Home Buying in 94538>Question Details

Rhea, Home Buyer in Fremont, CA

We had put in an offer on a bank owned property in November 2008. We got outbid. In january, our agent got

Asked by Rhea, Fremont, CA Fri Feb 13, 2009

back to us saying that buyer # 1 was unable to perform. Here is the sequence of events:
1. Realtor informed us that a 24 hour notice was generated and sent to buyer #1 asking them to perform.
2. Realtor repeatedly informed us that the contract with buyer #1 was null and void due to failure to perform.
3. Realtor presented our offer to the bank .
4. The bank accepted our offer pending release of contract from buyer # 1.
5. Due to buyer # 2's concern about buyer #1 not releasing contract, realtor advised an addendum to the contract of buyer # 2 which states Removal of contingency subject to release of escrow funds from prior canceled contract
6. Now buyer #1 is ready to close. Realtor asks buyer #2 to walk away by signing a release of contract.

I should also point out that the seller and buyer are working with the same real estate company.
Can the bank engage in a contract with buyer # 1 even though they are in contract with us?

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Answers

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I have a real problem with what you said that "Realtor repeatedly informed us that the contract with buyer #1 was NULL AND VOID due to failure to perform. " If there is no signed cancellation of contract, it should still be in effect. All real estate transactions have to be in writing. It makes me nervous that a realtor would say that. It's not for him/her to make that determination.

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.
0 votes Thank Flag Link Sat Feb 14, 2009
It sounds as if your contract was accepted subject to and contingent upon the cancellation of offer #1. This gives the bank/seller the option of continuing with #1 or canceling and going with #2. It is customary to wait for #1 to mutually cancel so that there is no claim by #1. Offer #1 is the most convenient to the seller as they have probably gone through their inspection and other contingency periods. I know it is frustrating but it sounds like you should make sure the bank knows you are still interested and have them accept your offer as a backup (if they will). Continue to look...you did the best you could.

Jeff and Cheryl Fox

Properties Plus
818-995-9108 Office
800-917-8080 Toll Free
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Email: mail@jeffandcherylfox.com
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16133 Ventura Blvd. 7th Floor
Encino, CA 91436
0 votes Thank Flag Link Fri Feb 13, 2009
Rhea:

Glen is correct – the banks can AND will do anything they want to. It’s unfortunate, it’s not necessarily even legal, certainly not nice, but it’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 #2’s contract, it simply means that buyer #2 is not going to proceed by removing contingencies until buyer #1’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, I’d start by asking for a meeting with the broker to sort things out.
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Web Reference: http://www.carlmedford.com
0 votes Thank Flag Link Fri Feb 13, 2009
Rhea,

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.
0 votes Thank Flag Link Fri Feb 13, 2009
Rhea,

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.

Good luck!

Glen Hagen
Web Reference: http://www.GlenHagen.com
0 votes Thank Flag Link Fri Feb 13, 2009
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