Does Lender Final Approval letter supersede Purchase Contract?

We just closed a difficult, 8 month transaction. The Seller had been dutifully keeping the HOA dues current, despite a serious hardship...so as to facilitate an easier short sale. During 8 months Buyer countered numerous times in "tiny" increments, with a wait time of up to 7 weeks for every bank response. The asset manager contact changed mid-way through, then new appraisal requested, which came in higher than last agreed price, so counters started again. Continued with back and forth baby increment counters over several more months, then Buyer finally relented, as the condo price was still about $25k under market comps.

When the Final Approval Letters (both loans with Citi) did not include several fees such as HOA Doc fees ($300), Seller refused to pay, stating that he could no longer contribute any more money, and he claimed that the Short Sale Addendum prohibited the Seller from contributing any funds to escrow to close the deal. As we've always done in the past, we turned to Buyer. Buyer also refused to pay, stating that it was "illegal" to ask her to pay because the Final Approval letter does not supersede the purchase agreement contract. So the agents and escrow chipped in and paid all these fees.

On day that deal recorded, the Buyer received a Final Closing Statement, and this HUD included the sub escrow fee for title company ($115) and the wire fee associated with it ($45), which had not shown up on the Estimated HUD they'd seen earlier. Buyer now threatening to sue everyone, file complaints, etc.

Questions:

1) Does the Lender Final Approval Letter supersede the Purchase Agreement?

2) Does Buyer have a case by suing for the 2 items that were not on estimated HUD, but later showed up on Final HUD?

3) Is Seller prohibited from contributing funds that Lender does not provide...that are "usually" Seller funds, as per Short Sale Addendum language?

And, here's the punchline...DRUMROLL...Buyer claims she was an escrow agent for 11 years. ;-)

As long as the short sale addendum stated that the purchase and sales agreement was subject to third party/bank approval with terms "acceptable to the seller", then it would absolutely be acceptable to request this from the buyer, in order to gain the sellers approval of the terms. Then you simply call their bluff and say "pay for it, or we find another buyer". You work too hard to get nickle and dimed by buyers (and sellers) when you have these little issues...call their bluff, they work it out or closing does not happen, at a min make them share with you. I can promise you the short sale closing is more important to the buyer and seller then it is to you.

I think it is actually a good idea to get a commitment up front from the buyer to pay for $xxx worth of seller closing costs not approved by the lender. No reason to take an irrational non flexible buyer to the closing table on a short sale in my opinon. Addressing up front weeds out the inflexible and sets the expectations that they will have to be flexible.

Replies

Joseph Alfe March 2, 2012 at 7:38am

This is why we not only secure the buyers cooperation and flexibility as a condition of accepting their contract, but we allow the buyer to submit a lower offer with the understanding that they may have to cover certain expenses relating to the closing.
Sam March 1, 2012 at 6:51am

As long as the short sale addendum stated that the purchase and sales agreement was subject to third party/bank approval with terms "acceptable to the seller", then it would absolutely be acceptable to request this from the buyer, in order to gain the sellers approval of the terms. Then you simply call their bluff and say "pay for it, or we find another buyer". You work too hard to get nickle and dimed by buyers (and sellers) when you have these little issues...call their bluff, they work it out or closing does not happen, at a min make them share with you. I can promise you the short sale closing is more important to the buyer and seller then it is to you.

I think it is actually a good idea to get a commitment up front from the buyer to pay for $xxx worth of seller closing costs not approved by the lender. No reason to take an irrational non flexible buyer to the closing table on a short sale in my opinon. Addressing up front weeds out the inflexible and sets the expectations that they will have to be flexible.
Becky Martin February 29, 2012 at 1:40pm

The only beef this buyer has is with the Title company - no reason to include anyone else in their complaint lol The buyer will also not have a complaint at all if they went thru with the closing and executed all the closing documents. Just another opinion from a stupid Realtor:)
Deidre St. Romain February 29, 2012 at 12:45pm

Thanks for clarifying that Bryant because YES of course it supersedes - they hold the reins so to speak and we either accept or reject (counter). Sometimes it works and sometimes it doesn't. Me too - stupid Realtor w/an opinion!!
Bryant Tutas February 29, 2012 at 11:32am

Well its simple. the purchase contract is subject to the lender's approval. the lenders approval comes in the form or a short sale payoff letter. the fees outlined in this letter now tale precedent over anything else. the buyer and seller can agree to the terms of the approval and move towards closing OR they can counter or reject. If they decided to close then they agree to accept the terms of the approval.

But of course I am not an attorney. Just a stupid real estate broker with an opinion :)

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