San Diego Housing Bubble News and Analysis

Before you go all legalistic on their asses, you might want to recall that the seller is broke (hence the short sale).

This may not be their fault. It may be that there is a property manager who does not really understand the position he is in and that if there is no short sale, the HOA gets zero. It may be that the first lien holder is stupid and is unwilling to give the HOA any amount of sale proceeds.

I just got a $5400 HOA debt worked out for $3400
$1000 was paid out of escrow and the rest was paid at $200 a month for a year by the sellers. I would have been more aggressive but the sellers wanted to work it out--whatever.

However, a lot of deals get destroyed because an hoa gets greedy or because the agent does not think to bargain.

While not technically legal, you might want to offer to cover some of the amount and work it out directly with the HOA. It sucks but if a few thousand would allow you to complete a purchase of a few hundred thousand then it might be worth considering.

Good luck and feel free to ask me any questions here or directly

urbanrealtor at gmail

A short sale is not the same as a bankruptcy. You can own an expensive BMW, a 401k, a stock portfolio, another property, and... lots of other things, and still get a short sale.

Correct.
However, the seller has already indicated an unwillingness or inability to contribute additional funds to this deal. Even if this were an elective short sale for a rich person (which is rare but not unheard of) there are additional measures protecting the seller from action. Specifically, the CAR RPA (which is, I suspect, the document the OP references) generally gets coupled with either the CAR Short Sale Addendum or the San Diego Association of Realtors Addendum to Purchase Agreement (SDAR APA) either of which specifically excludes the claim option for buyers.

Either way, it is very tough to force somebody to pay a debt to a third party so that they can lose money selling a house to you.

There are exceptions to this but they are pretty rare.

Perhaps I did not understand the original post. It appeared to me that the poster was irritated because there were statements made to and agreed upon by both parties in the purchase contract and SIGNED by both parties and now the seller is reneging. Thus the buyer is seeking legal recourse. The question is, can he get it?

Typically if you are a seller in a short sale and you receive an offer you must not agree to costs AT THAT TIME. The listing agent should have advised to NOT agree to them and counter the offer at that time. You don't agree to terms and then later say sorry I am broke I cannot pay for what I told you I could pay for.

Now will a court uphold it? Don't know but there is no excuse for it even if the seller is broke.

In rereading the post it looks like the op is asking if the purchase agreement (which likely assumes that a seller is able to convey clear title) is binding in a short sale.
It makes no mention of a agreed costs re HOA stuff. It looks like the "reneging" or "breach of contract" is the seller being unwilling to buy off a lien holder (which would be a normal thing). That is why the SSA or APA would normally be used.

Where do you see that they had an agreement regarding specific lien holder costs?

I suspect there is an addendum (ssa, apa, or otherwise) that addresses short pay situations.
If the listing agent suggested moving forward without it, then the agent stands to lose his license and the seller his money.

You're right that one should not make agreements has no reasonable expectation to fulfill.

Again, reading the original post it looks like the poster is not complaining about the lien being cleared due to the short pay. In fact the poster was actually specific to mention HOA stuff.

So my guess is either that the seller is reneging on paying HOA document transfer fees, which of course are clearly spelled out in the RPA, or the seller is not paying off the HOA backpayments.

In reality the RPA does indeed cover these issues as well. On page 2 of the RPA HOA document and transfer fees are specified to be paid for by the buyer or the seller. It is very clear and concise.

On page 3 section 12B there is a discussion about liens. Now in that section it does not state the Seller HAS to pay those off! However in section 12C it DOES say that the seller has a duty of disclosure to the buyer about those matters affecting title and an HOA lien would be just that if there is a deficiency owed.

My point is, I am assuming the original poster understands short sales and is not griping about the lender accepting or not accepting the short payout. However it appears (and again perhaps my assumption is wrong) is that the poster is griping about the seller agreeing in the contract to pay for items that the seller is now defaulting on.

