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Ask Our Broker

Can a Seller’s Agent Disclose

The Terms of an Offer
To Another Buyer?
Q: When a seller’s agent has a
full-price offer and deposit check
in hand, can he disclose the offer
terms to another buyer?

A: This short question is one of the

most difficult in real estate.There’s no
good answer, but let me at least explain the issues
involved.
You might think as a bidder for a property that your
offer is confidential. In some jurisdictions that’s the
case as a result of law or regulation.
Buyer brokers,according to a 2006 change to the
Code of Ethics of the National Association of Realtors,
“must advise potential clients of the possibility that
sellers or sellers’ representatives may not treat the exis-
tence,terms, or conditions or offers as confidential
unless confidentiality is required by law, regulation or
by any confidentiality agreement between the parties.”
In other words,buyer brokers cannot be responsible
for the actions of property owners or listing brokers
who see purchase offers. In the case of property own-
Bagging a Bank-Owned Bargain
e rs ,t h ey are not NAR members.As to listing brokers,
they may face a different issue: multiple offers.
Buyers with know-how find big savings in foreclosures
If you’re a buyer, you likely do not want your offer BY CHARLES SCUTT tions don’t even generate a single bid.This is the property for valuation and inspection,”
“shopped” to another purchaser who might then make CTW Features because what is owed to the bank typically Beitler says.“The fact that the property has
a better bid. In most cases, but not all, you can expect always is greater than the property’s total officially changed hands means that the
confidentiality from the broker, depending on the anks aren’t just good sources for bor- worth. So the lender essentially becomes the lender has done all that work.”
jurisdiction where the offer is made.
But imagine a situation where there are two bids for
a home, one from Smith and one from Brown.Imagine
B rowing the money you need to buy a
home,they also can be an excellent
resource for finding terrific housing deals in
successful bidder, reclaims the home’s title
and is forced to sell it for what the market
can bear.
Doing business directly with the bank
usually results in a lower required down pay-
ment, a better mortgage-loan interest rate (if
the form of real estate-owned properties. This can result in a significant bargain for the bank offers financing on the home),
also that bidder Smith says he automatically will top An REO, also known as a bank-owned buyers with the right know-how, says Todd reduced closing costs and a discount off the
any competing offer by $2,000.The bids are equal, but property, is one that is returned to the mort- Beitler, President of The Real Estate Library in market value of the property, says Beitler.
because Smith has an “escalator” clause his offer imme- gage lender following an unsuccessful fore- Boca Raton, Fla., an industry foreclosure data “While you may not be able to “steal” a
diately increases and he wins the house. closure auction.These auctions start with a and information provider. property from the bank, a properly struc-
Smith is happy to win. But – and you knew this was minimum bid that covers the loan balance, “The advantages to buying bank-owned tured deal will make you the envy of the
accrued interest, associated foreclosure- real estate include no liens or judgments to neighborhood because you could have a
coming – Smith wants to make sure he did not overbid process costs and legal fees. Contrary to pop- contend with, no homeowners or tenants to lower total price. For those looking to save
for the property on the basis of a “ghost”offer, so he ular belief, the majority of foreclosure auc- evict, no back taxes due, and easy access of See FORECLOSURES Page 2
asks for a copy of the competing bid.
Without evidence of a competing bid, how does
Smith know his offer should have been raised? How
does he know there was any competing bid?
As to Brown, he may not want his bid revealed for
Finding the Right Loan for Your Project
reasons of privacy or security – or simply because he BY NANCY MOFFETT knowing what’s available, you’ll several types of loans for financ- turnkey solution is attractive and
lost the house. Moreover, Brown, in making a bid, CTW Features be better prepared when you ing new construction: convenient to those who are
never said it would be OK to show it to competing talk to lenders. relocating and getting cash pro-
buyers. YOU’RE READY TO TAKE the big TURNKEY LOAN ceeds from the sale of their pre-
You can see the problem. Smith has a very good rea- step: Build a new home or make BUILDING A NEW HOME If you’re buying from a large vious home,”Adams says.A draw-
major renovations to your pres- tract or subdivision custom back to the turnkey loan is that
ent home. One of the first tasks Mark Adams, new home con- builder, the turnkey loan is an the price will be close to the
you face is financing your proj- sultant for BuildMax, a home-con- industry standard, he notes, in appraisal value, often requiring a
See ASK OUR BROKER, Page 2 ect. Deciding what kind of loan struction financer based in which the builder handles the
is right for you is difficult, but by Bradenburg, Ky., says there are construction financing.“The See LOANS Page 2

