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Theleinus, Home Buyer in Santa Clara, CA

What are protection to buyer after remove contigency on a short sale occupied by renters? I need to remove contrigency in a few days. Property is a

Asked by Theleinus, Santa Clara, CA Tue Jul 13, 2010

short sale in CA and currently occupied by renters. I am requesting renters move out 5 days before closing. What if they don't move? Can I cancel the contract because I'll never know when the renters move? What if I find out new problems at the final walk-thru? Can I cancel the contract? Can I request withholding money in escrow to fix the problems? If they are big problems (electrical, plumbing; fire), can I cancel the contract?

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This was an interesting thread on the purchase contract. Here is one way to have written the contract.
1) Require a Tenant Estople Statement
2) Put in a contingency for tenant vacate and tie walk through after the tenant has moved out
3) Require the property to be vacant by a specified time after bank approval
4) Use the short sale addendum
5) Get inspections and have a contingency for them

Of course the listing side can counter any of these demands, but at least you have put in some methods to minimize your risk.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Sun Sep 5, 2010
Hi Mathew, I appreciate everyone's opinions/answers to my question/contract here. No one in here gains any material benefit by contributing here. I am responsible for my own actions based on my own judgment, and would NOT blame anyone here.

Let me ask in a different way: based on real case experience, please some one in here can tell me:

In a short sale contract C.A.R. Form RPA-CA 4/10 with NO written statements about tenants and with
1) NO box is marked in paragraph 5
2) NO revise dates in paragraph 16

If tenants are still on premise by close of escrow, case questions that anyone in here has knowledge of:
1) Buyer send Notice to perform to seller and eventually contract cancel and deposit returned.
2) Buyer send notice to perform, tenants moved out, and contract moved forward to sign of escrow.
3) Buyer send notice to perform, go to court/arbitration, and court/arbitration decided.
0 votes Thank Flag Link Wed Jul 14, 2010
Hello all, I just talk to my agent. This is completely off the wall. These are answers he claimed he got from an Real Estate attorney :
1) Regarding para 5.C "seller may be in breach of this Agreement" when renters (or even owner) still occupied the house: buyers can sue the seller but CANNOT cancel the contract. Buyer can sue the seller until the house vacant and then sign off escrow and the sue the seller if wish.
2) Regarding para 16 "house is not maintained": same as above, buyer CANNOT cancel but can sue seller for
breach of contract.

The key here, I didn't ask but guess, is "breach of contract". Once a party breach of contract then the only course of action is to sue (the contract is still in effect). No matter it is a regular sale, short sale, or REO.

The bad part of a short sale is the seller does not have much interest as in a regular sale, worse when the house is occupied, and worst if by tenants. The bank can decide on the price but does not involved in the contract. It can choose to do as it wishes.

I search for "cancel this agreement" in the contract and found at: 3.H.(3) Loan Contingency, 3.I Appraisal Contingency, 6(4) Statutory Disclosures, 10.B & 10.D Property inspection, 14. Remove of contingency, 14.C Seller right to cancel, 14.E Right to cancel if the other fail to sign close of escrow (in agree with Micheal here), 14.F Effect of notice of cancellation (in a cancellation, both have to sign to release deposit or have to sue).

So, basically, once I signed remove contingency then I can request seller to perform, if the seller "breach of contract" then I can sue him, but I cannot cancel. But then I don't understand

14.E Close of Escrow: before seller of buyer may cancel this agreement FOR FAILURE OF THE OTHER PARTY TO CLOSE ESCROW pursuant to this agreement, seller or buyer must give other demand to close escrow
If I refuse to sign escrow, where is in the contract saying that seller can collect the deposit (I am having a headache looking for it).

I told my agent about term in an addendum and he said the seller or he will not agree to:
1) House is vacant on Jul 1 or buyer will cancel the contract (seller will not agree)
2) Money from broker commission is withhold to repair new damage to property (he will not agree)
0 votes Thank Flag Link Tue Jul 13, 2010
Hi there.

I would not recommend listening to anyone on here who discusses contract law unless they are attorney. No licensed real estate broker or salesperson is qualified to discuss contract law without also being an attorney - in fact, they can lose their license for doing so.

