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Buyer Sues Lender Over Short Sale

By
Real Estate Agent with Elizabeth Anne Weintraub, Broker DRE #00697006

short sale lawsuitI'm certain there are plenty of real estate agents, present company included, who are tickled pink over this development. Seems a lender agreed to a short sale and then tried to back out of the contract. Sound familiar to anyone?

Aurora Loan Services, based in Littleton, Colorado, has been sued by a buyer, Ribsy Productions, a Solana Beach, CA-based real estate company, for reneging on a short sale. The property is located in Tucson, Arizona. Apparently, Aurora agreed to a short-sale offer of $158,000 on a $587,000 secured loan. That's a 73% drop in the mortgage balance. Somewhere along the line, Aurora changed its mind. Hello, lawsuit.

It's about time that short-sale buyers stopped taking this kind of treatment from banks. You know, if the bank doesn't want to agree to a short sale, then don't. But don't make promises and later break them, I say.

I've heard of banks coming into escrow with last-minute changes to the HUD-1. Those changes include refusal to pay a commission. And agents have to to agree at that point because they have a fiduciary responsibility to their clients to uphold their client's interests above their own. But banks also pull out last-minute punches on the poor buyers who have been waiting forever and a day for a response.

I say it's about time. And I hope the buyer wins.

elizabeth weintraub land park real estate agent in sacramento

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Elizabeth Weintraub is co-partner of Weintraub & Wallace Team of Top Producing Realtors, an author, home buying expert at The Balance, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown, Carmichael and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Call Elizabeth Weintraub at 916.233.6759. Put our combined 80 years of real estate experience to work for you. Broker-Associate at RE/MAX Gold. DRE License # 00697006.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of RE/MAX Gold. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

Comments (22)

Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Elizabeth, seems like a breach of contract case to me. Maybe the lender in error, put too low a value in there. That's an awful steep discount. But hey, they signed the paperwork.

Aug 26, 2008 01:47 PM
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Elizabeth

It was only a matter of time before a lender was sued as a result of their actions in short sales

Good luck and success

Lou Ludwig

For additional information about Lou Ludwig go to www.LouLudwig.Com

Aug 26, 2008 01:48 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Hi Gary: Banks have been getting away with sticking it in the shorts to buyers for too long.

Hi Lou: I wish more buyers would sue them. I wonder if the banks have any assets, though.

elizabeth weintraub land park real estate agent in sacramento

Aug 26, 2008 01:51 PM
Ellie McIntire
Ellicott City Clarksville Howard County Maryland Real Estate - Ellicott City, MD
Luxury service in Central Maryland

What a deal for the buyer- Can't say I have seen that much of a reduction in price before. Maybe they have some one dyslexic at the bank who made a mistake?

Aug 26, 2008 01:52 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Hi Ellie: I have. You have no idea how crooked the appraiser was or the agents were when the deal was done originally.

elizabeth weintraub land park real estate agent in sacramento

Aug 26, 2008 01:55 PM
Karen Staha
Gaston & Sheehan Realty - Round Rock, TX
CRS, GRI, ABR, REALTOR, Austin & Surrounding Areas Texas

An offer of $158,000 on a $587,000 secured loan?  I'd sue too!

Aug 26, 2008 01:58 PM
Steve Shatsky
Dallas, TX

It's a shame that some lenders get a black eye.  So many of them lately seem to be making a real effort to improve their service levels (although there is still a long way to go) but others want to keep dragging down the reputation for all of them.

Aug 26, 2008 02:02 PM
Toni M. Rose
Prudential C. Dan Joyner Realtors - Easley, SC
Easley SC Real Estate

I support the buyer entirely. I had a short sale agreed upon about 2 yrs ago and was set to close on a Fri. On Wed. I had someone go out to the house and call me and tell me there was someone in the house. The seller knew nothing about it, I didn't and the buyers neither. I went into the court records and found out the house went through the foreclosure sale on Tues! I had a buyers agent threaten ME because of this mess. The bank didn't care and wouldn't talk to him, so I got all the rage and worry.

The next ( and last) one I tried. The bank took 5 weeks to respond to the 1st offer. The buyers were already gone- needless to say. The 2nd offer I was assured would be different....it took 4 weeks, same effect. The 3rd offer, the same.

