Home Buying in Long Beach>Question Details

Wantahouse, Home Buyer in Long Beach, CA

Can I cancel escrow on short sale after seller accepted?

Asked by Wantahouse, Long Beach, CA Sun Jan 4, 2009

a property not listed in MLS for in a neighborhood I prefer and 60K less currently being rehabbed by investors who purchased it in Dec. 08. Received an initial escrow insructions via email on Dec. 26, 08 prior to seller's acceptance which my realtor later called to tell me to not sign and wait till official acceptance. Since it's a short sale, realtor did not advise which seller (owner or bank) accepted the offer. A day later, realtor emails me that seller accepted offer without copy of accepted contract and that escrow is now official requiring me to sign escrow instructions. I want to pursue the other property. What are my legal rights and the ramifications?

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Dear Wantahouse:

On short sales, the seller is the owner. The owner's lender is not a party to the sales contract however, the purchase of the property should have been written contingent on the short sale lender approving the deal and "agreeing to permit the proceeds from the sale of the property to pay the existing balances on loans secured by the Property, real property taxes, brokerage commissions, closing costs, and other monetary obligations the Agreement requires Seller to pay at Close of Escrow." Ask you agent if you have short sale lender WRITTEN approval of the contract. If your offer was written using the C.A.R. form SSA - Short Sale Addendum, then this document clearly states the terms as shown above in quotes in addition to setting the time frame for compliance with those terms as quoted below.:
"This Agreement is contingent upon Seller's receipt of written con sent from all existing secured lenders and lienholders ("Short Sale Lenders"), no later than 5:00 P.M. on ______________ (date)." and therefore without written approval from all Short Sale Lenders there is no contract.

Without knowing all the particulars of your deal, it is hard to tell you what your rights are at this time. I hope the above will help to open the conversation with your realtor about what is truly going on in your deal. If they cannot answer your questions, then you should ask to speak with their broker. Good luck in getting to the bottom of this and Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sun Jan 4, 2009
Generally CA buyers use the CAR-approved Residential Purchase Agreement. If you have used this agreement, then as they buyer you have several ways out of the contract. In fact CA courts have called this a "free look" for buyers. In essence you can cancel the contract if you are not happy with the results of the inspections (home and pest) or the appraisal. Or you can cancel if you are unable to get finanacing. The bottom line is that as the buyer you can cancel until you have signed a document removing contingencies.

The best strategy as a short sale buyer is to make multiple offers. You should make MANY offers. I had one client that made 10 offers, and it still took months to get a yes on one single house.

Best of luck to you. Feel free to contact me if you have any more questions.

Matt Capron
Broker / CEO
Vertical Horizon Real Estate
San Diego, CA 92101
619-847-3100
0 votes Thank Flag Link Tue Sep 8, 2009
Alison Van Wig- thank you for replying. Already asked my realtor for copy of acceptance letter from seller. Awaiting reply.
0 votes Thank Flag Link Sun Jan 4, 2009
On a short sale the offer is not accepted until you have an acceptance by the bank. They are the ones that are accepting the lesser amount. Therefore; you need to ask your agent for a copy of the banks acceptance. Also, until you sign your contingency removel, you can change your mind at any time-you have not removed your contingencies.
Web Reference: http://www.superbroker.com
0 votes Thank Flag Link Sun Jan 4, 2009
LInda Slocum- thanks for the reply.

Deposit was written to my realtor's office and cashed few days ago. Realtor forwarded (supposedly) it escrow.

Short sale addendum with Offer was signed by me on Dec 3, 2003. Item B.Time Periods, Section 1(ii) was checked: "shall begin the Day After Seller delivers to Buyer written notice of Short Sale Lender's consent.

Am I still entitled to the 10 day rule or am I stuck?

Unfortunately, this market has forced potential buyers like me to submit multiple offers. This was one of four offers submitted. Was outbidded by two, one was supposed to be vacant and "move in" ready but was occupied by 8 people who destroyed property.

I'm a first time pre approved buyer, not interest in fixers who looked for months in hope of moving into a house at the crack of New Year's dawn. Property of interest was one of many we looked at. It required major rehab. An investor bought it last month, fixing it up and want to sell it off the MLS. There aren't a lot of "move in" ready homes in my price range and the neighborhood I want that is not in "pending sale" status.

Thank you for the informative advice.
0 votes Thank Flag Link Sun Jan 4, 2009
Per CAR Form SSA, the date is left blank. All I have is an email from realtor that seller accepted offer.

On the B section: (ii) is checked stating "shall begin the Day After Seller delivers to Buyer written notice of Short Sale Lender's consent.

So where does this lead me?
0 votes Thank Flag Link Sun Jan 4, 2009
There are a few things to consider here:

1. Did you sign any agreements or supplements provided by the bank, the seller, or the seller's realtor? If so, read them carefully to see if there is any wording that would alter the standard contingency period of 17 days.

2. You have the right to see the acceptance letter from the bank in order to verify that this short sale transaction was in fact approved. Escrow could have jumped the gun with issuing the escrow instructions prematurely. Acceptance by the seller is somewhat meaningless, since the bank has to approve the short sale before it can move forward.

3. Check the wording on your original purchase agreement (and any addendums or counter offers) to see if any of the standard terms of the contract have been modified (i.e. contingency periods, contingency removals, escrow cancellation). You should also have signed a Short Sale Addendum, which indicates additional contract terms in regards to short sale transactions.

4. Have you submitted your deposit to escrow?

If the bank has accepted your offer and your contingency period is still intact (even with a bank addendum, you should have at least 10 days), then you have the right to withdraw your offer during that contingency period. If you have not submitted your deposit to escrow and you are still within your contingency period, then there likely is no recourse since they have none of your funds, unless you've signed addendums or counter offers to the contrary. If you have submitted your deposit to escrow, then escrow has the right to retain a portion of your deposit to cover their expenses if you cancel escrow. Either way, as long as you have not gone past your contingency period, then you should be able to back out of this transaction with little to no financial impact.

That said, it is not a good idea to bounce around from property to property. If you're not sure that you want a property or not, then don't submit an offer until you've completed your investigations, including ruling out other properties in the area.
0 votes Thank Flag Link Sun Jan 4, 2009
Without knowing the how the offer was written, a short sale is not final until the bank accepts it. Your buyer broker should be able to guide you as to your rights. You may need a local real estate attorney to review it. Most purchase agreements also have a short sale addendum adding protection for you. It should also be contingincy on a home inspectrion and financing which you should be able to use to get out. Goo dluck with working things out
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Jan 4, 2009
You should talk to your REALTOR about the contingency approval periods in your contract to determine what rights you have with regard to the property that you have made an offer on. Generally you have an inspection period that gives you time to do inspections on the property and the surrounding area to determine if in fact the home is suitable to you at the price that you have offered. If you find during that inspection period that there are issues that you were not aware of when you made the offer, then you can try to negotiate to correct the situation or cancel the contract.
Without knowing what you have agreed to though, it is very difficult to advise you.
I wish you the best of luck with your situation.
0 votes Thank Flag Link Sun Jan 4, 2009
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