Home Buying in 90012>Question Details

Alyce Ayling, Home Buyer in Menifee, CA

Realtor required us to complete escrow in less than a month, a lot of contradictions as to why...

Asked by Alyce Ayling, Menifee, CA Mon Dec 3, 2012

We had a lender & were pre approved for a loan, made an offer on a house in Calif, was a short sale & we waited 9 weeks for bank to approve, we got the go ahead. The seller's realtor said we MUST close escrow by Nov 29, 2012 (approval came around Nov 2..holidays in Nov were: Veteran's Day & Thanksgiving) Realtor said the bank refuses any extensions at all, so no deal if past Nov 29. Everyone on our end rushed around as fast as possible for the deadline. We never knew if we would get the house or not. Finally, after paying for several things including appraisal & inspection,pool repairs to meet inspection our lender said there just wasn't enough time. We begged for an ext from the seller's realtor. She says it's not the bank that's preventing it, it is the seller because he wants a tax break from the 2007 tax act that will expire Dec31. I work for a CPA & he says that law does not even affect Calif because CA is non recourse anyway. It seems like the realtor lied from the beginning.

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Usually it's the owner or lender on the property ( Not your Realtor) who has the requirements for close of escrow dates. If your Realtor let you know this it's because that requirement was part of the listing information.
Since you are getting so many contradictions,the only way to get to the bottom of it is to hire a lawyer...not sure you want to go that far.
0 votes Thank Flag Link Thu Nov 19, 2015
Technically, once your close of escrow date has passed, seller has some control to extend. There are ways around this. If you still have your contingencies to at least protect your deposit money. Have you removed all your contingencies in writing? Ask your Agent to show you your contingency periods and do what ever you can to save your deposit - even if it means waiting for the turn of the year. If you requested an extension and they didn't approve it, you can cancel and try to get your deposit back but you only have a few days before you are issued a notice to perform.
0 votes Thank Flag Link Tue Dec 4, 2012
Hi Alyce,

Enough has been said about the path of the transaction so I'll just shine a light on a few points:

1) In your question you stated:
"We begged for an ext from the seller's realtor. She says it's not the bank that's preventing it, it is the seller because he wants a tax break from the 2007 tax act that will expire Dec31. I work for a CPA & he says that law does not even affect Calif because CA is non recourse anyway."

I think you may want to talk to your CPA again. In CA, I believe the non-recourse protection only applies to purchase money loans; if the Seller ever refinanced during ownership non-recourse protection is gone.

Now, come Jan 1, 2013 Senate Bill 1069 [ Cal. Code of Civ. Proc. § 580b(c) ] kicks in whereby Homeowners who default on their refinance loans (one-to-four residential units) are protected against personal liability for any deficiency following foreclosure. The anti-deficiency protection, however, DOES NOT extend to any cash out in a refinance. This new law only applies to refinance loans or other credit transactions used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, that are executed on or after January 1, 2013.

The federal Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their PRINCIPAL residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in years 2007 through 2012. California has a similar law enacted April 12, 2010, SB 401, called the Conformity Act of 2010 covering January 1, 2009, and before January 1, 2013.

2) In your reply to Kawain you stated:
"There is no paperwork that I signed stating a deadline. Back in August, when we originally signed a contract to buy it, it states escrow will be 45 days from acceptance, however we had to wait until the bank approved the short sale, which was only recently"

Ask your Realtor® for a copy of the Short Sale Lender's Approval letter - these always have due dates! The 45-day close of escrow clock starts once your Realtor® receives a copy of the approval.

3) I really do not understand why the Seller is pressuring you; personally, as a Seller in a distresses sale position I would simply change the listing status to "Pending, Show for Backups" with "Cash Only" and "Escrow must close by 12/31/12" disclosures to increase the likelihood of closing before the end of the year just in case you are unable to do so. Wouldn’t this be best for everybody involved?

In any case, good luck! -Steve
0 votes Thank Flag Link Mon Dec 3, 2012
Thank you. I was under the impression, however, that refinancing to take money out always WAS taxable if you went into foreclosure, I will definitely look into it further. The house was never a rental, I'm aware of the principal resident rule. We've just been given vague & contradicting info all along, which only adds stress & these deadlines don't help speed anything up anyway.
Flag Tue Dec 4, 2012
#1 - receiving short sale approval in just over 2 months is excellent. Most likely, the seller's realtor (listing agent) quoted Nov. 29 because the bank's approval letter stated that date (you should receive a copy of it). Your frustrations and reasons are more than legitimate. A reasonable request should receive a reasonable response. As others have stated, unless they are being offered a cash deal--no one else could close faster than you. I'm sure you've tried sharing the information that their tax concern is irrelevant--regardless, with their focus on Dec. 31, would you offer to pay a penalty if you could not close before then? By all means, try approaching them again (through your agent, and/or up it to the broker).
0 votes Thank Flag Link Mon Dec 3, 2012
It's hard to write everything in this forum. We were told at first through emails that the bank will not extend the date of 11/29. None of our paperwork states this. When 11/28 came around & I started questioning this extension, the seller's realtor became very irate & defensive & said it has nothing to do with the bank, it is only because the seller wants to take advantage of this "tax break", which I've subsequently proven it is erroneous. She said the seller has every right to refuse an extension. These are her exact words.
Flag Mon Dec 3, 2012
Dear Alyce,
I'm sad to hear that you are going thru all this.. I would need a little more info:
1. Do you have a copy of the short sale approval duly signed by the seller? What is the deadline per that letter? If you don't have that letter ..demand it.
2. Have your released any contingencies yet?
3. What was the number of days to close escrow per the purchase contract?

