Should I get a lawyer involved? Seller (bank) wants to cancel

Question

I'll try to be brief, and I'm not looking for legal advice, more of a 'what would you do in this situation' thing.

I put an offer on a new primary residence in Oregon in November (I live in California currently), which is a foreclosure owned by a bank.  Title company does a search, finds there is still a 2nd lien on the property.  After some digging, turns out the bank didn't foreclose properly, they failed to notify the 2nd lienholder, they said they'll need to do a 'strict foreclosure' and that will take 60-90 days.  OK fine, that sucks but we really want the house.

My realtor submits the contract extension, the bank comes back to say they won't extend the contract, they asked me to cancel the contract while they work on clearing the title, and they said I could resubmit my offer (no guarantee they'll accept it then).

My realtor looks over the contract in detail and he doesn't think the bank can actually back out of the contract, and he said I might want to talk to a lawyer to see what options I may have.

We really really want this house, and are willing to stay under contract for as long as it takes, but the bank seems to want to back out.  Nobody involved can understand why the bank would want to back out of the contract (a guaranteed sale)... only thing I can think of is they no longer like my offer and want to try to get something better.

Has anybody run in to this situation before?  Anybody have any advice?  I don't want to incur a ton of legal fees just to acquire this house.  What outcome might I expect from the legal route?  All I want is to buy the house at the price/terms we negotiated.

Kevin Trumbull · Answer

@Wayne Brooks actually you're right, just poured through the addendum, and they do have an out clause due to the title issue.  Then I guess the question becomes, why are they asking me to request a cancellation, why don't they just terminate since it appears they legally can...

Wayne Brooks · Answer

Every bank addendum I've seen usually gives them the right to back out for no reason, but always the right to back out if there is title issue, like this.  There's no reference anywhere to the effect of"if seller can't deliver clear title with reasonable effort within so many days of the scheduled closing"????

Jill Schuster · Answer

Please do not construe this in any way as trying to interfere with your relationship with your agent. I have run into similar issues with Sellers and a letter from an attorney saying that you intend to compel performance works well with regular Sellers who don't have a right to back out. But, for a bank and especially in the situation this contract is in where they can't cure the cloud on title all that easily, it may be difficult to enforce the contract. If you want the extension, you should consult an attorney to review the contract (was it the standard Oregon form? or the bank's form?) and see if you have a leg to stand on.

Jill Schuster, Principal Broker

REMAX Integrity - Corvallis, OR

Jill Schuster, Principal Broker

REMAX Integrity - Corvallis, OR

David Tipton · Answer

@Kevin Trumbull, they may have deep pockets, but don't you have Bigger Pockets?  (I literally can't help myself, I'm the worst with the "Dad" jokes...)

You should probably have an attorney review the contract before taking any action, if you're really considering trying to force the deal through.  Whether or not it's worth it to you to retain an attorney and potentially take on the costs of litigating the matter down the line depends how badly you want the property and how good of a deal it is.  You may be able to find an atorney to do a limited-scope fee agreement to just look over the contract and communicate with the bank on your behalf.  Filing a breach of contract action can be costly and time consuming and may ultimately wipe out whatever benefit you may get if the contract goes through.  Plus, as @Jill Schuster alluded to, the bank may have good defenses for their nonperformance of the contract (an attorney would have to look that over and let you know).

Like @Wayne Brooks, I would also expect the bank to have an escape clause in there for just this type of situation, but of course it's all speculation unless one can read the terms of the contract.

Kevin Trumbull · Answer

Thanks @Jill Schuster, good information.  This being a bank (with deep pockets) does make this tricky.  Contract was standard Oregon form, with the bank's contract amended to it, but it seems even their own contract doesn't allow them to back out.

Should I get a lawyer involved? Seller (bank) wants to cancel

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