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Contributor
mountainwater
Posts: 16
Registered: ‎09-01-2010
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Short Sale Questions

We just walked away from a short sale in east Yorba Linda after home inspection. We have some questions which our agent failed to give us answers or provide us what we requested. Your answers and opinions would be greatly appreciated.

 

  1. Our agent advised us the lender approved the sale, but cut some or denied some of the fees the seller was supposed to pay according the Contract. What our agent told us were different from what the escrow company told us regarding these fees. We requested a copy of the lender’s approval letter. But the letter forwarded to us with a paragraph (or more) missing regarding fees. We then requested the fee list the escrow company worked out for the seller to submit to the lender for approval (Is this called Demand?). But no matter how many times we requested, our agent said he did not want to get involved in the seller’s this stuff and asked us to get it from the escrow company. The escrow company first said the seller did not give him yet (That was when and where I got the word Demand); later on, said it was just the approval letter you had already got from your agent. (The escrow company is owned by the broker company) Why  they did not want us to know that list/Demand ? Are we entitled to know it?
  2. There are several severe water damage areas which both agents knew. When we received the disclosures, no one (including the property owner) disclosed anything. Are the property owner and both agents obligated to disclose these visible defects? Does the buyer have recourse if there are evidences that the property owner purposely undisclosed invisible defects in a short sale? 
  3. There are severe mold problem in drywalls of this property. Is there any law requiring mold to be analyzed by a lab and get it fixed, and the property is affirmed safe to live in before obtaining mortgage loan or closing escrow?

 

 

 

Silver Trusted Contributor
Rebeccah
Posts: 841
Registered: ‎09-08-2008

Re: Short Sale Questions

Caveat: I am not a lawyer.

 

1.  I'm not sure why the seller and/or escrow company apparently wanted to hide from you the terms of the bank's approval.

I don't know that you are necessarily "entitled" to know what the bank is willing to allow for fees to the realtors, escrow company, etc.  It's nice information to have, and certainly gives you a better idea of your negotiating position.  But you are not the one who has to agree to those restrictions - the people who would be receiving those fees are.  Maybe they aren't telling you because they are still being negotiated.  Certainly at/before closing, the actual fees (not the limits imposed by the bank) would have to be disclosed on the HUD-1 statement.

 

2.  In California, the disclosures primarily take the form of answers to specific questions on a set of disclosure forms.  Did the owners lie in the answers to those questions?  They are obligated to answer truthfully, regardless of whether the sale is a standard sale or a short sale.  There is a separate form where the real estate agent (I forget which one, I think the buyer's agent) is supposed to indicate anything visible that *they* noticed on a walk-through, that they think may be important.  Presumably, if you know that "both agents knew" about the water damage, then so did you know about the damage.  Whether the disclosure is in writing or not, you don't have any "recourse" for nondisclosure of damage that you know about.at the time that you close the sale.  You can either close the sale or not close the sale, knowing what you know. 

 

If you know about some damage, then you know you need to do some diligence to find out the extent of the damage - that is what inspections are for.

 

Now, if you can PROVE that the seller knew and withheld information about the house's condition that could not be discovered on inspection, and that you suffered a financial loss as a result, then you could sue, and maybe you could even win a judgment against the seller.  But good luck collecting that judgment from a seller who can't affort his mortgage payments and/or can't affort to make up the shortfall on his loan balance when the house is sold.

 

The realtors are off the hook for anything they don't personally observe.

 

3.  I'm not aware of any law requiring mold abatement in order to close a sale.  Disclosure (if it's known), yes.  Then it's on you and the seller, and seller's lender in the case of a short sale, and perhaps your lender depending on their policies, to negotiate what, if anything, to do about it.

 

Rebeccah

 

Contributor
mountainwater
Posts: 16
Registered: ‎09-01-2010
0

Re: Short Sale Questions

Thanks for your reply, Rebeccah.

 

1. Our main purpose for requiring the approval letter and demand was to make sure how much exact amount the lender allowed for termite Section I treatment instead of the whole cost as contracted; and what exact items were denied by the lender which the seller/lender were supposed to pay per the contract.

 

2. The disclosures were from three parties: the owner and both agents. We received  CAR Form AVID, TDS, SPQ, etc. But none of them disclosed anything. Yes, the owner lied. Their not disclosing anything made us more cautious. We requested to cut holes in the drywalls where there are severe water damages and found severe mold problem in side walls.  

 

What we have learnt: never buy a flip. If some of the drywalls had been replaced and water stain had been painted, you would never suspicious of mold problem inside the walls,or roof sagging especially for a property in that community.

Redfin Market Manager
PaulReid
Posts: 503
Registered: ‎03-12-2010
0

Re: Short Sale Questions


mountainwater wrote:

Thanks for your reply, Rebeccah.

 

1. Our main purpose for requiring the approval letter and demand was to make sure how much exact amount the lender allowed for termite Section I treatment instead of the whole cost as contracted; and what exact items were denied by the lender which the seller/lender were supposed to pay per the contract.

 

2. The disclosures were from three parties: the owner and both agents. We received  CAR Form AVID, TDS, SPQ, etc. But none of them disclosed anything. Yes, the owner lied. Their not disclosing anything made us more cautious. We requested to cut holes in the drywalls where there are severe water damages and found severe mold problem in side walls.  

 

What we have learnt: never buy a flip. If some of the drywalls had been replaced and water stain had been painted, you would never suspicious of mold problem inside the walls,or roof sagging especially for a property in that community.


Hi mountainwater,

 

So, the property was a 'Flip' and a 'Short Sale'? That's about as bad a combination as you can get :smileyhappy:

 

You should absolutely get a copy of the full short sale approval letter as soon as your agent gets a copy of it. In fact, it should be in your original contract that you are provided a copy of it (form SSA 1C). Termite work is usually one of the toughest things to get the bank to approve in a short sale and can often complicate the transaction significantly if the bank isn't willing to pay for all of the 'Section 1' work.

 

If the sellers and the agents knew about defects they should have disclosed them. The AVID is the form the buyer's agent (selling agent) and the listing agent should have filled out. THe TDS and SPQ are filled out by the seller. Agents usually have no idea if there is mold inside the walls, unless they were there during the remodel of the home, but obvious visual defects they should note. You'll need to discuss the forms and how they were filled out with a real estate attorney to determine what type of liability there may be.

 

I'm not aware of any laws requiring mold to be taken care of or analyzed prior to the close of escrow. I would recommend any buyer I'm representing have samples taken and analyzed if it concerns them, but the seller is under no obligation to do that on a buyer's behalf. The standard RPA states that real estate in California is sold 'As-Is'. Lenders may have requirements regarding certain items if they appear in the appraisal, purchase contract, etc., but a seller can sell their home in just about any condition. Of course, there are certain municipalities that have different requirements, but in general homes are sold 'As-Is'.

 

Short sales are still the most unpredictable when it comes to costs, condition, etc. and it's best to be extra diligent when it comes to pursuing a short sale. It's also prudent to understand they usually end up having the most work involved for the buyer.

 

Best of luck!

Paul Reid | Inland Empire Market Manager