What recourse do we have as a buyer of a short sale, where the sellers are backing out?

Asked by Whydidthishappen, Hagerstown, MD Wed Jan 26, 2011

We put a contract on a short sale home Oct 1 and were told they expected the close date to be around Dec 15. We provided all necessary documentation, etc. Every 3 weeks we received a blanket update from the realtor saying that it is progressing along. We just received a phone call yesterday from the realtor saying the buyer was able to negotiate a better payment with the bank and will be keeping the home. The realtor would like us to sign a release agreement not. I do not feel comfortable doing this until I have more information. Do we have any recourse?

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31
Michele Scho…, Agent, Pace, FL
Wed Jan 26, 2011
Short Sales should be called "Long Sales" or "Very iffy Sales." How do you force someone to sell their home to you without suing? Unless you want a legal battle that might not end in your favor, let the seller out of the contract and sign the release agreement.

With a short sale, there is always the owner, the mortgage holder, and you. The mortgage holder(or bank) is the one with the power, and if they do not want to continue to accept your offer and can get the current owner to negotiate a better payment, it is in the best financial interest of the bank to cut you out, and keep the current owner so the bank will not lose money in this market.
Web Reference:  http://home4u123.com
1 vote
SmartCash Ho…, Agent, Lytle, TX
Wed Jan 26, 2011
Sorry this happend to you, but we never want to see another family kicked out of their home if we can help it as we would not want it ot happen to us. hopefully the realtor you were working with would have gone over contracts you signed in details and made sure you were aware all options in the transaction, but no real recourse can happen to the lender, or the seller. the good news is there are hundres more short sales and foreclosures coming up daily and there is probably one more perfect for you. so don't get deteured and you will be in a new home soon enough.
Web Reference:  http://www.bidselect.com
1 vote
E.J. Granber…, , Atlanta, GA
Wed Jan 26, 2011
Personally, I don't see the need to release what you didn't have total rights to in the first place, meaning as stated below, your contract is probably contingent upon the inability of the current owner to get modded/refinanced. Get a lawyer to advise you and review your concerns though by all means. It'll help you moving forward. Let us know how it turns out and good luck! However, you gotta be happy for a family that gets to keep their investment don't you? In my professional opinion there will be more good deals. You can trust me on that one! Don't sweat it too much, but do handle your business if you're not cool with it. Remember, buyers have to have plenty of patience when dealing with short sales and REO's as they are definitely a different breed from normal residential transactions. You should find a knowledgeable agent to represent you that is certified in your state. Also, you and your Realtor should have had a previous conversation on this exact subject when going over the contract's do's, don'ts, if's, whens, and hows. Again though, I wish you the best!
1 vote
Tony McMahon, Agent, WHITE PLAINS, MD
Wed Jan 26, 2011
You need to check with your current Realtor as to what your contract of sale states. Since you have a contract that is most likely contingent upon 3rd party approval and the lender has offered loan modifiaction to the seller instead , they would not also give their approval for the sale. Not knowing all of the details , this is only an opinon and not legal advice. You could also have a Real Estate attorney review your contract.
1 vote
John Potter, Agent, Frederick, MD
Fri Dec 7, 2012
I hope your contract is expired ! Our Team policy is to never tie up our BUYERS for more than 60
days in a Short Sale purchase. And for this exact reason. Your Agent should have interviewed the listing agent and re-viewed documents and received the warm and fuzzy as to the complete details
surrounding this Short Sale, BEFORE having you sign.

Best move for you is to move on, sign the release and keep looking. No sense wasting anymore of your time "Forcing" the issue of whatever happened. You may miss the home meant for you.

Get a better plan of action from your agent, and If you don't think your agent has a plan, move on
from the agent to a more experienced agent in BUYING Short Sales.

Good luck !!
0 votes
Steve Doughe…, Agent, Springfield, VA
Wed Feb 2, 2011
This is one of the challenges and frustrations of attempting to purchase a short sale. I personally think we should call them "long sales" instead, because of the long time that is often involved in the transaction. Bear in mind that a short sale contract is a contingent contract, and it is contingent on the bank holding the mortgage approving the sale.

