There appears to be some confusion as to what an agent does when they have a short sale listing that receives multiple offers, recently I have gotten a lot of calls in reference to how to handle this procedure. Below is what I have been saying for years, but instead of my opinion take a look at the NAR legal opinion.
Here is a recent legal opinion from NAR on how it should be handled.
Scenario 1: Property is listed.
There are no accepted contracts currently.
Multiple offers are received.
ONLY one of the offers can be accepted as primary.
Any of the other offers that the seller wishes to accept would be “back-ups”
and would be subject to release of the primary contract.
This is true even though the contract has a contingency that the lender must
approve the short sale.
In short sale situations the lender is NOT a party to the contract. The seller(s)
and purchaser(s) are the parties to the contract. Lender approval is just a
“contingency” just like a home inspection.
Scenario 2: Property has an accepted contract.
Another offer is received.
The offer needs to be presented to the seller unless the seller has instructed
the listing agent, in writing, that they do not wish to receive additional offers
once they have an accepted contract (See NAR Standard of Practice 1-7 below).
If the seller wants to accept an additional offer, it MUST be accepted as a back-up
subject to obtaining a release of the primary contract.
It seems that there is a practice in the field of agents having the sellers accept all offers as primary
and then relying on the lender approval of the short sale to sort things out.
This is NOT looking out for the “best interests” of your client.
One last reminder, many MLSs have rules in place that once an offer is accepted by the parties
to the contract, the status in the MLS must be changed from ACTIVE to UNDER CONTRACT
or BACK UPS.
See below the reference to NAR Standard of Practice 1-7.
• Standard of Practice 1-7
When acting as listing brokers, REALTORS® shall continue to submit
to the seller/landlord all offers and counter-offers until closing or
execution of a lease unless the seller/landlord has waived this
obligation in writing. REALTORS® shall not be obligated to continue to
market the property after an offer has been accepted by the
seller/landlord. REALTORS® shall recommend that sellers/landlords
obtain the advice of legal counsel prior to acceptance of a subsequent
offer except where the acceptance is contingent on the termination of
the pre-existing purchase contract or lease. (Amended 1/93)