Investor · Milpitas, CA · Member since 2014 · 116 posts · 103 votes
Hi BP.
Tomorrow I was supposed to close on a property, which we are now not going to. During the title search, we discovered a sizable second lien that they didn't disclose. When we mentioned the fact, they acted surprised. Can't say genuine or not.
Today they sent us a release of contract document, stating that they will send me my earnest deposit back. I am sure that they will do that, but I have put some money in for inspections and appraisal. Do you think it's possible to ask the seller for that back?
K. Marie, I missed your point about the Realtor being responsible for the lien, no one is saying that, the agent had a responsibility to find out if what the property they listed for sale that could be sold, they must perform reasonable due diligence. Now, if some lien were found in a final that was 20 years old and missed in previous searches, where the seller had nothing to do with that lien, that would be different, probably not the case here.
Good point Walt, that is a common solution and nondisclosure of matters is usually part of the deal. Agents and brokers will pay to protect reputations when they are in error. :)
While it probably doesn't rise to the point of financial liability on the part of the agent, it is definitely an issue of incompetence/laziness on the agent's part. "The lien was associated with the loan modification". This isn't an additional lien. Every agent should know that in a loan mod, a portion of the principal is temporarily "put on the side", usually about a third, for the sole purpose of calculating a new lower payment (ie 2% interest, 40 year amortization) on the remaining lower balance. That extra principal doesn't go away, it's always a balloon laying out there due at end of the term. And yes, as an agent doing a prelim on any potential listing is a given.
I wonder if this is a case of the seller not really understanding what happened when they did the loan modification. Perhaps they truly thought that chunk of principal just went away. So they never bothered mentioning it to the agent or anyone else. Lots of folks don't really understand everything they're signing in complicated situations like this.
Depending on the availability in the county where you're operating, you should have access to the recorder of deeds land records be it virtual or heading down to the office.
My partners and I do our own prelim scrub of the titles using online systems in our markets. Not only does this prevent us for having title issues, but it also gives us great insight when making an offer (we also use this as a sales tactic to convince non-occupying owners to sale to pay the note.) No point in offering $100k for a property with a $200k lien on the title, unless your strike price really is $200k and you're willing to clear all liens.
I have been involved in such a case. I do not know what liability the agent had in the case, but I know that my lawyer convinced the agent to foot half the bill and the seller paid the other half. The one condition was that I never discuss their involvement. But it involved a significant loss since there was not only DD costs but a dual closing and MY house was sold at that point. I had to get temp accommodations along with storage for furniture.
Good info and thanks for sharing. Was this an actual case? As in a suit/complaint filed? Or did your attorney get the seller and agent to settle before any legal action? I totally get that a seller and even the agent would decide to settle and pay you off. You had damages that they could easily see. I'm always more curious about the actual case and judgment (when there is one).
While it probably doesn't rise to the point of financial liability on the part of the agent, it is definitely an issue of incompetence/laziness on the agent's part. "The lien was associated with the loan modification". This isn't an additional lien. Every agent should know that in a loan mod, a portion of the principal is temporarily "put on the side", usually about a third, for the sole purpose of calculating a new lower payment (ie 2% interest, 40 year amortization) on the remaining lower balance. That extra principal doesn't go away, it's always a balloon laying out there due at end of the term. And yes, as an agent doing a prelim on any potential listing is a given.
Even though many sellers will lie through their teeth to me about property and estate issues, I gotta say I usually give them the benefit of the doubt when it comes to lien issues. Some of the stuff I see is truly complicated and hard to understand. But missing a loan mod? That seems kind of a glaring omission....for everyone involved. I never work with anything that basic. If only.
I have been involved in such a case. I do not know what liability the agent had in the case, but I know that my lawyer convinced the agent to foot half the bill and the seller paid the other half. The one condition was that I never discuss their involvement. But it involved a significant loss since there was not only DD costs but a dual closing and MY house was sold at that point. I had to get temp accommodations along with storage for furniture.
Good info and thanks for sharing. Was this an actual case? As in a suit/complaint filed? Or did your attorney get the seller and agent to settle before any legal action? I totally get that a seller and even the agent would decide to settle and pay you off. You had damages that they could easily see. I'm always more curious about the actual case and judgment (when there is one).
My lawyer sent a letter accusing the seller and agent of negligence and/or fraud, and said that it was up to the courts to decide who was liable. They talked to their lawyers, their lawyers talked to each other, and they agreed it was best to split the actual costs.
It's been a month now, and there has been many run around. Thought I'd post how it's been progressing, and I do have 1 more question.
Initially seller seemed to try to comply to what's written in the contract. The only thing they were asking was proof of due diligence spending. We were able to easily provide proof of the inspection costs, but it took us a while to get a statement from our lender that they were not going to return our deposit that was used for appraisals. I understand that they were trying to protect themselves, and I am fine with that.
Next, seller seemed to talk to an out-of-state attorney friend who encouraged them not to pay back the due diligence costs, even-though it was clearly written in the contract. I am certain that they are not in attorney-client relationship, but just had some casual conversations. Not sure if the attorney even had a chance to read the contract.
Next, we wrote the seller that we'd like to settle the differences through a mediation, which is again written in the contract. We have given them a week to agree that they would go to mediation with us before we pay the mediation fees. They completely ignored us.
My agent is quite upset, and he prefers to pursue the case to the district court. The only problem is that I am out-of-state investor. I'd have to hire a local attorney to represent me, instead of me to just walking to a small claims court. All of this is just for $1200, and attorney costs would certainly quickly add up to more than that. I think the seller knows this and betting on me to drop the case because of that.
I believe that we have the case, because it's all written in the contract of purchase that we both signed. Now the question is, is it possible to sue for the refund and also for the legal costs? Otherwise, perhaps the smarter thing to do is to drop the issue?
How much underwater is it based on your contract price? It might be worth contacting the holder of the second lien and saying how much it would take to clear the second lien. Ideally 1st lien + commission + reduced amount for 2nd lien <= contract price. You could also look at the sellers agent's commission if the numbers are very close, but don't quite match up.
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