Short Sale Nightmare! HELP!
Presently in a short sale nightmare. we were backup offer and bank counteroffered to the first and they withdrew their offer. Subsequently, our contract was supposedly submitted to bank by seller's attorney. We thought this would be a relatively painless process as our contract amount was nearly identical to what the bank was seeking in the initial first offer. Soon thereafter, seller advised their attorney to stall/hold up the deal (even though our contract was already into the bank for consideration). Seller's attorney indicated that PNC (2nd mortgagee) is seeking $21,000 in order to release the lien/deficiency, and that is what is holding up the deal. Seller is completely unwilling to put forth any additional monies. Although we, as the buyers, are willing to put forth money to the deal I have a feeling any $ will be scooped up by the first mortgagee. When I mentioned this to the attorney, they agreed but suggested that it would likely have to be outside of the HUD, which I know is completely fraudulent. It is clear from all of the seller's actions that he is trying to stall the deal as long as possible to delay the foreclosure action against his home. Finally, we have also never been provided any written documentation of either lender's responses and are receiving conflicting information. Here are my questions:
1. Can the attorney unilaterally advise BofA to place a hold on the short sale contract?
2. Aren't we as the buyers entitled to a copy of the HUD or written approval/denial by the first & the second mortgagee in order to negotiate with the lender? (we don't believe that the lender has ever come back with any offers on our contract. It appears that the sellers attorney is basing everything on what happened in the initial contract with the first offer)
3. Do we have the right to negotiate with the lender(s) directly? (Seller's attorney keeps making all these assumptions without allowing us to at least submit something to the bank).
4. What are our rights and how can we force this deal to close?? (Seller is attempting to stall and control this deal, when it should be the banks' that decide. Money is not the issue with this property).
PLEASE PLEASE PLEASE HELP.
Replies to This Discussion
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Permalink Reply by Vanessa Calhoun on
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Although I can understand your frustration, I would strongly recommend that you speak with a real estate attorney. The reality is that this entire short sale scenario is between the seller and their lender. You're simply on the sideline looking in. In GA, our short sale addendum specifically states that either buyer OR seller has the right to terminate the contract up until X amount of days prior to the expiration of the agreement or contractual closing date. As you've stated that the seller has received a higher offer, they may have exercised a right as outlined by your contract.
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Permalink Reply by Bryant Tutas on
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So Harry, Is the legal counsel implying that an inspection contingency, appraisal contingency, financing contingency or any other contingency in a CONTRACT makes in NOT a contract? Since these contingencies may also also change the terms of the contract at a later date. A contract is a contract. A contract with contingencies is still a contract. An executed contract is a contract where all terms and conditions of the contract have been met and the contract has been performed. A contract in real estate is executed at time of closing.
An executory contract is mainly used in bankruptcies. Interesting that he considers the purchase agreement an executory contract. This would make sense if the lender was a party to the contract but they aren't. I'll need to get my head around this.
Harry Clay said:No doubt the specific laws read differently in each state, Brian. But here in CA, C.A.R. form SSA states:
A Residential Purchase Agreement is contingent upon Seller's receipt of and delivery to Buyer of written consent (Short Sale Lender's Consent) to the Agreement from all existing and secured lenders and lienholders.
and...
If Short sale Lenders' written consent or term sheet(s) provided to Seller requires changes to the Agreement in order to satisfy the terms...neither Buyer nor Seller shall be obligated to continue negotiations to satisfy any of the requirements of the term sheet(s).
Neil Kalin, Esq, Asst General Counsel for C.A.R. recently explained to the BAoR @ the annual Legal Update that an executory contract is not a binding legal contract until such time that it is executed.
The Agreement is not fully executed until such time that the Short Sale Lenders' consent has been received by Seller & delivered to Buyer.
Bryant Tutas said:TShot may very well have a contract and if the short sale is being handled properly, she does. The contract is between the buyer and the seller and is perfectly legal and binding.
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Permalink Reply by Jeff Payne on
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Harry, I briefly read thru your short sale information and addendum, good stuff. I did not see; however, where it states that the contract is executory and not executed. Your "lender approval contingency" is not too far off from what the Florida addendum states.... In Florida, the contract is between the buyer and seller but it appears that CARs legal council is implying that the lender is also a party to the california contract.... Interesting
Harry Clay said:No doubt the specific laws read differently in each state, Brian. But here in CA, C.A.R. form SSA states:
A Residential Purchase Agreement is contingent upon Seller's receipt of and delivery to Buyer of written consent (Short Sale Lender's Consent) to the Agreement from all existing and secured lenders and lienholders.
and...
If Short sale Lenders' written consent or term sheet(s) provided to Seller requires changes to the Agreement in order to satisfy the terms...neither Buyer nor Seller shall be obligated to continue negotiations to satisfy any of the requirements of the term sheet(s).
