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.
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.
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)
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.
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.
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
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.
(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?
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
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!
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!
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.