Any Recourse for Short Sale Shortcomings?
Short sales can be great deals for investors and homebuyers looking to save a lot of money and are willing to take on a fair shade of work. The problem is that sometimes these incredible deals aren’t quite what they were marketed to be. In fact, sometimes the homeowners who are offering the short sale can be leaving out a significant amount of information, or they may attempt to alter the deal once the deposit is made.
At first glance, the buyer can see this as a malicious act, some petty attempt to secure a better deal, but if you look a bit deeper, it can be clear that many of these home sellers are being forced into this situation because their mortgage adjusted to a rate they can’t afford, or they lost a job, or some other major life event has occurred. As a result, their behavior, or lack of complete disclosure, isn’t necessarily due to malevolence, but more a desperate and misguided desire to hang onto their home for a little while longer.
What recourse do buyers have?
While many buyers understand that a short sale is not a wonderful experience for any homeowner, their patience can only go so far and money talks. That’s always the bottom line in any short sale. The bank approves the short sale incumbent upon the current occupant to make any and all reasonable accommodations within the short sale process. Recently it came to my attention that a short sale had gone terribly wrong somewhere during the process. A buyer had placed five thousand dollars in escrow for the deposit and was moving toward the closing. Then the current homeowners then said that they couldn’t afford to move and wanted the buyer to cover two months of their rent. The real estate agent agreed to pay it in order for the sale to proceed.
Then the homeowners wanted moving expenses. On top of that, the homeowners weren’t allowing the buyer to enter the property any longer. He became suspicious of their behavior and was wondering what they were doing to the house. For all he knew, they could be removing and selling all the appliances and anything else that was worth money.
It got me thinking about what recourse short sale buyers have when things go wrong, and upon a quick search on the Internet, this doesn’t happen just once in a while; it happens quite often. Some of the actions are tenants who live in the house, which isn’t disclosed to the buyer until after the closing. Of course, the tenants are entitled to remain in the house until the end of the lease term, and then month-to-month beyond that unless a formal thirty day notice to terminate the lease is supplied.
One last thing the homeowners stated was that the HOA fees were several months late and that the new buyer would have to pay them. So, what recourse is there?
In the agreement
Anything not in the initial agreement has to be approved by the buyer. If they don’t approve, then the homeowner has no legal authority to demand any extra fees, moving expenses, or rent. As far as theft, make sure that the sale agreements stipulates clearly on what remains in the house and what can be taken from it. If the appliances are to stay and it is noted in the agreement signed by both parties, then taking them would be considered theft.
As far as the rental situation is concerned, the tenant has the right to stay until that formal notice is sent after their lease period ends. There have been many instances where a short sale has gone sour and lawyers are required to reclaim deposits, damages, and money lost. Unfortunately, this is a by-product of an incredible buying opportunity.
The bottom line is: buyer use caution.
David Reinholtz is a professional Mortgage expert in Real Estate Industry .David is also a sales and marketing expert and trains professionals in every career field. David has personally trained tens of thousands of loan officers, mortgage brokers, real estate agents and individuals through The Close More University Seminar Series, LoanOfficerSchool.com Classes , Correspondence and On Line Learning, and countless private engagements and training events throughout the country. David is the Founder and CEO of LoanOfficerSchool.com, an approved education provider for The Conference of State Bank Supervisors and The National Mortgage Licensing Systems' (NMLS) required pre-licensing education and continuing education.
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