I think of short sales as the wild west of real estate because normal rules don’t apply. (Short sales are when a home is selling for less than what is owed on it so the seller is “shorting” the loan amount) I was teaching a class to real estate agents on short sales and an agent asked me the following; “We are in contract on a short sale. The listing agent told us she wouldn’t send in backup or any other offers and now she is. Is this allowed?”. (A back up offer is where another buyer makes an offer even though you are in contract. You could end up being screwed out of the deal if the bank prefers the back up)
In a normal real estate deal having a backup isn’t a concern because they can’t just bump you out of the deal, no matter how much better the back up is. In a normal transaction the contract means something. But a short sale is the “wild west of real estate” and the same rules don’t apply. Being the first in contract will not protect you if the listing agent is going to submit other backup offers to the lender. The short sale lender controls the terms of the deal but since they aren’t a party to the contract they aren’t obligated to follow the terms of any deal which has been negotiated.Consequently the contract has little meaning.
If I was the buyer’s agent I would have written the deal prohibiting the listing agent from even showing the home, let alone sending any other offers to the lender. If you are buying or selling make sure your agent has experience with short sales and understands the process so they can help you play the game. They will need to understand the nuances of a short sale and how to best manipulate the process to your benefit. If you are selling it can be the most viable exit strategy available. If you are buying it can be a great deal. If you don’t know what you are doing in either case it will be a nightmare.