Neil Kalin, Esq, Asst General Counsel for C.A.R. recently explained to the BAoR @ the annual Legal Update that an executory contract is not a binding legal contract until such time that it is executed.
The Agreement is not fully executed until such time that the Short Sale Lenders' consent has been received by Seller & delivered to Buyer.
Bryant Tutas said:TShot may very well have a contract and if the short sale is being handled properly, she does. The contract is between the buyer and the seller and is perfectly legal and binding.
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Thanks Harry. We have very similar documents. I still don't see anything in there that states that the buyer and seller are not under a legally binding contract. I just do not see how that can be a true statement. NO where is the term "executory contract" used. The addendum refers to a Purchase Agreement and a contingency.
Let me ask you this. If the buyer and seller both signed the purchase agreement and the SS addendum and the buyer agreed to place a deposit and give the seller 90 days to get short sale approval. In 21 days the buyer decided to just walk away. Would he be in breach of contract? Would the seller have legal recourse (claim the deposit)? If so then it is a legally enforceable contract. Wouldn't you agree?
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According to your rationale under C.A.R., the buyer should be able to contact and negotiate with the lender directly as you've stated that the lender is a party to the contract... I cringe whenever I hear people say that short sale Purchase & Sale contracts differ from "normal" sales. This is why I keep referring buyers such as this one to an attorney for legal interpretation of the contract at hand based upon appropriate real estate law AND contractual law.
Harry Clay said:Now boys...I'm not an Attorney! lol
Fundamentally, C.A.R. is telling us there is no fully executed contract until you have 3rd Party (Lender) Approval (& that approval is delivered to buyer).
C.A.R. is saying the Lender is a party to the Short Sale Contract.
That's how Short Sales differ from a "normal" sale, & that's why these disclosures are required.
And in Tshot's original post, it was stipulated that lender approval was never received.
Plus, he doesn't understand why he has no legal standing to "negotiate directly with the lender or to force the deal to close".
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I wonder if that attorney has ever even done a short sale? Sometimes they just talk out of their......But what the heck do I know.
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Harry, I have no doubt that is what you were told by the attorney. Does not make any sense at all since the lender does now own the home and their only role is to release the lien. Not sure how California would be different than any other state in regards to homeownership. Since CAR believes the lender is party to the contract, does that mean that the lenders name is on the contract next to the seller? Is the owner of record then not required to sign the contract, just the lender. Sorry for all of the questions. Always appreciate your input!
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Vanessa,I agree with you 100%, a short sale is NOT any different than an equity sale, it just has one more contingency that needs to be met in order to proceed. Not much different than a financing contingency or a home inspection contingency, they have to be satisfied in order to move forward also.
Vanessa Calhoun said:According to your rationale under C.A.R., the buyer should be able to contact and negotiate with the lender directly as you've stated that the lender is a party to the contract... I cringe whenever I hear people say that short sale Purchase & Sale contracts differ from "normal" sales. This is why I keep referring buyers such as this one to an attorney for legal interpretation of the contract at hand based upon appropriate real estate law AND contractual law.
Harry Clay said:Now boys...I'm not an Attorney! lol
Fundamentally, C.A.R. is telling us there is no fully executed contract until you have 3rd Party (Lender) Approval (& that approval is delivered to buyer).
C.A.R. is saying the Lender is a party to the Short Sale Contract.
That's how Short Sales differ from a "normal" sale, & that's why these disclosures are required.
And in Tshot's original post, it was stipulated that lender approval was never received.
Plus, he doesn't understand why he has no legal standing to "negotiate directly with the lender or to force the deal to close".
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Permalink Reply by Lillie Handy Dominguez on
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1. Attorney represents Seller, thus per Seller's instructions can do so.
2. Buyer is not legally entitled to the Seller's HUD
3. The contract is with the Seller and not the Bank, therefore, you must deal with the Seller's Attorney and Banks don't want to deal directly with the Buyer.
4. Short Sales are a risk like gambling in Las Vegas - there are no guarantees nor control - The Short Sale addendum you should have signed specifies their risk. You have no recourse that I know of....Sorry.
In a short sale I represented, a Buyer went directly to the bank and the bank would not disclose anything to them nor deal with them. The contract to sell is with the Seller, not the Bank.
Good Luck,
Lillie
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Permalink Reply by Shannon M Thomas on
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I am having a hard time seeing why paying off a lein before close would be fraud. I had to have a release of lien judgement on a property to close. The bank would not accept anything else. We paid it. Got a notarized copy from the lien holder stating that it would be released with judgement # case vs case filing and lein date and then gave copy to bank. It worked and we were able to move to close. Short sales are difficult and a completely different set of problems and problem solving skill sets are needed from property to property. Fighting the process doesn't help, it just is what it is. My question is are you working with a Realtor that is experienced in short sales? Also if you pay that second doesn't still give you the clear to close, its just another obstacle out of the way but doesn't guarantee you that successful outcome your seeking.
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