone else has bid above what they are unwilling to bid, they drop out of the bidding, saving you, your client and them insurmountable time submitting offers that are lower than existing ones. Everyone gets a fair shot this way. Some agencies do this by phone conference call, where each buyer and their representatives are bidding and can hear each others’ bids in real time. Some do this by setting a time deadline for “highest and best” written offers, and once the offers or counter-offers are received, the seller either accepts one, or counter-offers with another deadline. These methods of handling multiple offers may be the most effective way to handle them.
Chris Michaud is the owner of Acceptance Group LLC and ChrisMichaud360, which offers real estate, consulting and educational services to private and industry clients. He is the co-author of a soon to be released book (in early 2015) about the ill-fated government policies that affected the financial and real estate markets, which were designed more for social purposes and political gain rather than economic growth and sustainability.
Chris is an accomplished real estate investing expert, and has served clients for more than 30 years throughout most of New England with real estate consulting services, brokerage, training and development. He has owned, operated or managed several major real estate franchises, including ERA, Coldwell Banker, Century 21 and World Properties International.