What a bummer!

What exactly do you hope to achieve through the Court?

Have you incurred any monetary damages?

You can't force the lender to accept a short payoff.

Do you have reason to believe the seller has liquid assets to cover the shortfall between sales price & payoff?

If not, then what do you hope to gain?

The seller can only sell whatever interest they have in the property. They can't pass clear title to you unless that loan & corresponding mortgage gets released.

Even if you ended up with a judgment...what good is it if you can't collect? You'd be out attorney & Court costs, still not own the house, & just have a pretty piece of paper (judgment) to show for your efforts.

Do you know if the house is part of the collateral package for the business loan with a specified release amount? Or, is it a separate loan & mortgage? Your post sounds like its a stand alone deal. If so, the lender has, probably, sold the loan on the secondary market & retained servicing. If this is the case, they would thus be hindered in their ability to transfer debt.

IMO, your best course of action is to get your earnest deposit back quickly & move on.

/tricia

According to the purchase agreement I can sue for specific performance and/or damages.

They have lots of toys (harley/big trucks) in the garage. I bet the could sell items if push came to shove.

As for damages - I'm in for about $1500 not counting earnest money at this point (inspections, etc). Plus this means at least a month of a 4 hour daily commute for me when I start the new job before we could close on a different house.

Come up with a number that they need to compensate you for the time and hassle. Make sure you include your realtor in the discussion and they get compensated as well. Be firm, and if they can't satisfy you, then contact the closing attorney about your options.

You can't squeeze blood from a turnip, but maybe it can bleed ATVs, boats and over-priced toys.

Your remedy to is to file lis pendens, which requires specific performance. You would (likely) need a lawyer to do this.

What it would do is make it difficult/impossible for the sellers to sell the house to anyone else is the mean time. That will only compound the seller's problem, assuming they need to sell. I would start with your RE agent calling their agent and/or them and telling them that you plan to sue for specific performance but that you really don't want to go to the expense nor to cause them the hassle. But that they need to talk to their lender and explain that the lender is doing better by giving them 30k in a loan or otherwise than not getting anything.

edenbojr,

I'd guess there's little to zero equity in the "toys". Most likely leveraged in excess of market value.

Specific Performance - yes, you can sue but as I noted above...what do you hope to gain? Judgment? Worthless unless you can collect. IMO, you won't collect anything on a judgment except dust.

You'll get your earnest money deposit back so that's not damages. The inspection fees, etc. totalling $1,500 would be damages you're technically entitled to collect. The commute will be hard to pin down in Court because nobody knows where you'll eventually purchase. I don't think you'd be awarded anything.

Personally, as much as I feel for you emotionally - logic tells me you should just move on & consider your experience a costly education in performing due diligence before signing a P&S for real estate.

Next time, before you sign a P&S Agreement...go to the land records & see if there's a mortgage. Look at the amount. Is it higher than the sales price? Is there equity in the property? How old is the mortage? Ten years? Two years? A buyer's agent 'should' help with some of this but there's no substitute for the buyer performing their own due diligence. I've no doubt that after this experience you'll never sign another P&S without that trip to the land records, right?

/tricia

"Personally, as much as I feel for you emotionally - logic tells me you should just move on & consider your experience a costly education in performing due diligence before signing a P&S for real estate.

Next time, before you sign a P&S Agreement...go to the land records & see if there's a mortgage. Look at the amount. Is it higher than the sales price? Is there equity in the property? How old is the mortage? Ten years? Two years? A buyer's agent 'should' help with some of this but there's no substitute for the buyer performing their own due diligence. I've no doubt that after this experience you'll never sign another P&S without that trip to the land records, right? "

All of that was done. Tons of people are upside down on mortgage. If the sellers agree to purchase agreement, I, as buyer, have no other option but to beleive they have the equity to make up the difference. In fact we asked specifically and were assured it was covered.

Sorry, but this was in NO WAY my fault.

From what I understand, you'll get your earnest money back but are unlikely to be able to force them to sell you the house. It doesn't matter whether you did due diligence or not. I doubt a court would require that they liquidate other assets to be able to sell you the house.