What appears to have happened is that the seller of the home was approved for loan modification. Many short sellers don't really want to sell their home, and if the bank can modify their loan in a way that makes it affordable for them to stay there, then most will prefer to do that. Having said that, it has been my experience that most banks usually make it an either/or situation for the home owner. Either they apply for a loan modification or they apply for approval of a short sale. It is unusual, but not unprecedented, as you clearly can show, for a home owner to pursue both options simultaneously.

Short sales have their risks, and your experience clearly shows that this is one of them. My non-legal opinion is that you probably have no recourse since it was a contingent contract, but for legal advice, it is best to consult an attorney.
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Wed Feb 2, 2011
Hi,

I know this is disappointing....the first step is to talk to your buyer's agent. Probably you have a contract contingent upon getting written short sale approval. If the bank has offered a loan mod, then they will not be issuing a short sale approval...and the offer is not valid.

More to your specific question....don't sign anything without talking to your agent and an attorney, if you feel it's warranted. If you want to get legal advice....then consult an attorney and make sure you are comfortable with the outcome.

sorry......

Karen
0 votes
Julie Pearce, Agent, Spring Hill, FL
Wed Feb 2, 2011
If you simply put in an offer, and you were waiting all this time for it to be approved by the 3rd party (bank), but never actually received that approval, you can think of it this way: The bank had two offers to choose from, yours and the people who originally mortgaged the home. At the end of the day, they chose the latter, probably because in the long run, they would be able to get more out of the original mortgagees than they would from you. Sorry to hear you wasted four months that you could have been using to find a great home. This is exactly why lots of people are avoiding short sales, and sticking with private sales or REO's. You don't get tied up for months waiting for an answer that might not work in your favor. Chalk it up to experience, and maybe join that army of short sale avoiders. They're not all they're cracked up to be...
0 votes
Katharina Ha…, Agent, Ocala, FL
Wed Feb 2, 2011
When the bank excepts an offer, usually you have signed an addenda from the Bank covering all issues that may arise just protecting the Bank. Look at all paperwork that has your signature on it, read the fine print. It should also give you your options in your case.
0 votes
Daryl Short:…, Agent, Binghamton, NY
Wed Feb 2, 2011
I would guess you don't have any recourse but consult your attorney. You could be missing alot of great properties in the process of trying to force these people to sell you their home. Sometimes just chaulking it up to " I won't do that again" and moving on is the best way to go.
These people are just trying to preserve their lifes and credit worthiness and are not wanting to give up the fight yet.
0 votes
Laura G Kost…, , Scottsdale, AZ
Tue Feb 1, 2011
Read your contract and addendums. What does it say about breach by the seller. Read them carefully. It might mean a long process of a law suit where you have to show what harm it is doing to you. This is usually difficult and expensive. Good luck.
0 votes
Robert Nowak, Agent, Chicago, IL
Wed Jan 26, 2011
I doubt you have any recourse since short sales are contingent on lender approval. It's obvious the seller did not want to lose their home and put it on the market because it was the best option at the time. Sometimes people need to put their own frustrations aside and do the right thing. The homeowners obviously have no equity and could not make their payments- what kind of recourse were you looking for anyway?
0 votes
Stacy Gonzal…, Agent, West Sacramento, CA
Wed Jan 26, 2011
The Answer depends on weather you were actually in escrow with a letter of approval from the bank or not. If you were in escrow then you would have a case, the seller would be in breech of contract per the Residential Purchase agreement. If you were waiting on the approval letter and not yet in escrow, that is another story. You do not have a binding agreement until the bank has given written approval in letter form of the short sale unfortunately. The one thing that gets me is the lack of knowledge of the listing agent. You can not do a Modification and a Short Sale at the same time! It is one or the other and the agent should have been aware of the sellers situation.
0 votes
Dean L. Mart…, Agent, Hagerstown, MD
Wed Jan 26, 2011
One thing I don't see mentioned, The sellers should have notified the buyers that they were trying to negotiate with the lender. If they did not and simply waited until they had a remodified loan from the bank they were certainly not acting very ethical to say the least. If on the other hand, the buyer was aware of seller attemnpt to renegotiate the loan, then really I would walk away. I agree it's nice the sellers can keep their home, but that's kind of beside the point. they should have disclosed that they might be renegitiating their loan.
0 votes
Fred & Sohei…, Agent, Calabasas, CA
Wed Jan 26, 2011
You want to make sure that your offer has been submitted to the lender and the question is why the agent did not enroll you that the owner was negotiating with the lender. The only way you can do this is suing the owner and that is costly and painful. There is absolutely no authority to pay attention. I even brought up this to the commissioner, but guess what, after many months nothing happened. The listing agent and the owner are the King and rule this game the way they want it. Pathetically we have a very ill system and I do not understand of why our government does not look into this crook business. Any how let go and look for another deal and an honest agent.
0 votes
Joseph Hasti…, Agent, Bayside, NY
Wed Jan 26, 2011
Hello Why. I'm not local to your area but I felt compelled to respond. I'm just going by what you've written here. You "put a contract on a short sale..." My question since you didn't say is, was the contract fully executed? I know they mentioned closing by a certain date but if the contract wasn't signed by the seller, well...that would be that with no recourse. These things can and do happen.

