Tinker to Evers to Chance - For those of you who are not baseball fans (say it ain't so!), the footnote at the bottom will clarify what in the world my title is referring to. The rest of you may read on...
Recently, I wrote a blog post describing a difficult transaction where I represent the buyer entitled: Close Encounters of the Late-Night TV Guru Kind. It describes what is known to investors as an A to B to C transaction, in which B, the investor, hangs on to the property about as long as Mr. Evers held on to a double play ball.
My objections to this transaction are three; I will address the first objection in this post. First, I am disturbed by the fact that the investor that is signing the Offer and Acceptance agreement with my buyer is not the owner of the property, and I questioned how one could sign paperwork legally obligating himself to sell a piece of property that he doesn't own. One of my commenters pointed out that perhaps he has a Power of Attorney from the owner. To my mind, that is irrelevant because my buyers will not be buying from the owner, who will be out of the picture at the time our contract is fulfilled. Since the owner won't be selling to us, his signature is no more valid than than the investor's, therefore neither would be the signature of a POA signing on his behalf.
Now the investor is asking for a signed Short Sale Addendum. A step in the right direction toward full disclosure, but that paperwork was created for the situation where the batter is directly thrown out at first base by the third baseman, so to speak, that is the house transfers from the current owner to the new owner (A to C), subject to bank approval. At the time our deal closes, it will not be a short sale, so the terms of the addendum don't really make sense.
What would I like? I would prefer to see some clarity here. Let's write up this deal so that it is crystal clear to all concerned; a contract in which the would-be seller acknowledges that he is not yet the owner, that his ability to sell is contingent upon closing his deal with the current owner, and that his ability to do that is contingent upon the lienholder approving a short sale in that transaction. Let's not pussyfoot around trying to pretend this is a garden-variety A to C deal and contorting the existing paperwork to match. Perhaps regular Zipforms paperwork shouldn't be used at all, perhaps an attorney should draw up the agreement between the parties so that it says what it means. Too bad the guru attorney didn't provide THAT document in his guru package. My buyers are not stupid, they can see that the investor stands to make a nice profit on this deal, and obviously they aren't put off by that since we wrote the offer in the first place. Why obscure details and foster confusion that can come back to haunt you later if folks feel misled and taken advantage of? Better still, go ahead and close your deal with the bank first, then we'll talk! Oh, but of course, you don't want YOUR money at risk?
There are other issues that one would hope the listing agent is addressing with the homeowner-seller. That the lower the price at which he sells to the investor, the bigger the potential deficiency (we are only recently a nonrecourse state, it is likely his loan is full recourse), or the larger the number on the 1099c. That it is unarguable that the bank is not receiving fair market value, which could conceivable drag him into some trouble. That he should immediately visit his attorney and accountant to be sure his best interests are being served. But the seller is not my responsibility. Just a little FYI to the listing agent though: attorneys are watching. Some predict an onslaught of lawsuits down the road from short sale sellers that have felt badly advised.
In the next post, I will address my comment that the bank is not receiving fair market value. Play ball!!!
Footnote: Tinker to Evers to Chance refers to three Chicago Cubs baseball players at the time the Cubbies won back-to-back Word Series in 1907 and 1908. Joe Tinker, Johnny Evers, and Frank Chance were a short stop, second baseman, and first baseman respectively, who have been credited with perfecting the modern double play combination. Their remarkable prowess at turning the double play was commemorated in an eight line ditty by newsman and Giants Fan Franklin Pierce Adams that began: "These are the saddest of possible words, Tinker to Evers to Chance..."
(Photo credit SD Dirk, from Flickr via the Creative Commons License)
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