Seller can't just cancel the contract by himself unless you breach the contract. If you have all the intention to close and paper work to support..they can't cancel. If you exceed the timeline..seller would have to give you notice to perform..which gives you additional 2 days. If you exceed the Close of escrow time ..then they have to give you demand to close escrow which gives you 3 more days..

Regarding the agent's rude behavior and lack of communication.. you or your Realtor talk to the listing agent's broker and address this issue.

Hope this info helps...Good luck!
Shivani
408.480.2854
0 votes Thank Flag Link Mon Dec 3, 2012
I received a copy of the short sale approval letter after my lender demanded it. It was unsigned. It is the only document that mentioned a date of 11/29, & the letter only states that the seller has until that date to respond back to the bank. Docs re: contingencies we signed approx 2 weeks ago or more. The purchase contract signed back in August, before short sale approval says escrow to close 45 days after acceptance. We were notified of the approval around Nov 2. I feel the seller's realtor is bluffing, bullying us for whatever reason. I see nothing about the bank pushing for this unreasonable deadline & the "tax law" is erroneous. Thanks, I appreciate your input.
Flag Mon Dec 3, 2012
Hello Alyce,

Sounds like you accepetd terms that were not realistic. Unless you are paying cash escrows very rarely close in less than 30 days. There are just too many variables. In my opinion it does not matter what the reasons are I would NEVER have my buyer eneter into a deal where they are being asked to close a lender financed escrow in less than 30 days.

You opened escrow duringa a month with TWO FEDERAL HOLIDAYS. Thsi means banks were closed at least two days as well as escrow. Not to mention people tend to take short vacations over the Thanksgiving Holiday.

This dead line was simply unrealistic, I am afraid your agent had his/her hands tied from the word go, and had very little control over getting this very very unrealistc deadline reached.

Kawain Payne, Realtor
0 votes Thank Flag Link Mon Dec 3, 2012
thank you for your input. There is no paperwork that I signed stating a deadline. Back in August, when we originally signed a contract to buy it, it states escrow will be 45 days from acceptance, however we had to wait until the bank approved the short sale, which was only recently
Flag Mon Dec 3, 2012
I don't buy the story. I think the realtor just wasn't able to negotiate an extension well enough. Regarding the tax act that they are talking about will help the seller, but risking that for a foreclosure is ridiculous. And the seller doesn't have much say in whether or not the bank will give you another extension or not. If that is true however, you pretty much have your basis for the lawsuit. Ask them to reconsider, it's not too late.
0 votes Thank Flag Link Mon Dec 3, 2012
The realtor says the bank has nothing to do with the ext, only the seller & he can decide whatever he wants.
Flag Mon Dec 3, 2012
Hi Alyce, I believe the tax break they are referring to is The Mortgage Debt Relief Act that is set to expire on 12/31/2012. The amount of forgiven debt in the short sale will be taxed at ordinary income rates if the Act is not extended and the sale closes after 12/31. If the short sale closes before the year end this debt forgiveness will not be taxed. The forgiven debt amount has nothing to do with the non recourse amount. The non recourse just means the lender cannot come after the seller for the shortfall BUT the IRS will come after the seller for any taxes due. Hope that helps.
Good luck,
0 votes Thank Flag Link Mon Dec 3, 2012
here is what I found on the Wall Street Journal regarding the tax act.
Debt that’s forgiven through a foreclosure on a non-recourse mortgage isn’t considered income, according to the IRS, so the provision isn’t relevant.(Non-recourse mortgages don’t allow the lender to pursue the borrower for any deficiency after a foreclosure, while recourse mortgages do. Whether a mortgage has recourse often depends on the type of loan and the state. In California, mortgages taken out to purchase a home are generally non-recourse, while Florida is a recourse state. So, In the state of CA, this debt is NOT considered income. If it's not income, it is NOT TAXABLE. Please check with the IRS
Flag Mon Dec 3, 2012
Hard to say. Banks often have internal deadlines of which no one really knows the reason.
0 votes Thank Flag Link Mon Dec 3, 2012
So sorry to hear your story, frankly I stay away from short sales with a long pole! There are so few that have happy endings. The bank is usually the one that is the hold up. I do hope you had a Realtor working for you. Do contact the broker of record and if there was anything fishy going on they need to know as they are the supervisor of their agents. Good luck.
0 votes Thank Flag Link Mon Dec 3, 2012
Thanks. Yes we have always been represented by an agent & he has been wonderful. We would LOVE to avoid short sales, but that's all we are faced with in our area....at least in our price range.
Flag Mon Dec 3, 2012
One last thing to realtors out there:
Short sales are not easy for anyone, ESPECIALLY for buyers. It's not right to push us or our lender even more for your own personal gain....
I've seen ads out there from realtors telling people to hurry up and sell (Calif) before the end of the year due to the tax law expiring. This is False advertising and you are misleading potential sellers.
I'm thinking about complaining to the realtor's broker.
I'm done venting, thanks to all who tried to help.
0 votes Thank Flag Link Mon Dec 3, 2012
Short-sale does take time.
Short-sale can be unpredictable and there is guarantee that they will close on time or close at all.

