Home Buying in Placentia>Question Details

Protacio, Home Buyer in Placentia, CA

Can Seller cancel when docs are already in escrow?

Asked by Protacio, Placentia, CA Wed May 5, 2010

I am the buyer. Our original closing date was 3/30/10. However, my bank took their time to approve my loan that we went passed the escrow date. On 4/21/10 Seller signed an Addendum asking for credit because the closing took so long. Now that the docs are already in escrow, Seller wants to cancel because of failure to close on time.

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Protacio -

I'll say it again - get the Broker involved. NOTHING can be paid to the seller. EVERYTHING must be included on the HUD-1 and EVERYTHING must be approved by the short sale lender(s). If you are paying for any of the seller's costs, it MUST be included on the HUD-1.

It sounds like you have multiple Addenda doing multiple things and unless someone clarifies all of these Addenda and "understandings" this transacton could be a mess!

Best of luck,

Thom Colby
Broker / REALTOR
Southern CA
0 votes Thank Flag Link Thu May 6, 2010
Karen,

The credit the seller asked for was for delinquent taxes. I did not agree to this but it was included to the addendum adding my co-signers as additional buyers. So taxes are not allowed, either? How about HOA?
0 votes Thank Flag Link Thu May 6, 2010
Hi Protacio,

I would just like to echo the comments you've received so far....and add that your agent should contact the listing agent's broker and have a conversation. If the current owner is asking for money, they are probably violating the terms of the short sale. Most lenders require the buyer and seller to sign a form which states that the seller is getting no money out of the transaction. If this is true and you do give the current owner money, you too can be committing fraud. Protect yourself and get some legal advice....I am not a lawyer and so I cannot advise you of your legal rights and responsibilities...but I would like to alert you to this potential problem.

Time to get some brokers involved, and perhaps the Board of Realtors....if you have an extension from the short sale lenders, and you are ready to close....something's odd.

Karen
0 votes Thank Flag Link Thu May 6, 2010
Protacio -

Go back to your agent and his/her Broker. They need to review all of the documents.

Best of luck,

Thom Colby
Broker / REALTOR
Southern CA
888-391-5245
Web Reference: http://www.thomcolby.com
0 votes Thank Flag Link Thu May 6, 2010
The Demand to Close Escrow given by the Seller has wrong Purchase Agreement and close of escrow dates. Also Cancellation of Contract... shows wrong Purchase Agreement date. Are these 2 documents valid?
0 votes Thank Flag Link Thu May 6, 2010
Protacio -

We are not attorneys and cannot give legal advice.

Unless something is in writing, it does not exist. I've done MANY short sales and have had to get extensions on many approvals. I can't determine from this posting who's doing what to whom. You should have a copy of the Approval Letters from the sellers current lenders (short sale lenders). In those approvals it should be very clear exactly what the price is and the amount they are due on a certain date. Additionally, some lenders levy a "per diem" charge if the closing date passes and needs to be extended.

On those letters will be the contact info for the closing negotiator. If the Seller's Agent / Broker is not communicating, have your Escrow Officer contact the closing negotiator and let them know you have signed your docs and you're ready to record / close. Typically, that will get things moving again.

As others have said, the current owner / seller CANNOT receive any proceeds in a short sale. And, NOTHING should be paid to anyone outside of escrow - other than your appraisal which will show on the HUD-1.

Talk to your agent/broker and they should be able to work through this for you.

Best of luck,

Thom Colby
Broker / REALTOR
Southern CA
888-391-5245 Direct
0 votes Thank Flag Link Thu May 6, 2010
Protacio, I'm wondering if this is coming from the seller or the seller's lender. It sounds as if you have a written extension on your short sale agreement from the bank. If it is the seller himself who is demanding more money, and not the bank, that isn't possible, (at least without commiting a fraud) as the short sale lender will not allow the seller to gain any proceeds whatsoever when they are taking a short pay. If it's the bank that is requiring a higher pay-off, or a "per diem" in order to extend the short sale, it should be indicated in writing on the approval letter given with the short sale extension. If these things are not in writing, and in your hands, then it's possible that the listing agent has been stringing you along with whatever you needed to hear, and "hoping" he was going to be able to deliver on this. That's something to explore - you'll need to go back to what you have in writing - not what you were told - before unraveling this.

I would get your agent's broker involved asap - and the broker of the listing agent if at all possible.
It's important to remember the statute of frauds in real estate - that agreements must be in writing in order to be enforceable. If the bank has not pulled their short sale approval, and the seller has acted in such a way as to continue to proceed with the escrow, and now suddenly is using extortion techniques - that should be explored with a real estate attorney. Get legal advice - and quick!

Good luck to you!
0 votes Thank Flag Link Thu May 6, 2010
Thank you all for your answers.

This is a short sale transaction and I have my own broker.
Here is more detailed scenario: Short sale approval indicated funds must be received by Lender on 3/30/10 and later extended to 5/25/10. However, the escrow closing date was not extended. But the addendum that the Seller signed on 4/21/10 was to acknowledge that since closing date had passed he is asking for credit plus to add additional buyers. Anyway, after that Seller already wanted to cancel only for reason that escrow date is not met. We did negotiations and verbally, the Seller was once again in agreement that the deal is on. We did receive a demand letter to close in 3 days and of course again my bank only was able to order docs on the 3rd day. The day we were to sign, the Seller sent another Cancellation Notice indicating breach of agreement.
During this process the Listing Agent has been very difficult and unconventional. He would give verbal agreement today and then next day take it back. This transaction also has been dragged on because of decisions that Listing Agent were making.
0 votes Thank Flag Link Thu May 6, 2010
Sorry you're having such trouble with the home buying process. This is a casualty of the banking crisis. Your agent should definitely be assisting with these problems and advising you. He/She has been contracted to do so under your purchase agreement. If they are not, contact the broker or manager of their office. Very, sorry!
0 votes Thank Flag Link Thu May 6, 2010
Protacio -

Is this an REO Property? If so, is the seller / bank asking for a per diem amount as desribed in their bank addendum? If not an REO, has the seller given you a Notice to Perform?, or a Demand to Close Escrow? Is the only Addendum that has been signed the one asking for a credit and nothing else.

As Jason said below, did you sign an "Extension of Time Addendum" to delay closing escrow"?

Where is your agent? ARe you using the Listing Agent as your agent (double-end).

These are all very important questions as I think there is much more to this story - or - someone is not doing everything correctly.

Please get back to us with more info - and most importantly, you need to discuss with your agent who I hope is NOT the Listng Agent.

Best of luck,

Thom Colby
Broker / REALTOR
Southern CA
0 votes Thank Flag Link Thu May 6, 2010
Protacio,

You said the contract had a close date of 3/30/10, but that did not occur due to, I'm assuming, some underwriting issues from your lender. Did you and the seller agree to an extension (amendment to the contract) to push the date of closing due to the fact that it was not going to close on the date that both parties (you and seller) agreed upon? If so, what is that new date? If no, or if that new date has passed, and you still have not closed, it appears that you are technically out of contract and if that is the case, more than likely the seller can walk away/cancel, because essentially there is no more contract. All terms were not filled (i.e., you being approved for a loan and closing on the home.) Of course, I do not know all of the facts of this particular situation, but from what you have provided, this is the best I could come up with. You may want to discuss with your Realtor, if you have one representing you, if there is a need for you to contact a real estate attorney to further discuss your particular situation. I wish you luck.
Web Reference: http://www.JasonPeebles.com
0 votes Thank Flag Link Wed May 5, 2010
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