Home Buying in Chicago>Question Details

amandabax1, Home Buyer in Chicago, IL

Bank accepts then declines approved short sale offer twice then begins foreclosure. Should I be talking to a lawyer?

Asked by amandabax1, Chicago, IL Fri Feb 8, 2013

We offered the bank their approved short sale price which they accepted in writing. Several months later the bank informed us that in order to complete the sale they would need another $2600 due to another bank having a lien on the property and that bank requesting $2600 before they would let the short sale go through. We then told the bank that we would lower our offer by $2600 because the property is not worth anymore than what we offered them. They then said that they would accept out original offer and handle the other bank with the lien on their own. It has now been about 2 weeks and they have now informed us that instead of accepting our offer they intend to foreclose. This has been an emotional roller coaster for me and has cost me quit a bit of money. I have heard that it could take years to foreclose and that after the bank owns it we may still not get the property as it will go back on the market. Should I be contacting a lawyer?

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Leonard Benefico’s answer
Hi Amanda,

In a short sale, the owner still owns the property, not the bank. The bank must approve the "short" payoff. Did you enter into a signed contract with the owner of the property? It sounds like after several months after the "seller" accepted your offer, the bank came back with a 3rd party condition counter offer which was to request another $2600 from you in order to payoff the 2nd lien holder. When you "told the bank" you were going to lower your offer by $2600, how was that communicated from the bank to you and you back to the bank? It seems like you didn't accept their counter and therefore your "contract " would not get 3rdparty approval from the lender. When you say the bank then said they would accept your original offer, how was that communicated to you? And how have they informed you that they now intend to foreclose" When you say "should I be contacting a lawyer?" I ask don't you already have one and an agent for that matter? The information from your post has many loose ends so that none of us can address your issue properly without a lot of further information. As others have already advised you, we are not attorney's and cannot provide legal advice. Navigating through the short sale process successfully without a knowledgeable attorney and realtor is next to impossible, in my opinion.
1 vote Thank Flag Link Fri Feb 8, 2013
Sorry if I wasn't very clear. The seller accepted the offer and so did the bank, in writing. I offered the short sale price that the bank had already approved and agreed to sell at. From what I understand the bank, which is B of A either did not know that another bank had a lien on the property or did not know that that bank would not let go of the lien without an additional $2600. I communicate through my realtor. The bank also has a listing agent that they work with. The seller does not have a realtor of his own. from what I understand about the history of this property, the owner has not paid their mortgage in about 5 years and B of A is the one who wanted to do a short sale and had difficulty even finding the owner, although he would also now he is very cooperative. My realtor told the listing agent that we would not pay the $2600 and wanted to lower the offer. The bank told my realtor that they would not allow any changes to the offer.
Flag Fri Feb 8, 2013
Dear Home Seller,

As you have heard on hear it would have been best to have obtain the services of an attorney from the beginning who is experienced in short sales. At this point that is neither here or there. I will be honest I do not know the laws in Indiana in regards to foreclosure and what the exact foreclosure process is in Indiana. I have notice in our state of Illinois the banks move quicker on properties valued under $250,000 and for the higher priced properties banks drag their feet because they rather have someone living and maintaining the expensive home. I know of several homeowners right now who have been in their $750,000 plus home now at 3 years and have not paid a single penny to live in the home and the banks are finally beginning the foreclosure process. What I do know is that if you retain an attorney at this time it could cost you anywhere from $500 to the entire $2600 difference.

I don't know your exact financial situation and if you are the seller it may be prudent for you to pay the $2600 to get it done and avoid having a foreclosure on your credit report.

Best of luck!

P.S. Why hasn't any Brokers in Indiana responded to you question? Sad.
1 vote Thank Flag Link Sat Feb 9, 2013
If the bank sent you a written acceptance weeks ago, why do you not already have an experienced attorney? Where is your agent? These are the professionals you need to use to get the answers you seek. You state that you "heard" some story, why did you confirm that information with your professional team that should be assisting you thru this process. The process is going to cost you quite a bit more money if you are not using an experienced professional to represent YOU! If you are using real estate professional, ( most banks require the property to be listed in order to allow the seller to complete a short sale) your questions should have been answered by your agent. If you had a written acceptance why don't you already have a lawyer!? You need to be sure you are working with experienced professionals! The SFR after my name stands for Short sale, Foreclosure Resource certification. Find a professional that has the experience and education required, then take their advise and use the other professionals they recommend!
1 vote Thank Flag Link Fri Feb 8, 2013
I, nor most of the posters here, are attorneys and therefore are not qualified to provide legal advice. I am also not licensed in your state, same for many posters here, and therefore can not provide real estate advice. I can offer you insights, though:
To have an enforceable contract, all details must be in writing and accepted by all parties. Do you have that? Remember, first you must have a contract with the seller - who you don't even mention in your post. Seller doesnt agree to it, the bank can't sell it. The SELLER IS NOT THE BANK. When the seller accepts, he can only do so with a contingency for 3rd party (meaning uninvolved) approval - that's his bank. When you have a written acceptance from the bank for the deal that is in writing with the seller you have a deal that is enforceable. I can't tell if you have an enforceable contract from your post, but from mine you should know if you do. If you do, then maybe you talk to an attorney who is probably going to tell you that your recourse is against the seller who is actually not at fault in this case, so you can sue but it won't get you anything...probably.