Per your particular situation: ask your realtor to serve seller with extencion of time addendum ( prior to producing extencion of time - consult your lender and find out how much time you will need to close ).

See if seller will accept your request for extencion of time.
0 votes Thank Flag Link Mon Dec 3, 2012
I'm thinking this is more of a bluff by the seller's realtor. Maybe she wanted us in or out in time to get another (cash) buyer? It's the RUSH to get it done that is hard to understand. That tax law explanation does not pertain to Calif. We understand that short sales are difficult, we've been making offers for almost a year now. We don't feel we've been treated very well this time especially if the seller's realtor keeps making up "deadlines". We are the ones who are out money (appraisal $450, inspection $350, pool draining $220) that is non refundable. We are living day to day not knowing if we are moving.
0 votes Thank Flag Link Mon Dec 3, 2012
Short Sales are extremely difficult... your questions points out the main reason... there are A LOT of stake-holders and everyone wants something different.. it is likely that a strong motivation for the listing agent is to sell the home and make commission... therefore they probably did not lie to you.

A short sale requires, patience, organizational skills, negotiations skills and creativity... and repeat patience 3 times. if you are beyond your patience limit, then you should move forward with another transaction and try to avoid the short sales.... each transaction is unique... I have ones that took 23 others.. and others that I have been fighting for over 15 months.

Ron
0 votes Thank Flag Link Mon Dec 3, 2012
I agree with Ron Thomas - this seller will not be able to do this before the end of the year unless he can produce a cash buyer who will agree to close. Have your Realtor educate you on the process the seller (through agency and bank) needs to go through to cancel - i.e. "Notice to Perform" - also have your agent go through what happens to your deposit in the event of a cancel - the more you know, the less stress! Short sales are particularly difficult - hang in there!

Nikkolene Callis, Real Estate Agent
Cruz, Mitchell, Callis
DRE#01894050
310-295-7879
http://www.associatesREgroup.com
0 votes Thank Flag Link Mon Dec 3, 2012
Get your lender to move vigorously and don't be distracted by anything else.

CA does not have jurisdiction over federal taxes.
0 votes Thank Flag Link Mon Dec 3, 2012
You can call her bluff, or you just do the best you can; it will come down to the same thing:

The Seller will not be able to do this again before the end of the year; so it sounds like a bluff.

Have they given you a "Notice to Perform"?

Where is YOUR Realtor while all of this is going on?
Possibly you should go visit the Listing Agent's Broker and find out the truth; I would bet that you will find a sympathetic ear; he will want this to Close.

Good luck and may God bless
0 votes Thank Flag Link Mon Dec 3, 2012
If you think it's "fishy", have your agent call their broker and explain the issue. Try to resolve the issue without conflict! If the Brokers can't resolve it, then pull your offer. Goodluck!
0 votes Thank Flag Link Mon Dec 3, 2012
Continuation of the question: Our lender and realtor do not understand the reason for all the rush & neither do we. We were led to believe it was the "mean bank". But that doesn't make sense because why would the bank throw away a good buyer. The seller's realtor "was able to convince the seller to sign an ext for just 2 more days". So we are still waiting, but the lender still doesn't think it can go through by then because he's waiting for a few conditions to clear. The seller's realtor is very rude, will not discuss any of this with anyone....as though it's beneath her and how dare any of us question her!! We just want to know what is going on? It sounds very vague or suspicious.
0 votes Thank Flag Link Mon Dec 3, 2012
Dear Alyce,
I'm sad to hear that you are going thru all this.. I would need a little more info:
1. Do you have a copy of the short sale approval duly signed by the seller? What is the deadline per that letter? If you don't have that letter ..demand it.
2. Have your released any contingencies yet?
3. What was the number of days to close escrow per the purchase contract?

Seller can't just cancel the contract by himself unless you breach the contract. If you have all the intention to close and paper work to support..they can't cancel. If you exceed the timeline..seller would have to give you notice to perform..which gives you additional 2 days. If you exceed the Close of escrow time ..then they have to give you demand to close escrow which gives you 3 more days..

Regarding the agent's rude behavior and lack of communication.. you or your Realtor talk to the listing agent's broker and address this issue.

Hope this info helps...Good luck!
Shivani
408.480.2854
Flag Mon Dec 3, 2012
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