Seller accepted our full price offer for single family residence, we went back and fourth with fixes, paid for an appraisal, paid for an inspection, sent our cashiers check for the down payment, signed closing docs with a mobile notary (we live out of state) and then the day of closing the seller said they didn’t have the funds to close. They owe 20k more on the house than the price we paid (completely baffled we would get this far before this coming up).
Any suggestions? We’ve already invested over a month of time/money plus would rather not lose the house as we feel it’s a good investment. Thanks!
As as a practical matter, it may be difficult to force the seller to follow through. However, I'd check with a lawyer on the process for tying the property up in court so that they cannot sell to anyone else
@Molly Neubert That sucks. If they truly don't have any of the necessary cash to bring to the closing table, I'm not sure what you can realistically do because that's a pretty big difference to make up and it sounds like it'd need to go through the shortsale process.
But can they come up with some of it? And then maybe borrow some from friends/family? Is there room for you to come up on the price some? (Not ideal I'm sure but maybe better than walking away and losing everything you've paid up until this point for inspections.) Can the Realtors cut their commission a little bit? (After all, some commission is better than none.)
Perhaps if everyone pulls together and contributes just a little bit you can find a way to get the deal done. Good luck.
Are there agents involved I'd imagine? Can something be worked out between all 4 parties?
My last solo buy in Jan saved the seller and I more than $22k. But we did all the work ourselves.
HAs the seller asked his mortgage company about a short sell? It would take a while to get approved, but that is possible.
Ask also how much the seller does have to pay towards closing. Try to negotiate with the realtors for the remaining money needed e.g. If its $10k the seller has and you need $10k more, maybe the realtors can each kick in $3k and you can kick up the price $3k.
If there are no agents involved then it get a little easier to take the deal anyway. There are ways to help the seller to stage left.
I had a seller try to back out and we finally made it to the closing table. It delayed my closing a few days and it ruined the peacefulness of the process. If I had to do it over again I'd like to think I'd walk away and just eat my costs. After learning more about that seller, it's her usual pleasant self. Now I pay more attention to the owners and do a little more research on the front end.
That whole process let me know how critical your agent can be, they can help or hurt a situation.
Was this a private deal or did you both use brokers? If there was a selling broker involved, it would be his responsibility to know that there was $20k owed above and beyond the selling price and it was his duty to disclose that information to prospective buyers. Since it was not disclosed, you might have a case against the broker and the loss might be covered under his E&O insurance.
If this was a private deal, the obvious question is, Is the property still a good deal for $20k more? If so, I would kick it in and close the deal.
@Molly Neubert I am surprised the title/escrow company did not alert everyone on this since they are the one that gets payoff balances. Can you give more details about who was involved? Were there no agents nor a title company?
The seller cannot convey marketable title... so the deal is dead imo.
This happens frequently, often because of judgments/liens and/or the seller failed to understand that a prior loan modification did not forgive some of the balance but rather tacked it on the back end as a 2nd trust to be paid upon refinance/resale.
It wasn’t private, we used two agents. The sellers agent is currently not responding to our agent
How did the sellers not realize they were going to be short on paying off the mortgage?
Have you talked with your agent and their brokerage and lawyer about your ability to sue them?
I feel like I’d at least threaten to do so to see what happens. Letter from lawyers are intimidating.
Well, that really sucks. Yes, very weird this wasn’t caught earlier than the day of closing. A few parties didn’t do their due diligence.
Check your contract. Since the seller couldn’t deliver clear Title they may be in breach of contract.
Trying to get short sale approval is a semi-lengthy process. They need to be in financial distress (savings exhausted) and actually have to be missing payments. It’s not as easy as asking the bank to forgo some of the lien just because the market value of the property is less than what is owned.
How badly do you want the property? Are the sellers still making mortgage payments? How old is the loan? Basically, if they are still making payments and it’s an older loan, the equity will be building up. If you can get some sort other “concessions” somewhere you might be able to bridge that $20k gap. Long shot — even if $1k monthly principal payments, in 1 year your are more than half way there. But who wants to wait a year plus...
In the end, this is a business deal, right? Figure out your costs / benefits and go from there. Good luck.
Unless you're willing to up the price $20k, there is little you can do practically speaking. You cant get blood from a stone.