Managing Offers and Counter-Offers During a Pre-Foreclosure

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We are very experienced with selling properties that are in pre-foreclosure (the first step in the foreclosure process). Soon after your property is listed for sale, you will receive an offer to purchase. You may be relieved and perhaps a little nervous. Fortunately, there are standard methods to deal with offers, and we will help you through the process. For starters, we will make sure to pre-qualify the buyer.

Buyer Presents an Offer

The process starts when a prospective purchaser submits a written offer to purchase your property. The offer is contained in a document that may be referred to as the Purchase Agreement, Real Estate Purchase Contract, or Purchase & Sales Agreement, etc. The agreement will contain several pages of detailed information, including the price and other financial terms. You should be particularly concerned that the price is sufficient to cover all of your debts and that the proposed closing date is before the foreclosure sale.

The offer will also include “contingencies,” events that must happen or else the sale won’t close. For example, if the offer is contingent upon the buyers qualifying for financing or your property passing certain physical inspections, we would consider strict deadlines for removing those contingencies.

On the other hand, if the offer is contingent upon something that will not likely occur before the foreclosure sale, such as the buyers first selling their property, we would need to reject that contingency. No worries, we will review the purchase agreement carefully, paragraph by paragraph, considering that most offers give you a strict deadline in which to accept, reject, or propose a counter-offer.

Making Counter-Offers

Although we understand you are anxious to sell your property, you may find yourself facing an offer that doesn’t quite satisfy your needs as to price, terms, contingencies, and/or closing date. No problem. You have the right to “counter-offer” to the buyer with terms that are acceptable to you. We will work together to write a counter-offer and have it presented to the buyer’s agent as soon as possible.

It is important that we don’t wait more than 24 hours to give a counter-offer. Once we have a potential buyer, we need to keep the momentum moving forward.

Don’t be surprised if the buyers submit a counter-offer to your counter- offer. In fact, sometimes the process can go on with multiple rounds of counteroffers. But don’t be discouraged. A series of counteroffers is a sign that we are moving closer in the negotiations. However with each counter-offer, we will make it clear how long the potential buyers have to accept or reject it. With a foreclosure pending, I suggest we require the buyer to respond to your counter-offer within 24 hours.

Several important issues in the offer to which we will need to look at very closely are:

Price. Most potential buyer expect you to counter on price, and will bid a little low precisely to see how you will respond.

Financing. If the offer contains financing terms we agree are impractical, or if the buyer wants you to accept a mortgage or deed of trust for a portion of the sales price and you don’t want to, the counteroffer
is your opportunity to refuse those terms.

• Contingency of buyer selling property. As previously mentioned, a contingency is an event that must happen before the sale closes. Most contingencies are standard conditions in real estate transactions and don’t
raise a problem. However, other contingencies are problematic and could endanger the timely close of the sale.

The worst example of a problematic contingency is where the buyers propose to purchase your property contingent on first selling their home. This contingency is never acceptable in a foreclosure scenario. It would be excruciatingly painful to lose your property at a foreclosure sale because you fruitlessly waited for buyers to sell their property. Refuse to accept this contingency in your counter-offer.

• Inspections. Frequently, buyers want a detailed inspection of your property before closing, either by themselves or by a licensed home inspector. The purpose of the inspection is to determine whether there are
any physical problems that would prohibit them from purchasing the property. If a buyer’s offer allows too much time for inspections, we will shorten the time limits in your counter-offer. For example, the home inspection should be conducted within 5-7 days after acceptance of the accepted counter/counter-offer.

• Condition of the property. We will reiterate in your counter-offer that your property is being sold in its “as is” condition. This claim will eliminate the condition of your property as an excuse for the buyers to delay the closing. It will also protect you from a lawsuit if a buyer purchases your property and subsequently discovers defects. But keep in mind that the “as is” clause does not eliminate your obligation to disclose any physical defects of your property. (We will discuss this more in detail at our initial meeting.)

• Closing Date (settlement date). Closings typically occur within 30 to 45 days. But you may not have that much time before the foreclosure sale. To avoid this conflict, we will state in your counter-offer that the settlement or closing must occur no later than a specific date (preferably at least five days before the scheduled foreclosure sale). Also specify that because “time is of the essence,” there will be no extensions of that date.

Accepting an Offer or Counter- Offer

We will carefully review the buyer’s offer and counter-offer, if there is one. All terms of the buyer’s offer (or counter-offer) will stand unless you counter that they be eliminated or modified.

We will be sure that all counter-offers show not only the date, but the
exact local time of presentation and expiration. Once we have determined that all of the terms are acceptable to you (such as price, financing, closing date), you can sign the offer or counter-offer. We will then deliver the purchase agreement and earnest money to a settlement agent/closing attorney and make sure the transaction proceeds smoothly.

Back-up Offers

Sometimes, contingencies are not resolved, and deals are cancelled, leaving you without a buyer, even though the foreclosure sale is lurking around the corner. To avoid having to start all over if a deal falls through, we will accept “back-up” offers.

Example: Our seller client Mr. Marshall accepts a buyer’s offer with a 10-day financing contingency. Several days later, Mr. Marshall also accepts a back-up offer from someone that already has financing.

As it turns out, the first buyer can’t find financing within 10 days, so Mr. Marshall cancels the original contract in escrow and pursues the backup offer.

In your counter-offer, we’ll need to disclose to the buyers that you will be accepting backup offers from other potential buyers during the contingency/escrow period. We will also need to make sure that any buyers making a back-up offer understand (in writing) that their offer will not be formally considered unless the pending sale falls through.

I hope I’ve given you a good view of handling offers and counter-offers during a pre-foreclosure. If you have any questions, please feel free to contact us. If you are have a property you are ready to list for sale, please complete the form below:

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About Dana Ash-McGinty 172 Articles
Dana Ash-McGinty is the Principal Broker of ASH | MCGINTY, a Washington, DC Real Estate Brokerage. This real estate maven has 15+ years experience in residential, commercial and land sales in addition to multi-state residential renovation, re-zoning, and condo conversion projects. A sought after real estate authority, she has been featured on CNN and in various real estate and financial publications. Dana is married to the highly esteemed Dr. Dana W. McGinty, a Washington, DC based internal medicine physician. They are often referred to as "The Danas".

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