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 LOANS
CONTINUED FROM PAGE 1
down payment.
ONE-TIME CLOSE/DRAW SCHEDULE
LOANS
The one-time close or draw
schedule loan allows homeown-
ers to control funds to the
builder and select a home to be
built outside of the traditional
builder’s tract or subdivision.
Adams says this type of loan
makes funding available for “the
small-to-mid sized ‘scattered’ or
‘on-your-lot’ builders.” It requires
a 5- to 20-percent down pay-
ment, which means the home-
buyer needs to have equity in
the lot or funds from the sale of
their previous home.A general
contractor still is required, but
the homeowner has some con-
trol of the quality by controlling
the purse strings.
BRIDGE/HOME-EQUITY LINE OF
CREDIT LOANS
If you’re building a new
home, have a mortgage on your
existing home, which hasn’t yet
been sold, and can’t make two
mortgage payments, a bridge or
home-equity line of credit loan
could solve your problem. Either
uses the equity in your present
home to help finance the new
home.When the new home is
completed and the existing
home is sold, you’ll be able to get
a conventional mortgage to pay
off this short-term loan.
REMODELING YOUR EXISTING HOME
FORECLOSURES
CONTINUED FROM PAGE 1
money buying their first home,
purchasing a foreclosure from
the bank is a good option to
explore.”
Normally, bank-owned proper-
ties are the lowest-priced proper-
ties in the area, says Denise Ste.
Marie, real estate agent with
RE/MAX Real Estate
Professionals, Shrewsbury, Mass.
“The bank representatives have
no emotional attachments and
are more inclined to consider an
offer since they look at it as a
business transaction at arm’s
length and are more reasonable
in negotiations.”
The drawbacks to buying an
REO home, however, can include
working with a lender that
moves at a snail’s pace, the rare
but always possible problem of
having to deal with a difficult
former tenant or homeowner,
and possibly longer closing times
(40 to 100 days from when your
offer is accepted).The biggest
disadvantage is that you are
forced to buy the property “as is”
with no cooperation from the
bank in making reparations or
allowances, says Beitler.
These properties typically
need a lot of work, says Ste.
Marie.“Owners who have lost
their homes are not happy and
sometimes show their frustration
by stripping the property. Buyers
need to make sure they have the
wherewithal to repair.The ideal
candidate is someone who
knows something about con-
struction. Most buyers that pur-
chase my bank-owned listings
are tradespeople, such as
plumbers or electricians.”
Ultimately, she adds, REOs
“allow a buyer to build sweat
equity, especially in a market of
declining values. Buyers need to
budget repairs and have an emer-
gency fund for unexpected
repairs.”
Bank-owned homes often are
advertised in local newspapers
and many are listed in the multi-
ple listing service. Experts rec-
ommend calling banks, lenders,
When you’re undertaking
major renovations for your exist-
ing home, what’s the best way to
finance them? It depends on the
project and your circumstances,
says Greg Reimer, home loan
consultant for Countrywide
Home Loans, Inc.,Trexlertown,
Pa.
HOME-EQUITY LOAN
A home equity loan gives you
the amount you’re borrowing in
one lump sum and is based on
the amount of equity in your
home.
“These loans are usually a
fixed rate for 5-, 10-, 15- or 20-
year periods,” Reimer says.“The
benefit is the rate is fixed and
your payments are of principal
and interest.The drawback is if
you take out $20,000, pay it
down to $10,000 and need more
money later, you have to refi-
nance back to $20,000 and may
incur some fees.”
HOME-EQUITY LINE OF CREDIT
A home equity line of credit
typically is based on the prime
rate, and as prime moves up or
down so does the rate. It also
allows you to draw funds as you
need them, similar to a credit
card.“Over the past two years,
prime has moved upward,” says
Reimer,“but the benefit is that as
you pay the loan down you can
expand back to the original
amount with no fees.Also you
can pay interest only for a speci-
fied amount of time.”
CASH-OUT REFINANCE LOAN
The cash-out refinance loan
involves paying off your current
mortgage and taking out a new
mortgage companies, title com-
panies and insurance providers
for leads and more information.A
real estate professional also can
help you find REO properties in
your area, says Ste. Marie.
“You can follow a foreclosure
listing in the newspaper and
wait for the for sale sign to
