[quote=UCGal]So if I get this right…
– Sellers put the house on the market – not disclosing it was a short sale.
– Buyers put down earnest money and went forward towards purchase.
– Sellers find out bank isn’t going to foregive the difference between sales price and money owed – and hang onto the earnest money.
And the first court ruled in favor of the dishonest sellers… but it was overturned in favor of the buyers. Is that correct?[/quote]
Yes, but there was never any mention that the sellers would have to sell short, either in the listing or by the listing agent before the buyers placed their offer, when the offer was accepted or when escrow was opened. By the time the preliminary title report was provided to the buyers (by the listing/selling agent . . . lol) as per their accepted purchase offer, the buyers questioned her on the amount of encumbrances. Then and only then did she tell them she would “try” to obtain a “short sale” (wishful thinking).
I am presently going over the opinion with a fine-toothed comb. The seller’s agent here was apparently acting in a dual-agency capacity (why do buyers do this???). Since buyers had no agent, the listing agent actually brought the buyers’ offer to the sellers. Buyers sold their own residence based upon the representation by sellers that they would sell them their property at the agreed-upon price.
The amount short in this case was $392,000 and the property had 1st, 2nd and 3rd trust deed encumbrances! None were in default at the time the preliminary report was made and delivered to the buyers.
The justices also took issue with how a preliminary report DOES NOT and CANNOT disclose the amounts of what the actual current demands would be, including late charges, missing payments, etc. They opined that it is seller’s broker’s DUTY to disclose this amount as a condition of title (and subsequent saleability) to all potential buyers BEFORE they place offers, so they can decide with their eyes wide open whether they want to enter into a transaction with these particular sellers.
Buyers sued seller’s broker only here, because they considered sellers to be insolvent. Seller’s broker was THEIR broker also and owed them a fiduciary duty to look out for their “best interests” (lol).
Buyer’s case has been remanded back to the trial court after being thrown out on a technicality. Buyers can now amend their complaint again to include sellers as defendants at that time if they wish. Sellers’ agent/their broker and their E&O policy will be on the hook for NON-DISCLOSURE of the actual condition of the title as was known to them when they took the listing.
A “property profile” is of marginal help when taking a listing. I’ve always advocated having a “Come to J@s#$” conversation when taking a listing with sellers whom you suspect are behind in their mortgage, property taxes, HOA dues, involved in a lawsuit or on the brink of foreclosure.
This case is also another good argument for repealing the CA Business & Professions Code section regarding dual agency.
