Home Buying in Seattle>Question Details

Pen, Home Buyer in Seattle, WA

Seller didn't sign closing papers because she did not have legal right to sell and RE agent knew about the reasons and never told us, the buyers.

Asked by Pen, Seattle, WA Tue Feb 23, 2010

We signed closing papers last week and the day we were to take possession of our home the seller didn't sign. Her agent told my agent that the seller had gone bankrupt in the past year and needed court permission to sell. And also tells us the seller hasn't paid payments on the house for months. This is the first time we heard of any of this. We do not want to wait for when and if she can sell the house, but we are out earnest money (we hope will be refunded). If we had been told the circumstances of the sellers situation we would have never signed a contract on that house or spent the money on a inspection and appraisal. The total amount of money we are out of pocket right now is over four thousand. How should we try to get our money back? What can be done to make sure this agent (sellers) is reported for her failure to be up front and honest about this property? Should we sue the brokerage? The agent? Or the seller?

Help the community by answering this question:



Yuk. So sorry to hear about this. I can't imagine the frustration. There seems to be a lot more to the story. There are several processes that should have caught this long before the close date. Not sure without knowing more details about what happened.

Taking a wild shot in the dark here, but if it walks like a duck and quacks like a duck.... This one sounds like a nightmare. Try to get all you can back with the use of a RE attourney. Then wipe your hands of it and find yourself the house of your dreams elsewhere.

Like breaking up with an old flame, living well is the best revenge.

Good luck.
1 vote Thank Flag Link Wed Feb 24, 2010
Your seller had a "rock bottom number to avoid a short sale," this number is a moving target unless supplied by the lender directly as a payoff. Daily interest accrues, penalties add up. All too often the seller looks at their previous balance and assumes this is a payoff, and it's not.
To release the earnest money back to you, a Release form has to be signed by the sellers and yourself. Whoever is currently holding the earnest money, a title company or your agent’s office has control and not the seller. There is no benefit to the seller to tie this up and make a claim to it as it appears they defaulted and not you.
Getting the brokers of both companies involved immediately and letting them know an attorney will be reviewing everything would be a good plan.
1 vote Thank Flag Link Wed Feb 24, 2010
This is an extremely bad set of circumstances and if they are as you say:

First, I'd contact both the brokers from each offce and see what kind of remedy they may offer you.

If that is not satisfactory, I'd call the Multiple Listing Service and the Department of Licensing to report the Listing Agent, if they really knew all this information. If it was passed on to your agent and she/he did not notify you, she/he should also be reported.

The lat resort, which can be expensive, is to contact a real estate attorney. Something is gravely wrong here.
1 vote Thank Flag Link Wed Feb 24, 2010
"2nd - If the bankruptcy was filed a year ago, it seems to me that part of it should be settled. If not, it may be possible for the house to be released for sale through a fairly simple procedure. "

As to the bankruptcy issues, if it was a Chapter 7, then chances are the case would be closed up by now. If it wasn't, then a "motion to abandon" would be necessary for the debtor to sell the property. If the case was a Chapter 13, the debtor would need a motion to approve the sale. Neither would be very complicated in most situations. That could depend, however, on the value of the property both relative to the offer price and the debt against the property.
1 vote Thank Flag Link Wed Feb 24, 2010
Thanks everyone yes I believe an attorney is someone I should consult. Yes I had a buyers agent and there were two different real estate companies. The owner of this house did say she had a bottom price to prevent her from going short sale and we wrote the sales agreement for this price. Never once did we know about the bankruptcy or that she was behind in her payments. The seller had moved already, so she did want to sell. The escrow company was not able to get a payoff for the HUD papers. We didn't know that until after we signed and they told us to hold off on bringing our money in. Seems to me that the seller was well protected in this situation but not us, the buyers. When we asked about the earnest money our agent said the seller may refuse to refund and we would have to fight to get it back. This is one big ugly mess and I have no where to live.
1 vote Thank Flag Link Wed Feb 24, 2010
Wow! You have a lot of separate issues going on here.

1st – It all begins with the question on F17 – do you have the legal right to sell this property?

2nd - If the bankruptcy was filed a year ago, it seems to me that part of it should be settled. If not, it may be possible for the house to be released for sale through a fairly simple procedure.

3rd – If the seller has not made payments that brings up the question, is there sufficient equity to pay off the encumbrances? If not, that puts the home in a short sale situation. If only a few payments have been missed, depending on who the lien holder(s) is, it may be an easy short sale. If it is a short sale, the listing agent has an obligation to note it as such in the MLS listing so buyers know up front.

4th – You certainly should be entitled to your earnest money back as you are not the party that defaulted.