It finally foreclosed and my seller went to the all the court hearings, armed WITH all my documentation, including my timeline. The judge REFUSED to order a judgement against her because of the banks actions. We were thrilled. I've never heard of that. He slammed their rep in court, really let him have it too. It was a small victory for this sweet lady, at least she won't get collection calls from now on!  

More people should become actively involved in the process if it happens to them. I think banks would try harder to work it out reasonably.

Aug 26, 2008 02:08 PM
Jerry Becker
Jerry Becker and Associates - Littleton, CO
Littleton, Colorado

It's nice tohear but I'm afraid by the time it runs through the courts our real estate market will be much imporoved.

Aug 26, 2008 02:23 PM
Robert Worthington
Worthington Realty - Manitowoc, WI

In a market that is for capitalists.  Wow.  I can see this happening a bunch

Aug 26, 2008 02:29 PM
Abiud "Abi" Montes
EWM Realtors - Fort Lauderdale, FL

I believe this is a breach of contract from the bank. They signed the paperwork and the only thing is that the bank will write it off as a loss and the employee from the bank who made the mistake may lose their job.

Aug 26, 2008 02:32 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Hi Karen: We all have our price points, I suppose. :)

Hi Steve: For me, short sale transactions have been easier this year over last year.

Hi Toni: Sometimes banks don't communicate with various departments. If it's any reassurance, I've had a bank foreclose in the middle of short-sale negotiations, too.

Hi Jerry: Are you looking into a crystal ball? :)

Hi Robert: It is happening a lot, which is why I'm relieved to see at least one buyer take a stand.

Hi Abiud: I'll be watching to see how this one plays out!

elizabeth weintraub land park real estate agent in sacramento

Aug 27, 2008 02:25 AM
Chris Ann Cleland
Long and Foster Real Estate - Gainesville, VA
Associate Broker, Bristow, VA

Elizabeth:  This is great!  I am so glad that someone has the nuts and money to sue a bank over one of these blessed things.  I hope it turns out in her favor.  Though, if I had to bet, I'd say the bank will win. 

Aug 27, 2008 02:39 AM
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Banks tend to want to call all the "shots" and generally feel they are "above the law."  I hope this suit is successful.

Aug 27, 2008 02:45 AM
Sweet Viscape
Arlington, VA

Hi Elizabeth:

I agree that it was only a matter of time before a lender was sued over something like this.  Very interesting development nonetheless.

Thanks for the great post.

Misty

http://viscape.com

List your properties for FREE!

Aug 27, 2008 05:52 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Hi Chris: Why do you think the bank will win?

Hi Jon: I suspect banks do think they are lawsuit proof.

Hi Misty: This is definitely a case to watch. Whether it will have an affect on other contract bailouts by banks, it's hard to say. It might not change anything, regardless of the outcome.

elizabeth weintraub land park real estate agent in sacramento

Aug 27, 2008 07:44 AM
Debi Ernst
St. Charles County, Missouri - Prudential Alliance Realtors - O'Fallon, MO
GRI, e-PRO, Broker/Sales Associate

Elizabeth - That's a first for me.  I haven't heard of lawsuits  like this one.  Well, I hope the buyer wins, too...  :)

Aug 27, 2008 09:52 AM
Georgio Konstantaras
Prudential California Realty - Brentwood, CA

WOW! That is crazy. I couldnt imagine how i would react as an agent after putting in all the hard work it takes to complete a Short Sale. Thanks for the heads up! I wish continued success with your business.!

Aug 27, 2008 09:15 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Hi Debi: I'm betting there are others -- maybe even a few that were settled out of court. You know how long it takes to get a case heard these days -- years!

Hi Georgio: I wish you continued success in yours. I see you are from Pleasanton -- headquarters of Property ID, no? Little fuzzy after that lunch with champagne and limo ride . . .

 elizabeth weintraub sacramento real estate agent in land park

Aug 28, 2008 02:11 AM
Fred Chamberlin
Guild Mortgage Co - Oak Harbor WA - Oak Harbor, WA
Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant

Elizabeth, I agree the lender needs to be responsible for their actions. I just hope this doesn't slow down the already snail passed approvals on short sales.

Aug 28, 2008 06:22 AM