I agree with the point that in any short sale the sellers pretty much are not going to pay for squat and let my clients know that from the beginning. I would say the buyers agent should have let him/her know that but there is a point made here that agreed to conditions in the contract, when signed by both parties should be honored and the poster does make a point to query if they would be held up in court. I think they very well would be or at least should be.

I took the implication to be back payments as they are incredibly common in shorts.
Okay, I see the miscommunication here. WHen I said "It makes no mention of..." I was referring to the post, not the RPA. Also, we don't know if the OP is using a CAR RPA.

Page 4 actually. Again ASSUMING he is using the CAR RPA, then there is room for flex "..except monetary liens unless buyer is assuming those obligations" (RPA: par12(a)(i))Disclosure does not appear to be at issue in the post and that would already have been disclosed in the Prelim.That is as stretch of an assumption. That does not seem in evidence to me. Though I could be mistaken.Again, where in the original post do you see that implied? I don't know enough about the case as to whether it would really hold up but Paragraph 12 does not incline me to believe so. I do agree with you that it should be more clear to the buyer but as I stated earlier, this does not bespeak familiarity with the process.

I didn't take the post to mean backpayments because it was not implied at all. I took it to be HOA documentation because of what the person posted,

"For example, if they will not pay for the HOA package, would we be able to force them to pay by court order or mediation?"

To me, an HOA package to me would be the Bylaws, CCRs and previous meeting minutes.

********

No disclosure may not be an issue here but if it is HOA backpayments like you said which are incredibly common, then disclosure should be made about that. Now like you, I understand it is also incredibly common that they are not made (like never), but that doesn't make it right. Getting it from the prelim is commonplace but once more, if we go by the letter of the contract, it SHOULD be disclosed by the seller if the seller knows about it and most sellers defaulting on HOA payments do know about it.

Once more the point of the poster to me is a complaint about adhering to the letter of the contract.

A lot has transpired since I made the original post. Here's an update:

-We agreed to pay the $$ for the HOA package (splitting it 50/50 with the seller's agent).
-Additional back HOA fees surfaced which we worked out with the agents to split 4 ways.

All that sucks, but it's the least of our problems. What happened next I did not see coming...

We signed escrow & loan docs and made our downpayment. A few days later, the seller had still not signed and we finally hear that they have decided to let the house go into foreclosure because of a notice from bank #2 to pursue them for the difference (bank is Chase by the way and apparently this letter is standard operating procedure even though they don't go after them).

Both banks agreed in writing to my offer price. Regardless of whether #2 decides to go after the seller does not change the fact that we have a good contract, am I right? The short sale addendum is only there to say the sale is contingent on the lender approval--once we have that we have an enforceable contract (at least that's my understanding and my lawyer agrees).

As I mentioned above, I have secured the services of an attorney and am beginning the process of suing seller for specific performance. We called the seller, sent a letter, basically tried to give them the opportunity to fulfill the contract (we were nice about it too!). They've effectively stuck their head in the sand and are waiting for this storm to pass.

Thoughts...? Attorney and myself think I have a solid case. This being my first time buying a home and suing someone, I would appreciate any input you smart pigs have (hopefully it'll make me feel better and boost my confidence).

I'll let you guys know how it all turns out.

If there is a Short Sale Addendum or an Addendum to Purchase Agreement, you are SOL.

Both of those forms build in protections for sellers in a short sale if a lien holder does not approve a sale in a form that works for the seller (like saying that the seller is still responsible for the deficiency).

It is possible that both the listing and buyer's agent were negligent and did not provide those. In that case you might have some options.

If the lawyer you are using is anything other than a residential real estate specialist (like that is his entire practice) then you are SOL with atty fees.

If the seller's bank declines this or puts non-viable conditions upon the sale, then really you don't have a deal.

Even if you were to succeed in a specific performance lawsuit, the practical reality is that getting the crazy logistics of a multi-loan short sale working (without seller cooperation) mean your victory would be both Pyrrhic and pointless.