Refer to your purchase contract, as each one is written differently. Also, the bank may have issued their own specific addendums, which is usually the case, and can change the terms in the main contract. If so, you should consult a real estate attorney. Not even your agent is legally qualified to answer such questions...its a shame but true.

There are parts of the purchase contract which require the sellers to maintain the property and provide the home vacant at the close of escrow. It is usually the sellers problem to deal with the eviction of their tenants unless you specifically accept that responsibility in the contract.

The contract will spell out a lot of the issues you are talking about so I suggest giving it a thorough reading. Your agent might also be able to provide a California Association of Realtors guide for the purchase contract so you can more easily understand what you are reading.
Web Reference: http://www.atlistings.com
0 votes Thank Flag Link Tue Jul 13, 2010
A little further clarification might help. Where you see "may be in breach of this agreement": it simply means that the contract becomes VOIDABLE. In effect, if the issue is not resolved to your satisfaction you can go ahead an VOID (cancel) the contract and get your deposit back from escrow. This applies to both sides equally. If the terms of the contract (including any addenda) are not met you sensibly try to work it out first. If that fails you can cancel and move on with your house hunting.
Re the approval from the bank. Do you know if there are any 2nd or 3rd lenders involved? If so you still have to get a seperate approval from them.
Re the Aug 14th foreclosure date. If the short sale is moving foreward and your agent is on top of the job it is easy to get this date extended.
Bill
0 votes Thank Flag Link Tue Jul 13, 2010
Hi, first if the home ends up in foreclosure, too many short sales do, you will be released from the contract and your deposit returned.

My office has a short sale that went to foreclosure auction ( the different bank depts do not communicate well) and we were able to have it stopped for thirty days to work out the silliness and close the short sale. What I am saying is, the close of escrow can be very fluid if all parties are exhibiting due diligence to execute the intent of the contract.

Any home you were to purchase could potentially have an " accident", as you put it, so don't fret over hypothetical issues.

You have no worries about contingency issues if the seller is not upholding their end of the agreed upon points.

Delivering as seen
Unencumbered
Free to enjoy

Without those little points no money will exchange hands if you say NO, unacceptable.

If you want to quantify a value for your items of concern then have your agent write addenda that states they will have their commission (or portion of) held in escrow until (YOUR ITEMS) are addressed. Have it signed and deliver it to escrow as an instruction. This will give you some certainty that your issues are addressed!

Also, I would have your agent go over the walk through doc with you. Now.

Sounds really tough, right! Oh well. We are required to show good care to our clients as written in the ethics we sign on to. For some 'putting their money where our mouth is' becomes necessary.

Michael
0 votes Thank Flag Link Tue Jul 13, 2010
Thanks Bill. yes, I will not sign until the renters move out. I don't the the approval at hand but I don;t remember anything in it mention about an offer. It basically saying how much the minimum cash the bank will accept, how much seller and brokers will receive. So, if no one will pay then what good does it make when I request withholding money in escrow? it is not the seller's money, the bank is not the owner. I don't understand! It seems to me that, before signing remove-contingency, the best course of action would be

(1) writing an addendum in an affect "renter move out by Jul31 or agreement is cancel; seller to fix all problems discover by final-walk to ensure property in same condition or agreement is cancel". I imagine that they would reject and contract will fail
(2) crossing my fingers and pray for the human's good heart.

