Short Sale Chaos - The SELLER backed out!

By
Real Estate Agent with Real Living / Home Realty 29202
https://activerain.com/droplet/4NK

http://www.karenpannell.realliving.comThere was a recent consumer post on Trulia where a buyer had been waiting since October to get lender approval on their short sale, only to be told this week that the seller had backed out!  Seems the seller was able to do a successful loan modification with the lender that lowered their payment and they didn't have to move after all! 

Well, good for the seller; bad for the buyer.  The buyer's agent wanted the buyers to sign a release and give them back their earnest money, but the buyer wasn't so sure - I think he really thought something fishy was going on.

As evidenced by the varying responses from Real Estate Agents all over the county, the law is very different in every state. 

My response to those buyers was to seek the advice of an attorney - this is a way too legally complicated situation.  Certainly, sellers can change their mind about selling, but there are consequences.  Should the seller pay the buyer some sort of damages?  Maybe, while waiting for lender approval, there was another property that came on the market that the buyer's would have prefered, but since they were locked into a CONTRACT, they missed out?  There are many scenarios one could play out here.

In Kentucky, once the SELLER has accepted a buyer's offer, it becomes a CONTRACT.  If the house ishttp://www.karenpannell.realliving.com going to be a short sale, the contract will have a CONTINGENCY that says the CONTRACT is subject to the lender's approval of the short sale.  So in Kentucky, a short sale contract is an enforceable CONTRACT once the seller has accepted it.  Anything beyond this, an attorney would need to address. (In Owensboro, KY, I recommend attorney Jim Watson, ph: 270-689-2424)

The other question that this post raised in my mind was:  Will the selling agent try to go after their commission (from the listing broker)?  They did bring a buyer and after all, it wasn't that the short sale was not approved.  The seller didn't even try for a short sale - they went for loan modification.  My other concern is whether this property was falsely represented to the public as well as the real estate community?  If the seller was trying to get a loan modification, they should not have listed their home "for sale".

For all you Owensboro, KY Real Estate and short sale questions, call me, Karen Pannell, 270-903-2167

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Topic:
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Location:
Kentucky Daviess County Owensboro
Groups:
Real Living
Christian Mortgage and Real Estate Professionals
HUD RURAL Loan
Real Living Home Realty
Tags:
short sales
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ky real estate

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Rainer
135,808
Kim Delia
Remax Professional Associates - Charlton, MA
Realty Delia Group

OMG!!!  I just had one... three months we waited for short sale approval.  Buyer was cash!  It was a local lender and I had to meet the bank at the property several times for the approval, then we had to wait because there was a lien on the property.  We negotiated everything and the week before close, the seller spoke to a financial advisor and was told to stop the short sale and modify.  This advisor obviously had no idea of the financial situation.  He was behind over a year, moved out and was on social security!  Needless to say two days before close, seller refused to sign the deed!

Feb 02, 2011 12:06 PM #1
Rainmaker
621,684
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

THis happens frequently!   And it is very frustrating but i agree with you ...get an attorney involved!   IN our area we have an addendum that states that the buyer or the seller can walk at any time prior to acceptance from the bank!! 

Feb 02, 2011 12:12 PM #2
Rainmaker
131,383
Karen Pannell
Real Living / Home Realty - Owensboro, KY
Owensboro KY Real Estate -270-903-2167 Homes, Cond

Kim - What a sad end for the seller - and he probably thought he was doing the right thing!

Deborah - I like the idea of that addendum!

Feb 03, 2011 03:26 AM #3
Rainer
24,607
Trent Chapman
Keller Williams -New Future Team - San Marcos, CA

Unfortunately for many buyers, in CA the Short Sale Addendum states that all terms are subject to lender approval, therefore, if the lender changes any terms, there is no executable contract unless both parties agree to those terms.  This gives either the seller or a buyer an 'out' legally as the terms to their original agreement were not accepted by the bank, therefore no enforceable contract exists.

To avoid this issue, I don't take on short sales unless the seller has been clearly educated on the chances of getting a loan mod, how it mostly makes sense for the bank, but not always for the borrower and that unless their financial situation changes, they should stick to whichever they choose (short sale or loan mod).  I haven't had a seller back out in over 2 years, now that I fully educate them.  Good luck!

Trent

TheShortSaleGenius.com

Feb 03, 2011 09:45 AM #4
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Rainmaker
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Karen Pannell

Owensboro KY Real Estate -270-903-2167 Homes, Cond
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