The bank obviously accepted your offer PENDING RELEASE OF CONTRACT --- which suggests that you are in back up position until Buyer 1's contract is cancelled.
You say Buyer is "ready to close." How close? Did they release all their contingencies? Have they signed their documents? Has the seller signed as well?
Yes, the bank can engage in a contract with each buyer: Buyer 1 in first position until the contract is cancelled; Buyer 2 in second position subject to cancellation of contract with Buyer 1.
Ask for written and signed proof that the buyer has satisfied all conditions including the Notice to Perform within a certain period of time.
Don't sign that release until you are absolutely sure, and that the concerned parties have provided factual information that the contract with Buyer 1 is being enforced. Get your agent's broker and the listing agent's broker involved.
Jeff and Cheryl Fox
800-917-8080 Toll Free
16133 Ventura Blvd. 7th Floor
Encino, CA 91436
Glen is correct â€“ the banks can AND will do anything they want to. Itâ€™s unfortunate, itâ€™s not necessarily even legal, certainly not nice, but itâ€™s true. They play by their own rules, like it or leave it.
IF the bank never received an executed copy of the Release of Contract, then the deal with buyer #1 could be construed as still alive, especially if the funds were never released from escrow. IF buyer #1 kept the contract alive and is now willing and able to close, buyer #2 may not have much recourse. As for the Addendum to buyer #2â€™s contract, it simply means that buyer #2 is not going to proceed by removing contingencies until buyer #1â€™s deal is officially declared to be completely dead. It sort of announces the obvious.
In this case, it appears the deal was never dead for buyer #1.
However, if buyer #2 is being asked to sign a release of contract, that means that someone somewhere is recognizing that buyer #2 still has a valid contract. If that is the case, you could conceivably continue forward with the contract, hire a real estate attorney and try to win the day.
Since this is with two agents under one broker, Iâ€™d start by asking for a meeting with the broker to sort things out.
Working with banks and REO companies can be frustrating, particularly as we as brokers may be discussing a contract with several points of contact for the same property. It sounds as if the bureaucracy of lots of well-intentioned people at the bank slowed down, or perhaps even overlooked performing on the contingency in your contract. If funds had been released to buyer#1, you would have no issue. The monies held by the bank or any escrow party for buyer#1 constitute an equitable interest by buyer#1 on the property.
There were also dates attached to both contracts; dates that stipulate when certain things were to occur. If those dates come and go, and the conditions have not been met, the underlying contract is voidable. The problem is that buyer#1's release was not obtained.
Ultimately, the bank's failure to act in a timely fashion has placed you in this position. They could refund buyer#1's deposit, but they may be reluctant to do so at this late date. Lastly, if contract #2 were substantially better, things may have ended differently. You might consider consulting an attorney to establish what recourse if any you have now.
The bank can do whatever it wants to do, but you may have legal recourse. I would immediately ask the council of a knowledgeable Real Estate attorney in your area if you want the property.
I would not sign any release unless you were compensated enough for doing so.