I'm sure you heard from other agents by now and what I have to say is old news. Anyway, if you are truly set on that particular house then you will have to go through the short sale process. This assumes that the bank okays the short sale. If on the other hand you would prefer to move on and find another house to your liking then you may be able to terminate your contract on the house in question and get on with your search.
Assuming that the house was not originally listed as a short sale property then when the seller put the house into the short sale process he changed the terms of the contract between the parties. In order to preserve the contract the seller should have presented you with an addendum to the existing contract that stated the new condition (the short sale) that required your signature in order for it to be binding on both parties. If an addendum or other form of agreement was not established between you and the seller then the seller broke the contract and you are entitled to terminate the contract without losing any deposits or good faith money.
I hope this helps you out in this unfortunate situation.
Prudential Choice Properties
I feel like for all of our trouble we should at least get a reduction in the sale price considering our offer is a little above market value since we wanted that house so badly. I was under the assumption by our agent that it could be a smooth process since we're under agreement but now I'm learning that may not mean much and it could be about few months until we close. I dont know at what point we walk away and wait until the spring, or if we should keep hanging on through all these ups and downs. Had we known it would be like this we would have passed on the house but now that we are living among boxes and our life is packed up, we just want to get in there.
Sounds like the next step is to circle back with our agent and see if she can guide us through this new process or if we should ask for additional help.
All great information given to you here. I am a local Real Estate Agent who specializes in Short Sales and Foreclosures and yes - there is a process for the seller to go through - the most important part to the process is that the seller is working with a Real Estate Agent that can assist them in negotiating the short sale with their bank. I am really surprised that this was not caught before. I wonder if this was a 2nd Lien? It sounds like it. If the seller is working with an educated real estate agent to assist them - it will take approximately 90 to 120 days to negotiate with the 1st and 2nd lien for the short sale but this is if they know what they are doing and it the work weekly to stay on top of the lenders and keep the file moving forward. It is the seller's choice if they want to have their real estate agent negotiate the sale or if they would like to hire a 3rd party negotiating company to do this for them - this choice is the best one unless the Real Estate Agent has gone through short sale training called: CDPE "Certified Distress Property Expert training - But, in most cases if the sellers choice is to use a 3rd party negotiating company there is a fee to the buyer between 3000 and 5000.00 at settlement but you know that the short sale is being handled properly - It does not sound like the parties involved have any experience in this area or the lien would have came up during the listing process in my opinion. Short Sales will sell for Current Market Value in as is condition or between 5 and 15% below current market value - nothing less - so it will be important for you to have your Buyer Agent pull comparables to see what the true market value is - if this was not done prior to making your offer. If your current offer is not at current market value or close to it - the seller's lender will not accept it and it will be a waste of your time to wait around. If this is your dream home as you have stated and you are close to current market value then even though it does take time to process a short sale - all good things take time and it will be worth it to wait.
I hope this information was helpful to you and good luck!
Since there is the additional $70K lien, that lienholder will need to be paid - even in a short sale. In a short sale, all lien holders (the mortgage holder and any additional liens on the property) have to ALL agree to the short sale. Which means, the $70K lienholder will have to agree to take less than the $70K they are owed (since you state the seller does not have enough to cover the full debt). You stated they were not willing to do this which means the short sale will not go through - unless they change their minds and agree (in writing) to accept less than the $70K they are owed.
I am not sure of your question. The bank does not have to honor the current agreement of sale. However if the offer is reasonable ( and it sounds as if it is) then the bank will likely accept the offer.
People seem to think the short sale process is some kind of crap shoot that defies logic. That's just not the case. The bank wants to sell and if all the information is provided and the offer is reasonable then the deal should close. If you want to pay pennies on the dollar for a house that's not going to happen. I think that when deals don't close either the offer is unreasonable or someone has not provided all the right information. It's easy to blame the bank as nobody can talk to them to verify what has actually happened. The short sale process is a slow and painful one but if you have all your ducks in a row ity should not take too long.