Foreclosure in Bakersfield>Question Details

Kjack, Home Buyer in Bakersfield, CA

We purchased a REO and are in the middle of escrow. Our lender, after appraisal, requested mold be removed, broken mirror and replace broken window

Asked by Kjack, Bakersfield, CA Fri May 28, 2010

I the buyer asked the REO bank for help with this. They issued a $5,000.00 credit, then I asked for a 15 day extension to the escrow to complete the work. I had also previously asked for them to repair broken appliances and a dripping faucet. After asking for the extension they have decided to cancel the sale totally. We are putting 1/2 down and have the other 1/2 as a prequalified loan. Escrow is half way finished. They are already advertising the house and have not sent me any kind of notice of cancellation. I am only aware of this through my agent. Is this legal?

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6
Ron Sullivan’s answer
Unfortunately yes. In any REO transaction if the buyer ask for any extensions of the original contract it can be cancelled if the asset manager controlling that file feels it’s in their best interest to move on to another buyer they may do so. In your case it was probably the word “MOLD” that killed the deal. Mold remediation in California requires a Certificate after remediation that runs sometimes up to $1000.00 and that is not including any work by a contractor to do the actual remediation. To most buyers dismay cash and how much cash in an REO transaction does not matter. Most asset mitigation companies want owner occupant families in their homes and small down are OK. So in these cases how much you put down causes no emotion with the bank.
0 votes Thank Flag Link Sun Apr 3, 2011
There must be some notification to cancel a contract. In addition, making a request for a repair is not the same thing as a buyer canceling a contract based on a contingency in the contract. Have you incurred expenses in this transaction?

That said I am surprised that your agent did not advise against making request for repairs. It is well know that when the lender says, "As is" they mean it. While no contract is truly "As is", it is stating that the seller is unwilling to incur expenses that are outside of the original offer.

If it is found that the bank cancelled the contract without just cause, a judge could render a Specific Performance judgment. The definition is below.

Under Civil Code Section 3387, there is a presumption that the breach of an agreement to transfer real property cannot be adequately compensated by monetary damages. Furthermore, the California courts have held that every piece of property is unique and, thus, damages are an insufficient remedy (Cottonwood Christian Center v. Cypress Redevelopment Agency, 218 F. Supp. 2d 1203 (2002)). Thus, the courts have permitted both sellers and buyers of real property to sue for specific performance—which means in this case, to force the buyer to buy the property. Clearly if the buyer breaches because he or she cannot obtain a loan to purchase the property, specific performance is not the appropriate remedy.

If you and your agent truly believe you have been wronged and there are damages. A Specific Action judgment could force the bank to sell the house to you. Of course you need to speak to a real estate attorney if you decide to head down that path. I can’t imagine it would be a fun path to travel. Good luck.

Best Regards,


Eric Soderlund
Web Reference: http://www.ESoderlund.com
0 votes Thank Flag Link Sat May 29, 2010
As a buyer of a reo, anything you could see with your naked eye such as a broken window, morror or dripping faucet should have been addressed in your initial offer. Banks dont like contingincies and dont want to fix anything. You should not have asked for either.

Items you can not see with your naked eye should be teh only things addressed after your inspection, most banks wont accept a contingincy for an insopection, while others print that anuy inspection is for your knowledge and they will not renegotiate after accepting an offer.

At this point if you had a contract, you asked them to fix something as part of your inspection, they denied it so they canceled teh contract based on your own contingincy. At this point they still have to sign a release. If you have questions by all means consutl an attorney to review everything.

good luck working things out
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sat May 29, 2010
Why not counter with another offer that includes the $5K credit with a new closing date (which factors in that 15-day extension)?
0 votes Thank Flag Link Sat May 29, 2010
yes. every reo purchase i have seen has an addendum that states the seller may .cancel escrow at any time and buyers only recourse is to retain deposits. i for the future you might consider an fha 203k loan to cover repairs.
0 votes Thank Flag Link Sat May 29, 2010
I'm experiencing the same issue on another REO that I represent the buyer on. The contract states that the seller can cancel escrow at any time if the buyer requests any repairs be made at the seller's expense. The property is being sold in "as is" condition. We understand that so we are willing to make the repairs necessary per the appraisal in order to complete our financing. The repairs are to be made at our expense and we are requested to sign an indemnity agreement stating that the buyer takes on all liability incurred in the event the sale does not close. My buyer was also requested to sign an agreement to remove all contingencies in our efforts to close as agreed.

Once the buyer signs the contingency removal then the seller is not to stand in the way of the buyer's performance to close. However, our seller continues to issue new contingencies and addendum's to the purchase agreement for the buyer to sign or they will not allow the sale to conclude. This is not acceptable or enforceable behavior.

Did you sign a contingency removal in your transaction? If so, the seller has not right to impede the continuation of your transaction towards completion. If not, then they may have the right to cancel the agreement with little or no notice to you. All REO sellers are different and have their own purchase contracts. Is your purchase contract fully ratified by proof of signature from the seller? That is an important aspect as well if you have any hopes of completing your purchase.

Good luck! I'm sorry that it is not the joyous home purchase you may have dreamed about.

Diane Wheatley, Broker
diane@moveupproperties.com
(909) 815-4499
0 votes Thank Flag Link Sat May 29, 2010
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