Home Buying in Laguna Niguel>Question Details

Amh, Home Buyer in Laguna Niguel, CA

Do Buyers have any recourse in a short sale when bank forecloses?

Asked by Amh, Laguna Niguel, CA Fri Mar 4, 2011

My Wife and I have been the primary accepted offer on a short sale for four months. We have received approval from the bank (servicer) and were waiting for approval from the investor. Out of the blue the bank foreclosed on the property. The seller is trying to have the sale rescinded but we are wondering if we have any recourse against the bank should they refuse? Have we waisted four months? We really like the property, is there any hope for us?

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17
BEST ANSWER
HI Amh, The only thing to do is wait. Sorry to say but thats how the banks operate these days.
The servicer makes more money by not selling it to you for as long as possible.
Seems to us that the bank never had intention to sell it via short sale. The bank most probably will foreclose buy it back and relist it at usually a higher price, however you may if the owner can't recind it put in your orginal offer you never know.
We strongly suggest you move on and look for an NON short sale property as short sales are really long and rarely close.
All the very Best
Dave & Lisa
Web Reference: http://www.urhomerealty.net
0 votes Thank Flag Link Fri Mar 4, 2011
Sorry to hear about your situation. It's always tough when a sale slips away into foreclosure.

When you prepared your offer, your agent should have given (and received your signature) on the CAR Short Sale Addendum Form SSA. Paragraph 4 is titled NO ASSURANCE OF LENDER APPROVAL and stated "...short sale lenders are not obligated to give consent to a short sale..." Your agent should have also told you that the banks pretty much run their own game and are accountable to no one, so pursuing any recourse may only add to your frustration.

Regards,
John Alesi
CENTURY 21 Superstars
4 votes Thank Flag Link Fri Mar 4, 2011
You've probably wasted 4 months.

However, it depends on how much longer you're willing to wait. If the bank foreclosed, then it'll eventually put the house on the market. Might be a few weeks; might be a few months. At that point, it'll be available for purchase. Now you'd be buying directly from the bank. And foreclosure purchases--while not perfect--tend to be a lot smoother than short sales.

One interesting tip: Often the house is put on the market as a foreclosure at a lower price than the bank would have received (and even approved) as a short sale. I've seen that happen a lot, though there's no guarantee of that. But I've seen properties listed and sold as foreclosures for 10%-20% less than submitted short sale contracts. In fact, in one case (I wasn't the Realtor, but I talked to her), she'd been representing some folks like you who were only days away from closing on a short sale when the bank foreclosed. She happened to know the private investor who bought the house from the bank. She negotiated a deal where the investor sold the property to the interested family--the investor made something like $15,000, but the family ended up paying about $7,000 less than the bank had approved the short sale for.

Again, there's no guarantee of that. But if you really, really want the house--and you're not under huge pressure to move--you could wait for it to come back on the market.

Hope that helps.
3 votes Thank Flag Link Fri Mar 4, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Amh -

Sorry to hear this news. At the end of the day, its time to move on and find another property.

There are a few things about short sales that everyone loses track of during the process;

1) The "Bank" and the "Investor" is NOT the "Seller" or the "Owner".
2) The Bank / Investor is onlky approving the amount of LOSS they are willing to accept.
3) Although the seller may have thought they had an approval - they likely didn't or it would have been in Letter Form from the Servicer (Bank).
4) Whether anyone wants to admit it or not, the Foreclosure Sale would have been well-advertised, and unless the seller had something from the Trustee stating the sale was postponed or the Trustee Sale date was changed on the Trustee's website, it was not.

In 2011, postponements of Trustee Sales and/or extensions of approved short sale closing dates will be VERY RARE.

Hopefully, you didn't deposit your earnest money or you've already received a Release from the FORMER OWNER so that you can get you $$ back from Escrow.

Best of luck,

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. IN MY OPINION, there is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
THOM@THOMCOLBY.COM
DRE# 01398570
1 vote Thank Flag Link Fri Mar 4, 2011
Fact of the matter is you didn't have a full approval from the lender and your agent should have known. When a lender approves a short sale they also have a date on that lenders approval letter that puts everyone on notice that they need to execute and close escrow by a certain date. The transaction was still in the short sale process because the investor(s) had not given their approval yet.
RonV
1 vote Thank Flag Link Fri Mar 4, 2011
Hi Amh,
Most times the department you are dealing with at the bank (short sale) is different from the Foreclosure department. Many times they are not even in the same state! It is not unusual for this to happen. You are taking your chances at not getting the home on a short sale. The sale is contingent! You trade the possibility of getting a reduced price for your time waiting. Sometimes it works out and sometimes not. Don't get discouraged though. There are a lot of really great homes out there. And honestly I do not think the short sales are much better deals than the standard sales and repos! Because the banks are getting generally 3 BPO's and selling at or close ot market anyway. Why put yourself through the stress? Find a good realtor to watch for a good deal to come up for you, one that you know you can close on.
Best of luck to you,
Connie Bramble
Prudential CA Realty
dre#898302
714-337-8718
1 vote Thank Flag Link Fri Mar 4, 2011
It is possible to get the sale reversed & for the bank to still accept the short sale, but the listing agent better know what they're doing. The alternative is to contact a real estate attorney who has experience with this. Someone NEEDS to know the #'s. And that is, what's going to make the most money for the bank? Is your short sale offer better than what they "think" they're going to get at an REO sale.