appear on the front lawn,” she
says.“You can also check for FHA
and VA foreclosures under list-
ings of government homes for
sale.”
Prior to making an offer, Ste.
Marie says it’s essential to do
your homework. Compare the
price you’re willing to pay to
other homes in the neighbor-
hood. Determine the costs of
improving and remodeling the
property.And invest in a thor-
ough home inspection that
includes checks for radon gas,
lead paint, termites and mold.
“Because these properties are
sold ‘as is,’ once the offer is
accepted, an unsatisfactory
home inspection is never a con-
tingency to renege on the deal,
and deposits are not refundable,”
she says.Also, remember that
“the listing agent is not an
inspector and can only disclose
what he or she can see.They
have no records of work done or
when.This is why an inspection
is money well spent.”
As for those late-night
infomercials promising unbeat-
able deals on bank-owned real
estate, buyer beware, says Ste.
Marie.The bottom line is that “if
it sounds too good to be true, it
probably isn’t true.”
© CTW Features
one.According to Reimer, this
works well depending on what
the customer’s current interest
rate is and how much is owed on
the loan versus the home’s value.
“It lets the customer have a
lower payment over a 10-, 15-,
20- or 30-year term,” he says.
“This works well depending on
how much money the customer
needs and how much cash flow
they have. Many customers opt
for this loan because they want
the lower payment.”
REHABILITATION LOANS
Rehabilitation loans work well
for the customer who can put 5
percent down and needs
$60,000 or more to complete the
project.
“The way this works is we get
plans and specs or the contrac-
tor’s price to complete the proj-
ect or projects,” Reimer says.“We
then give it to the appraiser and
they will give us an estimate of
what the home will be worth
after the work is complete.We
structure the loan on that value,
and, depending on the cus-
tomer’s profile, we can fund the
project up front or in draws as
the project progresses.”
Knowing your financing
options ahead of time can help
you choose what will work best
to make your home dreams a
reality.
© CTW Features
Ask Our Broker
CONTINUED FROM PAGE 1
son for wanting to see Brown’s bid and Brown has
every reason to prefer confidentiality.
Is there an absolute solution that provides ironclad
proof of another offer to Smith but does not violate
Brown’s sense of privacy and security? Not really.
Some brokers believe the solution is to provide Smith
with a “net sheet” showing the terms of Brown’s offer
but not revealing the identity of the bidder.Another
approach is to provide the first page of Brown’s offer,
with the bidder’s name inked out. In both cases, howev-
er, Smith is not getting a full copy of the original offer.
There is, however, a less-than-absolute answer, which
in practice works pretty well: Most brokers,like most
people, want to behave in a manner that is both fair and
honest.They understand that to claim the existence of a
bid that does not exist – or to inflate the value of a com-
peting bid – is unethical and dishonest. Such fraudulent
claims could result in the loss of their real estate
license, the loss of their livelihood and, potentially, crim-
inal charges.The result is that if you trust and believe
your broker then you have reasonable grounds to pro-
ceed.
Whether you’re a buyer or seller, speak with your bro-
ker and ask how bid confidentiality is handled, especial-
ly in a situation with multiple offers. If the issue really is
a concern, you may want to require confidentially as a
condition of making a bid – that is, require the seller to
sign a confidentiality agreement before a bid is opened.
A local attorney also can provide specific advice.
Q: Our listing contract ended at the end of the
month. The property is under contract and clos-
ing is scheduled six weeks from now. Our broker
wants us to extend the listing agreement for 45
days. Is this necessary? If the deal falls through,
we had planned to get a different broker.
A: The broker wants to be able to take back-up offers
in case the property does not close. He cannot do this
unless the property is listed, thus there is logic to his
request.Why not extend the listing with a right to ter-
minate without penalty with 24 hours’ notice? This
might be good for everyone.
© CTW Features
Need real estate advice? Peter G. Miller, author of “The
Common-Sense Mortgage,” would love to hear from you. Send
your questions to peter@ctwfeatures.com.