Don't begrudge the sellers their home since they now seem to be able to keep it. In this business I have a word that puts things in perspective and is always true....NEXT! Move forward and good luck.
0 votes
Donna Scoggi…, Agent, Austin, TX
Wed Jan 26, 2011
I would discuss this with your agent and read the contract very carefully. Getting advice from the internet is just free advice and contracts very from state to state.
Web Reference:  http://www.DonnaScoggins.com
0 votes
Pat & Steve…, Agent, Westlake, OH
Wed Jan 26, 2011
I suggest that you "pick yourself up and walk on." The cost of hiring an attorney with little hope of any positive result is money you could save for your next home. There are many short sales that don't work out for many reasons. Mourn the loss of this home and start looking for a new one with your Buyers'Agent.
0 votes
Jon Zolsky, Agent, Daytona Beach, FL
Wed Jan 26, 2011
Tim, that's a surprise answer. And it is wrong. The Bank is not a party to the contract. It is still between the Seller and the Buyer. The Bank, however, has the right to approve, or diaprove or set the conditions for approval, BUT THEY DO NOT SIGN THHE CONTRACT.
0 votes
Jon Zolsky, Agent, Daytona Beach, FL
Wed Jan 26, 2011
From legal standpoint you need to check the Short Sale Addendum to the Contract. Theoretically the Seller is liable for the contract he sigend, but for practical purposes, I do not think that you have a recourse, besides getting your deposit back.
Even if you try to sue for specific performance and get in front of the judge, do you think the judge would be more sympathetic to you failed attempt at purchasing a home vs. the chance for the homeowner to keep homeownership.
What damage would you show?
However, all this is my thoughts, and if you are into it, you need an attorney
0 votes
Karen Pannell…, Agent, Owensboro, KY
Wed Jan 26, 2011
So sorry your time was wasted in this way. Sounds like you need to consult an attorney.

In KY, when a seller accepts an offer from a buyer and the offer is subject to the seller's lender approving a short sale, that offer is an executory contract with a contingency (the contingency being the lender accepting the short sale). My advise would be to contact the Broker of the agent who represented you as well as contact your local REALTOR association. An attorney will be able to look at your contract and see what recourse you might have.
0 votes
Jeanine McVi…, Agent, Hagerstown, MD
Wed Jan 26, 2011
I agree totally with Tim Moore's answer above. You're agent should have explained the process and apparently didnt. Until a bank signs the Third Party Approval, there is no 'contract'. Please cut your losses and fi d an agent who is versed in all types of real estate. This market is a hard one and without an agent who is experienced, you will find yourself in these situations. Im sure you thought you had an experienced agent. Sorry to hear about this. Makes all of us Realtors look bad. Experience counts! Good luck!!!
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Wed Jan 26, 2011
What buyers do not understand in a short sale, and obviously some agents below don't either, is that it is only an offer until there are three sets of signatures on that offer. Seller, Buyer and BANK MUST all sign it. In a short sale there is a document giving the bank the right to approve a sale and without that signed you have an offer and not a contract. If you had a contract then you might have recourse, but I am sure you didn't and your agent should have explained it to you. Since you never had a contract the bank and the home owner continued to negotiate and that is why the bank never signed your offer. Any agent can claim to be a short sale expert, experience is key. Move on and maybe find a better agent.
0 votes
Dee Campbell, , Charles County, MD
Wed Jan 26, 2011
Hi,