To my way of thinking, if those sellers signed a contract with you it is up to them to keep up their end of the bargain - whether that means selling an SUV or dipping into their 401K money to do it. That is what honest people do.

Sadly, it sounds as though these sellers were using this contract to try to force the bank into forgiving some of their debt. They must have known that there was a chance that the bank would say "no." Yet, they signed the contract with you anyway. That was very dishonest of them.

Frankly, I wouldn't want to buy a house from jerks like that. What else have they failed to mention to you? I would get my money back and move on.

Sorry you are going through this.

LOL

Don't get your dander up!

You should never have signed the P&S without a written agreement from the lender regarding the short payoff.

In matters not one iota how many people are updside down on their mortgages. In fact, that's all the more reason for buyers to take the necessary precautions of performing thorough due diligence.

"If the sellers agree to purchase agreement, I, as buyer, have no other option but to beleive they have the equity to make up the difference. In fact we asked specifically and were assured it was covered."

Do you have it in writing from the lender???? No, I didn't think so. Do you have anything fron the seller stating that they are aware the sales price is insufficient to pass clear title & agree to augment the sales proceeds??? No, I didn't think so.

Yes, you do have other options. You just didn't make use of them.

And, no...it's not your fault the seller hasn't been able to reach agreement with their lender. It is your responsibility to protect your own a$$ though. Who else do your expect to do it? The seller? Nope.

Sorry, I'm a long time lender who's seen this situation many times. The law allows for you to sue for Specific Performance. You'll likely not collect a dime. Fair? Probably, no. Real world? Yep.

Frankly, I'm amazed that you apparently KNEW the seller was trying to get their lender to agree to a short sale & you STILL didn't get anything directly from the lender approving the sale. That part is your fault.

Folks, this is really a tough lesson & the OP has learned the hard way. There's already happening lots of these supposedly short sales & there's going to be lots more in the months to come. Learn how to protect yourself. Afterall, the seller wants to see proof that you qualify for a mortgage before signing your P&S, right? Why would it be any different if the seller needs to come up with cash outside sale proceeds to pass title?

If anybody's interested, here's what I would have done in the same situation. I would have demanded, through counsel, that the lender either provide a letter signed by a person of authority stating that the lender would accept "X" amount of dollars & provide full release of lien OR better still...demanded that the lender prepare the release of lien & place it with the title company until closing. As buyer, you are perfectly within your rights to make such demands.

Do you have any other options now? Well, yes you do but it's hardball.

You can show up for closing with your certified funds. Sign the closing documents. Then, have your counsel phone the lender explaining that you're sitting at the closing table with cash on the table. Tell the lender that if they don't immediately agree to the release of lien you'll walk & they'll likely have another REO on the books. It sure sounds like the lender is familar with these borrowers since the OP stated that they refused to transfer the remainder to the borrower's business loan. Quite possibly, forcing their hand will result in a successful closing. If not, you're no worse than you are now except, maybe, down another $500 for counsel to attend closing & make a couple phone calls. I've been on the receiving end of many of those phone calls. Some I've agreed to & others I've rejected.

/tricia

I think we're going to see more and more of this. As stated in an earlier post, alot of agents are using the words "short sale" as part of their marketing of the home without even having a conversation with the bank.

My advice would be to just let it go. Take the seller to small claims court for your $1500 if you want to. You should have been made aware that this offer was a possible short sale.

I'm an agent involved in 4 or 5 of these things right now. Each bank does them a little different. Most of the banks won't even give a verbal acceptance of your offer. They want the buyer and seller to sign contracts and then they will let them know. (In NY this is 2-3 weeks into the process) Of course the seller agrees to sell his house because he's already not making any money on it. But no one really knows if they bank will accept the offer. I am advising all of my clients not to pay for home inspections, and/or tests until the bank actually accepts the offer which could be weeks, even a month after putting in the offer. Im sure this will hold things up, but it will also stop people from losing money. I am also continuing to look for my buyers for other properties. If something comes up that is better, so be it.