As someone else said, short sales are not for the faint at heart. I understand your frustration but you should have known the risks going in. If your agent warned you and you didn't think it would happen now you know it might. If your agent didn't warn you then get another agent.
1 vote Thank Flag Link Fri Feb 8, 2013
Short sale rules-

1. Always work with someone who knows the process
2. Expect the unexpected
3. Always work with someone who knows the process
4. Understand when you say no to a bank, they expect it means no, and that yes means yes.
5. Get it in writing
6. Always work with someone who knows and understands the process.

You made an offer, it was accepted. You rescinded the offer and offered less.
At that point you lost your negotiating power and voided the first contract. Unless you got all that followed on paper, you have learned what we already know, you no longer have a deal.

If you want the property, engage the lender and see what it is going to take to buy it. Otherwise , move on and understand short sales are anything but short and often the most difficult purchases to make.
You are welcome to contact a lawyer and pay them to find out you do not have a contract, based on what you have shared here.
1 vote Thank Flag Link Fri Feb 8, 2013
You should of had an attorney working with you in the first place with your agent. But there is so much crazy stuff that happens with short sales. Nothing amazes me. There is really nothing you can do though. Its not like you can sue them for breach of contract. It is what it is. I am sorry to hear about this.
1 vote Thank Flag Link Fri Feb 8, 2013
Amanda, when you submit for short-sale approval it must consider the second lien in the HUD-1; the primary loan does not stand alone when there is a second mortgage lien on the property. It is always best to submit for the second lien approval at the same time you submit for the primary loan. The second lien will normally take 10% unless there is a HAFA involved which now pays up to $8500. Here is the solution that may work. If you have a purchase agreement for the last agreed short-sale amount resubmit it to the bank with an updated HUD-1 that includes the second lien's agreement to take the $2600. This should solve the problem.

Trying to drop the price by the demand of the second lien requires that you provide proof of the new value and that holds little water in the first 90 days after the BPO on the property which was used to approve the Short-sale offer.
1 vote Thank Flag Link Fri Feb 8, 2013
From my own experience , it will take months for foreclosure they just follow their own sistem, don't care about buyers,homeowners,renters
0 votes Thank Flag Link Mon Feb 11, 2013
Welcome to the world of short sales.

Number one, you should have retained a lawyer and a Realtor to help you with the purchase from day one. Secondly, do you think you can afford to sue a multi-billion dollar bank that has hundreds of full time attorneys on staff? Number three, read all the documents that you have signed.

Best regards,

Ivan Sagel
312.515.7823
Ivan@atproperties.com
0 votes Thank Flag Link Sat Feb 9, 2013
Now is a great time to re-read that addendum (17 pages) the bank sent you and you signed.
You signed away any rights or possible actions you may take in the future. The document in essence, states. you might get the house but might not. And if failure to purchase the house is the banks fault, you agree that it's not their fault......and can not hold them responsible.......and you signed it. That however, is the nature of all short sales.
As others have said, "It's not for the faint of heart."
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70% of short sale purchase offers fail in Florida. There is a reason for that.
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Unless you are feeling really lucky, you would be well advised to start looking for another house. How this house gets resolved in the foreclosure process may prove even less logical than the short sale experience you just finished. All this for what now appears to be a measly 2,600 dollars. When negations are reopened, the ball can bounce either way.

Best of success in finding your new home,,
Annette Lawrence, Broker/Associate
Reamx Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
Movie Tour
http://youtu.be/g1H-_ny-Mnk
0 votes Thank Flag Link Sat Feb 9, 2013
Amanda,

This is a most unfortunate and I'm sure disappointing situation. Generally unless approval is accompanied by all essential signatures an agreement is not considered binding.

You have experienced what many real estate agents try to protect their customers from. Knowing the risk and understanding the short sale process going into this venture could have at the very least prepared you for this roller coaster.

Could the lender change their mind again? Anything is possible.....

Good luck,

Bill
0 votes Thank Flag Link Sat Feb 9, 2013
You should have had a lawyer once you wrote your original offer. If you did not you really screwed up. Chances are you are out of luck, but it does depend on how the contract and addendums were written and other things, but an attorney is needed.
0 votes Thank Flag Link Sat Feb 9, 2013
I'll just add that you should of had a lawyer a long time ago. When in doubt talk to a realtor who can then refer you to an attorney.
0 votes Thank Flag Link Fri Feb 8, 2013
It seems the seller could not meet the lender's requirements, so the lender decided to exercise its lien to foreclosure and take title by judgement after all. They probably believe they can recover more money by selling the property at auction or as REO. Your offer must have been was below the value. The seller is likely unable to pay any judgement for the balance owed if they accepted your offer. It is always a matter of how much money will the lender loose. we all know banks do not want to own property but if the dollars are not there, they have no choice, they feel. The lender would have had an appraisal done. It must have been convincing enough to go to all the trouble and cost of paying the 2nd lien off and legal costs of foreclosing and still recover more than your offer would have netted them. Just what were the numbers? Not having an attorney in RE deal in Illinois, and a short sale in addition is unheard of. What in the world did the RE agent tell you to lead you to that mistake? What money have you laid out by the way? Loan application, inspections, appraisal, what else?
0 votes Thank Flag Link Fri Feb 8, 2013
YES YES YES - You should have had an attorney from a long time ago. Contact a local attorney and see if he/she can suggest any legal intervention. Also, ask your Realtor for advice (if you have one).
0 votes Thank Flag Link Fri Feb 8, 2013
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