A huge difference! And it’s really important to distinguish between the two. Many Realtors use the terms interchangeably (which drives me to absolute insanity). So let this blog post clear things up.
An offer is something a buyer presents in writing through their Realtor, to the seller or owner of the property listed for sale. An offer is just that…something for consideration, a proposition, an attempt to purchase. Nothing is binding. The offer is only for the seller to consider. The reason this is important to understand is that many listing agents with short sale listings will only present “offers” to short sale lenders. The listing agent may present one, two or 20 offers for consideration, while keeping the property on the market to solicit more offers.
If a seller won’t sign a good offer that’s worthy of sending to the bank…as a buyer, you should move on. There is absolutely no guarantee that property won’t get sold to another party without you even being notified. Offers have a time frame for expiration…if a buyer’s offer expires, that’s it…it’s over. Why would anyone need to notify you as a buyer if you didn’t get the property when your offer is invalid anyway?
Rest assured that banks don’t want offers, they want contracts. Short sale lenders have to present lots of information to the investors on these short sale loans…information that includes a HUD statement, a listing agreement (which is a contract between the seller and listing co. to offer the home for sale), and most importantly, they want to see a contract between the buyer and the seller. Something legally binding, something agreed upon. For a seller to leave it up to the bank to decide whether they should sign an offer to turn it into a contract is ill-advised. Reason being, the buyer could walk away, find something better and change their mind. There’s a lot to choose from…if a short sale seller gets a good offer, good enough to submit to the bank…sign that and get it under lock and key! Protect that agreement and see it through to closing.
Having offers and not contracts is more prevalent with short sale listings than traditional sale listings. Consider this, if you wouldn’t proceed with the next steps on a traditional sale with an offer only, what makes it OK for a short sale? Realtors representing buyers need to push listing agents to get sellers to sign offers to make the agreements binding contracts and pend the property, especially if the offer is fair and near market value. If it doesn’t seem probably for signatures, move on. There’s no use in wasting your time. And the good ‘ol walk away technique, can work really well.
Now I’m not a movie buff by any means, but I’ve found that putting a movie clip with these posts provides some humor and a good visual. We could all learn from Rex Kwon Do. If you get into a situation like I described above, you need to break the wrist and walk away.