I am sorry to hear that. It sounds like the seller got a loan modification and now is able to keep their home. Your contract is between you and the seller and should have 3rd party approval (the bank) contingency. Since they got the loan modification the contingency was not removed...hmm...you should contact a good Real Estate Attorney to explore all your options in this situation.

Good Luck,
0 votes
Alex Munoz, , Yuma, AZ
Wed Jan 26, 2011
your realtor should have not put you under contract unless your interest were addressed..theirs much more to writing up a contract when it comes to a short sale.as for recourse you may or not have one depending on what the contract states...
0 votes
Armien Fehr, , Festus, MO
Wed Jan 26, 2011
This is one of those you really need to speak with a lawyer on. depends on how your contract reads. if the lien holder had not accepted the contract yet,(which they have to on a short sale)Letter of acceptance from the lien holder, you really did not have an accepted contract yet. hopefully your agent is well versed in short sales. there are numerous classes and instructions for agents to be certified in the process.
0 votes
Vladimir Kats, Agent, Baltimore, MD
Wed Jan 26, 2011
I am sorry to hear about this mishap. As an expert short sale realtor, I can tell you that, unfortunately, either your agent or the listing agent, or both, dropped the ball at some point or another. If your side thought that you’re getting involved in a short sale and the end result was a load modification, that means that the seller pursued both at the same time which is not exactly correct. Usually, home retention options (such as loan mod) are looked at first and only after these are not viable, a home disposition alternative (such as a short sale) is considered. The listing agent might not have known that the seller is pursuing a loan mod or did not care. Buyer’s agent might not have asked or also did not care.

As far as your legal options go, there might not be many and you should seek attorney’s guidance on any possible remedies.

Chances are you signed either a 3rd party approval or short sale addendum that gives the seller certain number of days to deliver approvals. If approvals are not received in that time, usually the buyer has the right to withdraw the offer. Since there were no approvals, the seller can not sell you the property.

Now, if you can prove that the seller never intended to sell you the home and simply wasted 3 months of your life and you had actual quantifiable damages, you might have a case. Once again, please seek an attorney’s guidance.

For more information on short sale buying, please visit the section of my website dedicated to that subject by clicking the below link.

Best of luck!
0 votes
Jessica Hood…, Agent, Gambrills, MD
Wed Jan 26, 2011
Oh I hear these stories all the time and just have to grimace that agents and sellers are going in to these short sales without full disclosure and without an in-depth knowledge of how to process. You should most definitely been told that the seller was pursuing a loan modification. Your contract will be your gide as to what recourse you have up to and including suing the seller for specific performance. Unfortunately I think any recoruse you have would be expensive and time consuming. Contact an attorney for all of your options.
0 votes
Kathleen Sbe…, Agent, New Hope, PA
Wed Jan 26, 2011
It depends on how far along you were with the bank as far as negotiating the deal and getting the banks signature on all documents. Attached is a good article that explains the process in layman's terms. Short sales are risky - a bank owned property is usually an easier transaction. I'm not sure why the agent needs a release if the agreement wasn't fully executed. Make sure you have copies of all the papers you have signed and review them carefully.
0 votes
Sally Grenier, Agent, Boulder, CO
Wed Jan 26, 2011
Unfortunately no. This is why short sales can be so unpredictable. Anything can happen. Nothing is final until the bank approves the short sale and all parties sign the Short Sale Agreement. When you say "The Realtor" are you talking about the listing agent, or your own buyer's agent? You really need a Realtor working for you as a buyer's agent. They should have explained the pro's and con's of a short sale.
0 votes
Dallas Texas, Agent, Dallas, TN
Wed Jan 26, 2011
Your buyers agent is person direct all your questions to . Everything is governed by terms of the executed sales contract.

However if the seller able to keep their home recommend to move on.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
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