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We found a home we love and offered asking price. Closing date was set for 10/13 (yesterday). Everything is all set on our end but we found out 2 weeks ago that the seller owes more on the home than we are buying it for. From the sound of it, they did not understand the conditions of their loan and selling the home has caused them to have to repay $50,000 that they were not expecting to have to pay back.
We have been patiently waiting in limbo for 2 weeks, being told that a negotiation with their lender may be possible to get us into this home. However, closing date has come and gone and we still don't have any more information. It is reaching a scary point because we need to be out of our apartment by 10/31!
At this point, we are feeling like we should walk away... but we don't want to lose the money we put into the appraisal and inspection. I feel like the seller should be responsible! We entered into this deal under the impression that it was a traditional sale and now are out approximately $800 and may end up homeless at the end of the month. What are our options? Who should be held responsible for this? We had previously passed on a home when we found out it was a short sale because we don't have time for this hassle. I feel very misled!
Well, I agree with you -- you WERE misled. Seriously, what kind of idiot doesn't know how much they owe on their home, or expects a bank to simply wave their hand and say, "Oh, that's alright, never mind"?! The seller's real estate agent should have had a conversation with the seller when they put the house up for sale, when they went over what could be expected as net proceeds.
Lawyer up. What does your agent say? (Why do I have the feeling this is a FSBO?)
The contract is already in default, since you did not close on the day that was specified, and I assume that there was no formal extension executed. WHO is telling you about "negotiations with the bank"? The seller? The seller's agent? I've seen short sales that took YEARS to negotiate -- two weeks sounds naively optimistic.
Have an attorney review your paperwork and talk to the bank. At this point, you can file a termination and release for your deposit money, and then turn around and sue for non-performance, for your expenses, and damages (i.e., what it's going to cost you to rent a new apartment, etc.). If they DO get it straightened out in a week or two, they can certainly execute another contract with you. And, frankly, if I were you, I'd be filing ASAP. Otherwise, you could be talking weeks as they put you off, trying to figure out how to finish this closing. How badly do you want this house?
Well, it's a short sale. Either the lender was not told and now they have to backtrack for approval. Can take a long time and they MAY get approval. Or they are having your offer approved by the lender they have their loan with...which can take a few weeks to several months.
Lawyer. (Don't be scared off by 'lawyer'. Sometimes all it takes is a call or letter from a lawyer to scare people into telling the truth and then you have your exit line.) DO get a lawyer who knows about real estate and has a good percentage of real estate clients. You'd think it's simple but it's not and can waste your time otherwise.
A lawyer would be kind of silly at this point - your seller is $50k underwater -even if you got a judgement (in a year or two) that isnt going to help you now, nor will it "make them pay".. demand your deposit back and *request* your other (documented) expenses back and move on. Going all "law ninja" will just clam everyone up & ensure nothing & no one will step forward to make you whole. Your agent/broker may be able to get the listing broker to come up with some of your expenses if there is any indication they knew the home was over-easy..
You got hosed. A short sale will not go through in a few weeks and they probably misled you. Your better off writing this off and moving on. You can't squeeze blood from a turnip.
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