5th – If the listing agent truly knew the situation, yes there should be accountability. Start with contacting the broker of the firm. I don’t understand why a listing agent would not disclose knowledge of this nature up front, rather than working on a transaction that will never close. I definitely agree, you should immediately contact a good real estate attorney. A good attorney may be able to sort this out and get you in to that home. If you do not know of a good attorney, drop me a line by email through the web site below and I’ll be happy to recommend a couple of attorneys that I have worked with in the past.

Good luck!

Marcy Spieker
RE/MAX Metro Realty
Seattle, WA
Web Reference: http://www.spiekerhomes.com
1 vote Thank Flag Link Wed Feb 24, 2010
Hi, Kary,

The title company would have had the payoff on file, in order to draw the closing docs. Also, any recorded documents affecting this property would have shown on the Preliminary Title Report.

Jean Bradford
Associate Broker, ABR,GRI,CRS,CRB
1 vote Thank Flag Link Wed Feb 24, 2010
Hi, Pen,

The first thing I would do would be to raise heck with the title co. who processed this sale!! They should have
had documents proving clear title,other than the recorded exceptions. This situation doesn't add up, based on this information. Perhaps the seller really IS qualified to sign the closing papers, and has decided not to sell! The title company is in position to know the true story!

Good luck,
Jean Bradford
Associate Broker, ABR,GRI,CRS,CRB
John L. Scott
Silverdale, WA
1 vote Thank Flag Link Wed Feb 24, 2010
Something doesn't add up here. If the seller was deficient on the mortgage, would this not have shown up on the payoff statement used to draft the HUD?

So yeah, call your attorney.
1 vote Thank Flag Link Wed Feb 24, 2010
Hi Pen,
FIrst, I agree with Patrick, you will be well served to speak with a Real Estate Attorney. I would direct them to the Sellers Disclosure Statement where the question is plainly asked, "Do you have legal authority to sell the property? If not, please explain."
If they said, "Yes", you are entitled to some relief. The problem however is according to what you have told us, the seller is behind on payments and has financial difficulties. This doesn't excuse their behavior, but it may mean collecting any damages may be difficult. Your agent may want to contact the selling agent's Broker to discuss this situation as well.
1 vote Thank Flag Link Wed Feb 24, 2010
What a hassle! Sorry to hear about it. You should get your funds back - they should be in escrow and easily refunded as you're now "out of contract." If you've moved out and have some heavy damages or don't get your refund then yes, consult an attorney. Your state licensing board and the local Realtors association would be interested in hearing your compaints.

Your loan officer and their title agent should have discovered this earlier when dong a title search or payoff request. I always start of with check the title and try to get the payoff early on in the process for this very reason amongst others. Needless to say I've uncovered some potential headaches early on doing things that way.

Let me know if I can be of help in your next purchase!

Eagle Nationwide Mortgage Thomas.Stevens@ENMCdirect.com
0 votes Thank Flag Link Fri Feb 26, 2010
Sorry Pen - Unfortunately there are bad eggs in every industry - please do consult with an attorney and move on - there are many good checks and balances in place during the course of a transaction that this is certainly an exception to the norm. I am so sorry you got stuck with these bad circumstances. Good luck finding the next home of your dreams.
Web Reference: http://www.cooperjacobs.com
0 votes Thank Flag Link Thu Feb 25, 2010
So sorry to hear. Even if you gave more information it would not be prudent to comment here. You need an attorney to get involved and the sooner the better. Your earnest money should be fine though.

I would ask as many questions as you can think of via email (documentation) to your agent as to what was said to him/her and when. And get your agent to do the same thing with the seller's agent via email. Then meet with an attorney (or two) to see if they can help.

Sorry this happened to you but there may still be hope - best of luck.
Web Reference: http://www.homehounds.com
0 votes Thank Flag Link Wed Feb 24, 2010
Pen this is a terrible story. I am so sorry to hear about your situation. As far as honesty when selling the property, it is required the agent list if 3rd party approvals are required. I would be so angry if I found out after writing an offer, none the less, at closing. There most likely is some recourse you can take, an attorney is your best bet in this situation. Unfortunately a lot of brokers are not involved in or even look at their agents files, which I can imagine you are 1 of many that have had problems similar to this. I also bet we will see a flood of legal issues as the dust settles in the market over the next couple years. As for the earnest money, I would have your agents broker get involved and see if they have any luck discussing the matter with the other broker. If they can settle the issue you will save a lot of time and money on that side of things. If you need to go to court over earnest money it could be a long haul, 18 to 24 months to resolve, court costs, etc. Hopefully the earnest money issue can be settled immediately. Then you can follow up and pursue any legal recourse regarding the other issues surrounding this home and the purchase.

Please keep us posted on how and what unfolds. Good luck to you.
0 votes Thank Flag Link Wed Feb 24, 2010
Confer with attorney

Seller may not been up front with listing agent may not have known all particulars

Sales offer governs on how you can have earnest money returned or breach of contract by seller

Title company should have been aware of all this prior to close date . It could be matter of day sort all all this recommend contacting title company experts in resolving these issues.

Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Wed Feb 24, 2010
I agree with Dan and Marcey. Your ernest money should be able to come back immediately from the escrow company. As to anything else, there are several issues and after a long conversation with your agent, you probably will want to consult with an attorney. Good luck to you and if your agent does not have an attorney to recommend to you, I would be happy to refer you to one.
0 votes Thank Flag Link Wed Feb 24, 2010

I've read all the very good points here raised by agents around the country. Again - I agree, consult an attorney.

As for your earnest money, who was the check made payable to? In TN it would NOT be to the other contracting party (i.e. the seller) so the seller has never seen that money, it is held in a real estate company's escrow account. They can easily refund upon a release signed by the seller and yourself.

If the seller refuses to sign you may be able to sue for specific performance. Because the seller has never received and will never receive that money there's real no incentive to not sign and face a lawsuit rather than to sign and move on.

If the seller had a rock bottom price to prevent doing a short sale that should have been a warning sign that the seller may have been delinquent.

While it seems that the seller is in your words, "protected", in this scenario, they really aren't. They will still face repercussions from their own actions as well. However, I know that doesn't make you feel any better....

Step 1 to getting your earnest money back - find out who has it.
0 votes Thank Flag Link Wed Feb 24, 2010
I am a Realtor & an Attorney licensed in OH only, so I can't help you. You need to consult with a local Attorney who handles residential real estate matters. You are in a very complex situation. You need to have your Attorney sort out what happened & all of the parties who are responsible for your situation.
0 votes Thank Flag Link Wed Feb 24, 2010
Jean, the title company wouldn't know about the loan issues until a payoff was received. They probably should have known about the bankruptcy issue, depending on the counties involved.
0 votes Thank Flag Link Wed Feb 24, 2010
This is a legal question, and as mentioned you should see a real estate attorney. A bankruptcy attorney could also probably easily assess the bankruptcy situation, but if it was a Chapter 7 bankruptcy filed over one year ago it is somewhat unlikely that the bankruptcy would be holding things up.

As to your earnest money, someone should be holding that, and I would think you would be entitled to it back as long as you were able to perform (again consult an attorney about that). I doubt the refund of that will be an issue. That is probably the bulk of your money, and it may not be worth suing for the balance.

Finally, your agent is most likely owed a commission by the listing agent. IMHO, he/she should pursue that on these facts.
0 votes Thank Flag Link Wed Feb 24, 2010
As explained, this is a most distressing situation....With situations like this there is almost always more to the story...........This additional information can change things greatly!

To get to the bottom of this, we would also jump on board with those who have expressed your need to refer this to an attorney for their input.

Good luck
0 votes Thank Flag Link Wed Feb 24, 2010
Hmm... did you go into this w/o Buyer's Attorney? without Buyer's Agent representing your side? Who drew the closing papers? This is very strange.

If you signed Buyer's Agent agreement before you got into this, your Agent would be legally responsible for disclosing any knowledge about the transaction before such mess can occurs and, typically, when you do have a real Buyer's Agent this does not happen!

If you hired a Real Estate Attorney before you signed the documents, you should question your attorney what he/she has done to protect you and what will they do to recover your money? If that does not work consult with your local Bar Association on how to go about clearing this mess up.

Typically, when the transaction can not close due to the Seller's failure, than all of of the Buyer's deposits shall be prompty refunded. The money spent on inspection, typically, are not refunded.

My advice to any real estate buyers to avoid any possible mishaps: always have a Buyer's Agent agreement before moving forward with any Offer and always hire an Attorney to work on your transaction! Both are responsible to represent your interests and not the Sellers.
Web Reference: http://boc-re.com
0 votes Thank Flag Link Wed Feb 24, 2010
I would recommend attempting to go through the chain of command, and only pursing the legal side if you cannot resolve it. If you and the Seller were represented by the same Realtor/Broker, I would suggest contacting the Listing Agent's Broker directly to make an attempt to resolve the financial issues.

If you were represented by another Realtor, I would make sure your Realtor's Broker knows what has happened.

If you cannot get results or satisfaction, then small claims court is an option that would not require you to spend additional money on an attorney. Make sure you have as much written documentation, dates, and specifics in writing. If you make calls to these parties, take notes, write down who you talk to, what they say, etc. Document, document, document. It is very unfortunate that you have had such a negative experience.
Web Reference: http://www.SherriElkins.com
0 votes Thank Flag Link Wed Feb 24, 2010
Because there's more involved here than just getting your earnest money back (It should probably be on its way back to you by now). You'll want to contact a real estate attorney asap.
0 votes Thank Flag Link Wed Feb 24, 2010
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer