There Are NO Guarantees When You Buy A Short Sale!

The learning curve is getting pretty steep when it comes to short sales lately. There are still surprises cropping up that are teaching us all a valuable lesson- there are no guarantees when you buy a short sale.

Recently some clients of mine who were buying as an investment received an accepted offer on a short sale. The home had two loans (first with Bank of America the second with Chase) but only the second was being paid off short. Our approval came relatively quickly, but once it came we were all shocked to find out that we only had 7 days to close escrow! Being a cash deal this is entirely possible but since it was right before Christmas it was going to be tight. Disclosures were signed and our home inspection was scheduled for day 3 of 7. Just before the home inspector was supposed to go out to the property the listing agent called and informed me the house had sold at the trustee sale that morning.

What does that mean?

It means my buyers don't get the house because someone else owns it now.

Bank of America, even though they had ASSURED all parties involved there was no sale date set, and had fully cooperated with the short sale proceeded with foreclosure just two days prior to the new buyers taking possession of the property. All of us were in complete shock. Not only did we not see it coming, but Bank of America was being completely paid off in the sale transaction and would be made whole through the sale. They undoubtedly lost tens of thousands of dollars in foreclosing instead.

So what is the lesson here?

In this scenario based on the information available none of the parties involved could have known the house was going to trustee sale. There was nothing noted on the tax records or on Foreclosure Radar and the listing agent was given false information. However- that is not always the case. When you are buying a short sale it is vital that your agent and the listing agent and the owner of the property are diligent in working with the bank and staying abreast of the public records to be sure the information being conveyed by the bank is in fact accurate.

The secondary lesson to this is essentially to not get your hopes up. There are a couple disclosures you sign as a buyer that let you know that there are no guarantees when buying a short sale, and situations such as this are the exact reason why you sign such disclosures. Don't get me wrong, it certainly does not make it any easier, but if you know and understand from the very beginning that this outcome is a possibility it makes it a much easier pill to swallow.