What rights do we have if we wrote a contract on a short sale house that ended up being foreclosed on?
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What rights do we have if we wrote a contract on a short sale house that ended up being foreclosed on?
We wrote a contract on a short sale house, for the amount the bank had approved to sell it at. We asked for nothing to be done to the house. We were approved by our bank and all the work is done on our side. We were just waiting for the loan company to accept the contract. We now learn that the house went to a sheriff’s auction and the bank now owns it. We do not know if it went to auction before or after our contract was presented to them. So now it is a repossession sale and we need to close soon. Can the bank refuse our contract even though it was offering what they wanted for the house?
Asked on August 7, 2011 Kansas
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Your contract to purchase the home you desired in a "short sale" was with the owner of record at the time. Namely, the person whose home was subject to a foreclosure.
In many states for a "short sale" to close escrow, the lending institution holding the mortgage or trust deed, has to approve the purchase agreement between the seller and the buyer. The reason for this is due to the fact that the purchase price will be lower than the amount owed on the loan.
The result is that if the "short sale" is approved by the lender in a "short sale addendum", the escrow closes, there is a new owner of the property and the lending institution takes less than what is owed on the loan secured by the home.
In you situation, since the lender foreclosed on the property, the lender now owns it. Your contract with the seller is not enforceable. You get your deposit back assuming you made one with the seller.
Ifyou still want the home, you need to negotiate with the bank that foreclosed upon it in order to buy it.
Good luck.
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Your contract to purchase the home you desired in a "short sale" was with the owner of record at the time. Namely, the person whose home was subject to a foreclosure.
In many states for a "short sale" to close escrow, the lending institution holding the mortgage or trust deed, has to approve the purchase agreement between the seller and the buyer. The reason for this is due to the fact that the purchase price will be lower than the amount owed on the loan.
The result is that if the "short sale" is approved by the lender in a "short sale addendum", the escrow closes, there is a new owner of the property and the lending institution takes less than what is owed on the loan secured by the home.
In you situation, since the lender foreclosed on the property, the lender now owns it. Your contract with the seller is not enforceable. You get your deposit back assuming you made one with the seller.
Ifyou still want the home, you need to negotiate with the bank that foreclosed upon it in order to buy it.
Good luck.
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