Contrary to what some may think, an owner is not obligated to submit every offer to the lender for approval in order to do a short sale. As a matter of fact, there are offers that an owner should never submit to the lender. That is the owner’s right, as they still hold title and ownership of the property, and the bank’s decision in a short payoff is simply the amount they’ll take to release the lien and settle the debt.
In Westchester and the surrounding areas of New York, offers are not submitted to the lender for approval, contracts of sale are. And those contracts are between buyer and seller, not the bank. The contracts are conditioned upon bank approval, but they are binding contracts none the less. And it can take every bit of 3-6 months for the lender to render a decision, all while the foreclosure wheel turns. If the owner goes to contract with an offer that is less than a realistic expectation of value, they can be six months closer to foreclosure when the bank issues their denial of the short sale.
Sellers are therefore looking for realistic offers, not for their own pockets, but to ensure the bank accepts the short payoff. If an offer can be judged favorably by 3 recent (i.e., 6 months or less) closed and 3 active comparables, the offer bodes well. Buyers who submit speculatively low offers, unsupported by 3 sold and 3 active, are doing something ill advised; if their amount is not close to what comparable sales for similar properties are getting on the market, they could waste months waiting for the inevitable “no.” And that “no” could cost the owners their house.
We have a enough offers in multiple bid situations meeting resistance to the banks; lowball offers invite peril to the seller and frustration to the buyer. And it is ultimately the sellers decision as to whom they’ll go to contract with. A short sale sellers surrenders proceeds. But no owner surrenders their rights. While the bank makes the final decision on amount, it is the owner, on advice and market data from their agent, who determine what to submit to the bank for that decision.