What are buyer's rights when a short sale is approved by the bank, in escrow, and then the seller decides to cancel? Shouldn't all fees be

Asked by Tampopochan, Los Angeles, CA Tue Feb 23, 2010


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Sunil Sethi, Agent, Fremont, CA
Tue Feb 23, 2010
You need to discuss these options with your agent and if he doesn't know discuss it with his broker or have him call the C.A.R. legal hotline.

My guess is the listing agent didn't vet the seller throughly and explain their alternatives upfront. Your ability to get the money back easily will be limited to the sellers sense of fairness. If they can't understand you incurred these expenses based on the working agreement of your purchase contract which now they've choosen to ignore unilaterally, and then your options would be arbritration or legal action depending on how the contract was written.

good luck and let us know what happens.

Web Reference:  http://www.sunilsethi.com
1 vote
Erica Starkey, Agent, Danville, CA
Tue Mar 9, 2010
I would start by asking your agent. Your deposit should come back to you certainly. If you are talking about inspection fees and such, there would be a good case to ask for those back as well. Usally the seller can cancel if they don't agree with the terms of the bank's approval, but if they have done that and are deciding to cancel it is very much like a regular transaction.

Erica Jones Starkey
Broker, Co-Founder
JSCA Real Estate Group
Providing Superior Solutions for Your Individual Real Estate Needs
Web Reference:  http://www.jscarealty.com
0 votes
Dave Sutton, Agent, Portland, OR
Tue Feb 23, 2010
It would sure add clarity if you could specify what fees you're talking about. Your good-faith deposit? Fees you paid for pest and/or home inspections? Those are the common ones and it sure help to know if you've paid other fees.
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Marston Myers, , Brandon, FL
Tue Feb 23, 2010
IF the Seller had fully executed the contract (the Seller is still the Seller - the bank only approves the short amount of the sale) and you had removed all of your contingencies as Buyer and otherwise acted in good faith, this is just like a "regular" sale where the Seller breaches contract at the end. Your Realtor has an action against the Sellers for the entire commission offerred on the MLS. IMHO In the same situation where the Seller is threatening to cancel the deal I would "remind" the Sellers of this fact. The commission is then typically split between Buyer and Agent. This is is very rare and based on how your agent wants to proceed, perhaps just the threat of having to legally pay the entire commission or only your fees that you paid may work for you. This is based on CA law and standard contracts. If you used Short Sale addendums etc this may be moot. The fact remains that the original contract was between Buyer and Titled Seller.

Best of luck.
Web Reference:  http://www.aprpconline.com
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Voices Member, , Chicago, IL
Tue Feb 23, 2010
Jennifer raises a good point. In most short sale situations, the seller will claim to not have any money. I had a similar but different situation with a particular short sale. There were minor issues with the home that would not allow for an FHA loan to be approved, the seller refused to fix the small issues (total of maybe $500) because they did not have any money. The deal fell apart and although my clients received the deposit back, they had to eat the fees that they had already paid.

I can really only recommend the same as below as far as contacting your agent and/or attorney. As far as your question goes, there are no SET buyer's rights when it comes to having fees reimbursed in a short sale or foreclosure.
0 votes
Bernard Gibb…, Agent, Danville, CA
Tue Feb 23, 2010
Hello Tampopochan:

If the sale is canceled by the seller you should certainly get ant earnest money deposit back. What other fees are involved? Real estate contracts in California generally spell out the responsibilities of both the buyer and the seller and your agent should be able to draw your attention to the relevant paragraphs.

You did have an agent other than the Listing agent representing you, I hope?

If all else fails, litigation (maybe just small claims court) may be a resort but as Short Sale sellers generally don't have much, if any, money, that may not be worth your efforts.

Trying to buy a short sale can be a thankless task at times.

Good luck to you

Bernard Gibbons

Bernard Gibbons, Realtor, e-PRO Certified Internet Specialist, DRE License # 01331583
J. Rockcliff Realtors, 15 Railroad Avenue, Danville, CA 94526
Phone (925) 997-1585

See all homes for sale in Contra Costa and Alameda Counties
at http://www.BernardGibbons.com
0 votes
Jennifer Sei…, Agent, Walnut Creek, CA
Tue Feb 23, 2010
I am assuming there is not a dispute over your deposit and that money is being refunded to you. If that isn't the case I would be very concerned.

If I am correct in my assumption then you are likely talking about the costs associated with inspections and appraisal.

As the others have said, you'll need to talk with your agent to evaluate the situation. If you feel like you aren't getting answers from your agent you can also ask to speak with his or her broker.

I would also recommend having an attorney review the contract because you agent is not an attorney and therefore is not as qualified to get into the finer nuances of legal issues.

The unfortunate situation with most sellers doing a short sale is that, whether it's true or not, they will claim not to have any money. Sometimes it just becomes easier to walk away then to go through the hassle of fighting to get your money back.
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Johnny Huang,…, Agent, Walnut Creek, CA
Tue Feb 23, 2010
You should get your deposit back, however, in the standard forms, the release of deposit form is mutually agreed by both parties. If you want the fees paid as well (in addition to your deposit) you can ask for it and part of the cancellation of the contract.

If the seller disagrees and both parties can't agree on how the deposit is released and how fees are paid, then you have a legal issue. You will need to get a lawyer involved.
0 votes
Brian LeBars, Mortgage Broker Or Lender, Pleasanton, CA
Tue Feb 23, 2010
Not knowing all the exact details I would recommend follow the advise of your agent as well as contact your title company you wrote your deposit check to. If the seller didn't fulfill their end of the contract it would seem your fees should be reimbursed. Are you working with a local Realtor? If so what is their take on it?
0 votes
Anna M Brocco, Agent, Williston Park, NY
Tue Feb 23, 2010
Your agent can best answer your question, based on your contract--if you don't have an agent consult with an attorney specializing in real estate--most professionals do offer a free consultation--
0 votes
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