Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I made an offer to purchase a condo that was listed as a short sale back in March. The seller accepted my offer and proceeded to obtain final short sale approval from the seller's bank. We waiting patiently for the bank to respond, and in the middle of May 2011 we finally got the final short sale approval letter from the sellers bank. In the letter it stated that the short sale approval was contingent upon the sale closing no later than June 30, 2011. Great! Not a problem. That's plenty of time. So I proceed to schedule the appraisal, inspections, pay to get the HOA paperwork, etc costing me about $1000 total.
So we actually are a little ahead of schedule since everything was falling into place without any problems. So we agreed with the seller to close the sale of the property on June 17, 2011, almost a full 2 weeks before the June 30 deadline that was imposed by the seller's bank.
June 8 the seller signs final closing paperwork at the title company, June 9 I sign my closing paperwork at the title company. I wired about $27k into the escrow account to cover the closing costs and down payment. On June 14 my lender wires the my loan money to the escrow account. So on June 14, there is about $215k or so in the escrow account, just waiting for the sale to be recorded.
When the title company went to record the sale on June 14, they could not. To my horror, on June 14, the seller's bank decided to foreclose on the property and sold it at auction to another buyer for considerably less than what I would have paid for it had they just waited 3 more days for the sale to close.
My real estate agent got wind of what was happening on June 13 or 14, and he did everything in his power, making phone calls to the bank, etc, to try and stop the trustee sale. He even went down the the courthouse on June 14 to try and stop the sale, but did not succeed.
So now not only did we not get the property, we are out approximately $1000 in closing costs that we incurred. Also, we were renting and had made arrangements to let our lease expire as we would soon be homeowners in 3 days. Fortunately after this fiasco we were still able to renew our lease so we would still have a place to live, but at the expense of the rent increased by $84 per month. Additionally we will have to pay a $2k lease breaking fee when we do finally find another property and close the sale.
What I don't understand is how they can get away with this. I mean we had in writing short sale approval that was valid until June 30, 2011. The sale was going to close well before the deadline. Had I known that they would completely disregard their approval, I never would have pursued this home. I've been speaking with a couple of attorneys and they each have a different opinion on whether or not what the bank did was legal.
This has been a complete nightmare, and is going to cost me at least a couple thousand. My husband and I are quite disgusted right now. We have been talking to an attorney about if we can get any of our $1000 we spent in closing costs back.
I am looking in to filing complaints against this bank. But I'm not sure where to start or who to file a complaint with. Any advice here would be appreciated.
So I just wanted to share my story. I truly hope that this does not happen to anyone else out there, as it has cost my husband and I a lot of heartache, headache, and hard earned money.
I really feel for you.
This is not an uncommon story regarding short sales.
I don't know what recourse you have, but I would forward the story to your folks in Congress.
It is ridiculous for us to bail out banks while they proactively and ignorantly screw over people such as yourselves.
Buyers need to know that banks have no ethics, guidelines, standard procedures, or responsibility to act decently in a short sale, and the risks to the buyer are quite material.
Your case is another story that supports that fact.
Ditto on Mike's comments. Although it is beyond one's comprehension, the lender's loss mitigation people often never communicate with the foreclosure people and these things have happened before. IMHO, it was the listing agent's responsibility (or whoever did the short sale negotiation) to do what he/she could from the beginning of your approval process to get the foreclosure people to hold the process until the short sale process ran its course.
Last edited by bbronston; 06-27-2011 at 06:07 PM..
Reason: can't type worth beans
Thanks for taking the time to write the story. Unfortunately, I've heard similar stories over time. Its not as rare as you might think it is.
The bank didn't care it received less. Its going to file a claim with Freddie Mae or Freddie Mac and get all thier money back. The loan is guaranteed thanks to the US Government. Yes, they will also be reimbursed legal costs, etc. So actually, it was a strategic move to get more money.
They would have lost money on your short sale, by foreclosing, they make money. Get it?
Ditto on Mike's comments. Although it is beyond one's comprehension, the lender's loss mitigation people often never communicate with the foreclosure people and these things have happened before. IMHO, it was the listing agent's responsibility (or whoever did the short sale negotiation) to do what he/she could from the beginning of your approval process to get the foreclosure people to hold the process until the short sale process ran its course.
I'm thinking that any short sale agreement should include an addendum wherein the bank agrees to suspend all foreclosure activity while the short sale is pending, and certainly after the bank approves the short sale. With buyer able to recoup from the bank or seller costs of due diligence performed after bank approval.
Or similar....
Thanks for sharing...I'm involved in a short sale myself and if this happened to me, I would definitely show this to every congressman, state senator, assemblymen, you name it in my state.
I'm actually surprised if they gave you a closing by date how they can get out of that legally? What's the legal terms that allows them to get out of that?
By the way do you know what bank it was that screwed you out of this short sale?
They would have lost money on your short sale, by foreclosing, they make money. Get it?
I've heard this before and I am not saying it's not true...I don't know. But, if it is true, I don't understand the logic behind any lender/investor doing any short sales. They certainly don't have to do them. No one I know ever heard the term "short sale" before 2005/2006. If they make more money foreclosing (or lose less), why not foreclose on all of them and save all the manpower and document handling costs involved in short sales? It doesn't make sense to me.
I'm thinking that any short sale agreement should include an addendum wherein the bank agrees to suspend all foreclosure activity while the short sale is pending, and certainly after the bank approves the short sale. With buyer able to recoup from the bank or seller costs of due diligence performed after bank approval.
Or similar....
The problem is that you could only do that as an additional contingency since the bank is not a party in the contract. The buyer can't get anything back from the bank if they are not a party to the contract. I suppose the buyer could specify in the contract that the seller would have to reimburse if the deal blows up for this reason but it's only worth the paper it's written on. Still have to go to court if they don't honor the agreement.
why not foreclose on all of them and save all the manpower and document handling costs involved in short sales?
Its so much more complicated than you think. The banks have incentives to work with short sales such as bank bailouts, many government programs to help homeowners (which is gov helping banks), etc.
The problem is that you could only do that as an additional contingency since the bank is not a party in the contract. The buyer can't get anything back from the bank if they are not a party to the contract. I suppose the buyer could specify in the contract that the seller would have to reimburse if the deal blows up for this reason but it's only worth the paper it's written on. Still have to go to court if they don't honor the agreement.
I think that an attorney could draft language indicating that if the Seller must secure that commitment from the lender(s) before the Buyer committed funds investing in investigation iof the property.
Regardless... There MUST be a better way. Stories like the OP's are fodder for folks to avoid short sales like the plague.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