I don't want to do (1) because I want to buy. I am scared to do (2) because accident could happen. :-(. What if I do (2), accident happened, I request fixing with no effect; seller is angry because his house is foreclosure and would NOT sign release escrow. My deposit would sit in title company?
0 votes Thank Flag Link Tue Jul 13, 2010
Hello again,
You are obviously capable of understanding what is written in the contract but obviuosly can't be expected to know the implications when the terms are not met. In reading you messages it seems you have 2 major issues so I'll try to deal with them:
1. If your contract requires that the property be vacant prior to close of escrow then I advise you do not close until it is vacant AND ALL LOCKS HAVE BEEN CHANGED. Otherwise you will become a Landlord with problem tenants on day 1.
2. You would be wise to assume that no repairs will be done by either the current owner, or the Bank. Remember, the bank does not, and never will, own the property.
QUESTION. Has the bank agreed in writing to your offer? If not then all these other issues are academic. Short sales can work but are not straight forward as no 2 banks deal with them in the same way. In additiion, if there is more than one Lender involved it becomes vastly more complex as a 2nd lender will often not agree to the Terms negotiated to the 1st.
Good luck, Bill
0 votes Thank Flag Link Tue Jul 13, 2010
Thanks Micheal! My agent is trying to push. Wachovia bank might foreclosure by Aug 14 if the deal fail. My rate 4.25% lock is expired on Aug 9 (I don't want to loose the lock). "may be in breach of this agreement": if there is no addenda then what is meant by MAY in this case (I just remember, "What 'is' is by our previous president). Is it a definite "breach" or is it "decide by court"? What is the best way for me to find an Real Estate attorney? I already spend for inspections (prop, termite, roof), I wish to know my options before spending more on pool inspection and appraisal; or I just cancel.
0 votes Thank Flag Link Tue Jul 13, 2010
Hello Bill, the contract only spells out things should be done: para 5.C.(renters move out or seller MAY BE IN BREACH of agreement), para 16 (final verification to confirm property is maintained) but it does not say what are my choices of actions if renters didn't move, or property is NOT maintained. Is my agent correct: no one is going to pay for fixing new damage (example: a light was working in the report and now is not working).
0 votes Thank Flag Link Tue Jul 13, 2010
follow up! Uh Oh! You posted while I was replying. You need to prepare for the worst. Bill makes a fair observation that a Real Estate attorney may be necessary.

I would call the managing Broker who is representing you and put them on notice of your concerns. This may prove to remove the potential problem.

I wished you could have come to this forum for advice BEFORE you wrote your offer.

There are going to be million questions coming about your situation.


Good Luck and remember we are all here as a community to help consumers like you!

Michael
0 votes Thank Flag Link Tue Jul 13, 2010
Hi Theleinus, All residential CAR purchase contracts state..."Note to seller: ....may be in breach of this agreement" if the renter does not vacate at a predetermined date. The word -may- means that addenda can cause change though.

Your walk-through is designed, in theory, to alleviate your question.

Typically, if the property is not delivered in the state in which you agreed to purchase it you have the right to cancel if the damages/conditions cannot be mitigated. Actually, you would want to ask for remedy instead (witholding $ in escrow is one option of many) and proceed, as agreed, if you still want the property.

Andrea rightly claims this is dependent on your contract and your Realtor or agent should be able to clearly explain this to you.

I hope you have your own representation as a buyer of a short sale/rental property.

You're close, Congratulations!

Michael
0 votes Thank Flag Link Tue Jul 13, 2010
Hello Theleinus,
The questions you ask are fully answered by specific clauses in your Purchase Contract. If you need to request changes to the Contract it needs to be done in writing with an Addendum. Once you have removed all contingencies you either complete the deal on the terms written into the Contract, or place all or part of your down payment at risk.
Your Agent should be able to explain all this in detail. If you don't have an Agent and are not sure you understand the Contract Terms then I can only wish you good luck. A Real Estate Attorney is your other alternative.
Bill McCord
0 votes Thank Flag Link Tue Jul 13, 2010
Hello Andrea, thanks for an prompt answer. We received approval from the bank; waiting for inspection reports. Our contract has just the usual items and no special written request. It has Item 5.C. Tenant-occupied property (vacant 5 days prior to escrow). The renters know it is a short sale and they didn't pay rent last month. They are suppose to move out by Jul31. What if they don't move? Am I stuck waiting for them? What if they moved but mad new damage (intentionally because they didn't like the owner) to the property (I only worry about big things: electrical, plumbing, fire...)? Who would be responsible for fixing them? Can I cancel? My listing agent represents both sides (it is a mistake from us to work with him). He said I cannot cancel. He said that the seller will not spend any money fixing new problems, and the bank will not either. He is trying to protecting himself when I ask these questions.
0 votes Thank Flag Link Tue Jul 13, 2010
Hello Theleinus, at this point in your transaction, you should have already performed a home inspection to uncover any problems. Everything you want, they way you want it to be should also have been written into your initial purchase contract/offer. Have you received formal short sale approval (from the lienholder(s) in writing? Bottom line, whether or not you can cancel, request withholdings, etc. depends on how your contract is written. Have you consulted the real estate agent that wrote the offer for you?
0 votes Thank Flag Link Tue Jul 13, 2010
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