A better bet would be to get that atty you paid for to have a sit down with the seller and explain to him how hard it would be for Chase to come after him in a single action state and how his loan could be considered non-recourse (if that is a position that can be defended).

Finally I must ask:

Why would you want to pursue this?

There are lots of properties out there.

Chase? Ugghhhhhhh............

Yes this is a tough one. I will be interested to see how it turns out. One thing that may help you out is the approval letters. If you have a copy of the approval letter from the short sale lender(s) that has the signature of the seller then that will help. If you read the short sale addendum then you will see there is text in that addendum that protects the seller in such a way that the seller does in fact not need to move forward even with approval. This may be the case where a lender demands a note to cover all or part of the deficiency.

I would agree with UR that you may want to try to sit down and work things out. What has probably transpired is somehow the seller has realized that they can continue to live in the house for free until it gets foreclosed on. They have decided that having a foreclosure is not any worse then a short sale with regards to credit history. Right or wrong that is where they are at. So... you can use vinegar or honey to try to get the home. It is a tough call.

Okay.
The problem is that their motivations and inner turmoil is largely irrelevant.
The suggestion was not to sit down with the other side (though that is not a bad idea) but to let them get some free legal advice from a qualified (and "qualified" is the key) attorney who could clarify that the seller has less to lose by short selling.

Any seller can live in their place without paying for years these days.

If they are doing a short sale, they probably are willing to move out.

Still, if you are devoting this much time to this retarded endeavor, you might want to consider devoting money for a couple of hours of attorney time.

I know my advice is less rosy than SD_R's and more lengthy than sdr's (whose opinions actually have value), but it really is worth your time to try and get this dude to see the light. He will most likely do that with the aid of a professional who owes him loyalty.

My opinion.

Good luck dude.

I think this is an easy one.

OK, here's the problem. It depends if the 2nd is a recourse loan that went to recovery at Chase. If it did they probably want 50 to 80 cents on the dollar which could be alot of money. If thats the case, seller could have said OK I'll pay the X now instead of being on the hook for 2X later but realized they can just go BK if Chase comesa after them. Another is Chase wanted severa l thousand and seller was willing to pay it but realized they had non-recourse loans and just said F%*K it let em take the house and I'm off for nothing. These are but two of many possible scenarios.

But here is your real problem. Your only real rememedy is to sue for specific performance (i.e. force them to sell you the house). It would take a long time to litigate that. By that time you have one of two problems. The bank already took the house back and the sellers cant sell you the house anymore. The other is what judge would force someone to sell you their house if it meant being on the hook for a huge deficiency balance. So now you can sue for damages. What damages do you really have, maybe a couple thousand at most. If you ask me this is a loser case and I'd say go find another house instead of making oyurself miserable for the next year and paying for some attorney's Spring Break Ski trip with the family. Of course your attorney thinks you have a good case. He was thinking Big Bear and you just changed his outlook to Vail.

LOL.
Awesome.

It's David right?
Well put dude.

Most of you newbees dont know this but before there was TG, I was the funny guy around here. When he showed up, he filled that role much better than I could have so I dropped that act......but I still got it!

sdr not sure what you are seeing but I am seeing the seconds being a hell of alot more assholish this past year. Two of them I had to wrangle with said that they don't give a sh-t because they have charged off the money already as compared to 2007 and early 2008 where they were more content to take the morsels tossed to them by the first.

Out of curiosity was this Gmac, HSBC or wells?

One was wells home equity, one was usaa, another earlier this year was citibank. usaa were really assholes. wells home equity was less so but more likely because the first was with wells home mortgage.

The seconds are fine as long as they havent gone to far. Once it goes to collections/recovery you are dealing with a collection agency that doesnt give a shit. They get paid on what they collect and do not have a loss mitigation mindset. The one's you mentioned are minor leagues compared to Chase. They told one of my clients to go have a bake sale if she couldnt come up with the money.

Dan
FWIW the 3 lenders you mentioned are my favorites and the best to deal with by far.