Most often the short sale IS the better deal for the bank, but occasionally there may be newer comps that look more promising to the bank to just go with the REO sale. Your agent, the listing agent & if any, the attorney needs to do their research NOW.

And, you need to MOVE on this NOW.

You, as the buyer do not have any recourse since your whole deal is 'subject to lender/ investor approval'. Read the details of the short sale approval letter you received. When the servicer sends out an approval letter, this means the investor approved the deal too. Times when they can pull back final funds is normally only when an Arm's Length affidavit has not fully been signed or notarized & turned in.


EmilyKnell1@yahoo.com
562-430-3053 cell
Realtor Since 1996
Short Sale Expert
1 vote Thank Flag Link Fri Mar 4, 2011
Hi Amh!! Oh my goodness. Wow!! That is not good. It happens. Once they foreclose the property is gone. I'm sorry this happened to you. Seems like whoever you had working on it did'nt communicate properly with the bank. Maybe, obtain a lawyer. But i'm almost positive nothing could be done. Im sorry.
0 votes Thank Flag Link Fri Mar 30, 2012
It seems like there should be recourse from your perspective, especially since you had approval and have been waiting for so long. Unfortunately, even if your offer was good some of the banks are still getting organized. One hand doesn't know what the other hand is doing. A real estate lawyer familiar with your case would be the best resource, however unless you had a fully executed contract (which it sounds like you did not yet), the bank is not contractually obligated to give you the property.

Don't give up! There will be more chances to buy this same property, and if you're really lucky you'll get a slightly better price. If you do not have cash to buy the property on the courthouse steps in the Trustee's Sale, it is very likely to go up for sale quickly after the Trustee's Sale either as an REO (if the bank does not sell it for cash at the Trustee's Sale) or listed by the investor who bought it from the bank at that sale.

I can help you track the Trustee's Sale if you're interested.
0 votes Thank Flag Link Mon Jun 6, 2011
Attn: Short sale agents, there is a Trustee Sale Website for the Servicing Company, where the notice of sale date is posted (not the same as the public records). This should be monitored regularly. If there is a date someone should be on the phone getting regular updates from the Negotiator or Asset Management. It's not an "out of the blue" foreclosure, it is a public record.

I am so sorry you have experienced this. I do not know if it can be rescinded. I have heard of stories, but not a party to one. As for recourse, I'm not an attorney so I can not give legal advice. I would recommend you read your documents, I highly suspect you have signed acknowledging - somewhere - that this was a possibility.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Wed Mar 9, 2011
Hi Amh,

I'm so sorry....the fact is you've probably wasted those 4 months. That's such a shame. Short sales are tricky and there is no guarantee. All we can do as agents is our best.

If you love the home, it might come back as a bank-owned, so make sure your agent is watching that for you? You might even find the price is lower once it's back on the market. I had one client who this happened to and 4 months later we were able to buy the same property, $40,000-ish less. Strange market.

Sorry again....

Karen
0 votes Thank Flag Link Sat Mar 5, 2011
Please don't retain an attorney unless you are one. They will only exacerbate the situation and end up costing you a lot of money. It just might be time to release and move on. Or, perhaps wait until the bank auction and bid on it. If you really like and want the property as a home to live in for awhile it might be worth paying a little more for. If you're just looking for an investment to flip it's definitely time to say.......NEXT!!
0 votes Thank Flag Link Fri Mar 4, 2011
It depends You can ask That it be rescinded, you do need an expert short sale agent who knows what there doing, You can seek an attorney Read the approval letter you got from
the bank it is usually spelled out On
what they want done in a specific time. There are different factors involved in each situation as to what happen on the banks side or possibley the agent. Good luck.
0 votes Thank Flag Link Fri Mar 4, 2011
Hi AMH,
Let me guess, the bank is IndyMac/OneWest?
0 votes Thank Flag Link Fri Mar 4, 2011
Hi Amh

A lot would depend on whether the seller is able to rescind the sale and whether
the offered price is out of whack.

Maybe your offer was too low comapred to what the market is doing right now.

Best Regards
Perry
Web Reference: http://www.ruthandperry.com
0 votes Thank Flag Link Fri Mar 4, 2011
if your buyer agent can't help you with this then you are really out of luck. Find a new house and a new agent.
0 votes Thank Flag Link Fri Mar 4, 2011
Consider consulting with an attorney who specializes in real estate, he/se can best advise as to any options you may have.
0 votes Thank Flag Link Fri Mar 4, 2011
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