Foreclosure in Sacramento>Question Details

Wendy O'quinn, Home Buyer in Sacramento, CA

Does a buyer of an REO have any recourse if bank pulls out of deal after we invested money into the property?

Asked by Wendy O'quinn, Sacramento, CA Mon Apr 7, 2008

There have been several delays out of our control including delaying our house inspection because water and power were switched off at home so had to re-schedule inspection. We also paid out $1500 in repairs to property to satisfy a health & safety inspection required by Sacramento County so that we could access a housing grant on the downpayment. Now we are informed that our CalHFA loan is caught up in a backlog of applications and they are running 10 days behind schedule which will take us beyond our closing date. We have already had one extension on our closing date and bank is refusing to give us another extension. Bureaucracy gone mad will lose us our house and about $3,000 in costs.

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The banks contracts are written by the banks lawyers to be extremely anti-consumer. However just because a contract is written by crafty lawyers for big banks does not mean that it is legal. An attorney representing the consumer in this case might argue that the bank is obligated to sell you the property under the terms of the contract because you have made good faith efforts to meet your contractual obligations. An attorney might argue on your behalf that some of the delays were caused by the seller having the power and water switched off at the home. An attorney might argue on your behalf that the seller was aware of and approved your expenditures for health and safety repairs and is obligated to either sell the property to you or compensate you for the repairs, despite papers they made you sign to the contrary. Your attorney might argue that the bank in this case is perverting the spirit of the contract by preventing the completion of the sale now that you are finally able to close. Your attorney might ask for a jury trial (try to find 12 normal Americans who would side with a mean spirited foreclosure bank)

Before your attorney did any of that, the attorney might approach the bank and politely ask if the bank would like to avoid being sued for specific performance (to force them to sell to you as per the valid parts of the contract)

I speculate that many of the clauses that are in todays bank addenda are not legally enforceable and would not survive a jury trial in court. The banks probably know this but they also know few people will challenge them, some bank foreclosure departments think and act much like any neighborhood bully.

If they refuse to sell to you can you file a lien against the house for the $1500 in repairs? I'd ask the attorney.

It could be that the bank asset managers are being nasty to you as a strategy to make you put pressure on your lender. If you are represented by your own agent in this transaction ask them to get their brokers advice on what to do next.
1 vote Thank Flag Link Mon Apr 7, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Hope your deal closed. If not,
The bank is between a rock and a hard place. Say they pull the property. After reducing price and marking to market, plus finding another interested party, they could eaily loose another 5-10%. This, they are painfully aware of. I have seen deals go 4 full weeks past close of escrow without issue. The bank will scream and huff and puff but as long as your loan officer takes it on the chin and fields calls from the listing agent, and everyone is given status regularily all is usually well.
Generally you would not have recourse, you would have to rely on the bank being logical. They have more than you to loose. Not to scare you but there may be a per diem clause for not closing on time.
And FYI, the buck cannot be fully passed to bureaucracy, your loan officer should have verified with CalFHA their turn times and advised your Agent according to write a longer contract. They were running 3 weeks for approval even back in 2007 when I last did one. Can only imagine them now.
0 votes Thank Flag Link Wed Apr 16, 2008
Hi Wendy,

I am so sorry to hear your predicament but the way you explained it, your recourse is very limited because you have so many days to perform. If the bank did not want to give you another extension, you cannot force their hand to do so. In times where there is bureaucracy or loan mishaps involved, I always urge the selling agent to ask for a longer extension than be stuck and totally out of contract. I wholly sympathize with you but I think the bank holding the property is sticking by your contract and like Elizabeth said, they (the bank people) are the only ones who can give this deal a GO.
0 votes Thank Flag Link Mon Apr 7, 2008
Oh, my gosh. This is terrible. How long did your loan officer give you to start with? When I write CalHFA loans, I do so with 45 days to close, just for that very reason! How awful. The last loan I did on an REO involved a $100 per day penalty for running over the closing date. The loan officer, bless her, picked up that cost because it ran seven days past the close date due to a lender snafu.

You are so close now. Hang in there. Talk to your agent and loan officer. Hopefully, they can find a solution for you. Banks often will extend if persuaded.

I totally understand what you mean about bureaucracy gone mad. And it's so frustrating because it probably seems like you do everything right yet you still eat in the shorts. And that's not fair.
0 votes Thank Flag Link Mon Apr 7, 2008
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