Screwed by House Seller: Looking for advice/similar experience

In My Humble Opinion
1

Caveat: I do have a real estate attorney, but both of us have only just heard the news below this morning and I thought I’d look for others’ experiences or advice to help me get my head around this situation while he does his work.

Short story version:

Have a scheduled closing on Thursday (two days hence) for house my fiancee and I purchased. In meantime, have closing on my house (selling) on Nov 26 (two weeks from now).

I’ve scheduled the movers for this Saturday (about the only time we’re available, it being T-Giving week next week), we’ve been packing, etc. I find out yesterday by calling my attorney that the seller on our new house has been less than forthright about things (to everyone, it seems, including his own agent - though I give a hearty FU to her for not being more diligent). Not only is this a short sale (he has two mortgages) but he also has some IRS liens on the property.

He told his attorney that these were no problem (short sale and liens) last Friday. Today, we find out that, well, there may be a problem, and it is highly unlikely he’ll be able to close this week. If ever.

So now we may be fucked. In less than two weeks I have no place to live or keep my furniture, assuming the worst. Assuming that he can still close, it may not be until after my current house closes anyway. Aargh.

Anyone every had this happen? Is there any way to force a closing? Can we get money back from seller (or seller’s agent) for the lost deposits on moving, or renting an apartment, or storage of furniture.

Seems like their side acted entirely in bad faith all along, yet we’re the ones who may be screwed. No clue even what I’m going to do now. Can’t even tell my fiancee yet (while she’s at work), this will not go over well with her.

Shit.

Again, I do have a lawyer, just looking for other opinions/options/things to keep my head above water.

2

I’m not an agent or anything, but here’s my take on it… First of all, you’ll never get any satisfaction from the bad seller. That deal is over with unless a miracle occurs. But it sounds like both realtors and attorneys have been less than diligent about it.

In this market, the main thing is that you have a buyer for your current home. That’s a big plus.

If I were you I’d continue with the plans for moving out of your current house and selling it. You can put your thing in storage and look to buy a different house. I bet you’ll have no trouble finding one.

So the only problem is finding a rental for a couple of months. Not to make light of the problem, but the hard part is accomplished – you’ve sold your house (or are about to sell it).

3

p.s. – You might try to imply to all the realtors and attorneys involved that they may be liable for your living expenses and storage expenses for the next couple of months… but that may involve hiring another lawyer.

4

I thought this was the kind of thing that would be revealed by your title search. No advice, just confusion.

5

Appreciate the focus on keeping it positive - yes, we were always WAY more worried about selling. But right now, emotionally invested in moving, today it’s a bitch.

6

That’s exactly what happened. Title search was complete late last week, which brought up all these issues, and my atty has been communicating w/ seller’s atty over past two or three days to figure out what is going on.

7

Real Estate Person Checking In.

There is no way in holy hell two banks and the IRS will approve a short sale in two weeks. There is no way in holy hell the IRS will approve a sale on a house where the seller has tax liens on it.

NO FUCKING WAY!

The most obvious and overlooked solution is to see if you can “rent” your current house from the buyers for a month or two. Get together with the agents and the buyers and agree to let the rent be taken out of your proceeds from the sale.

See if you can get a wrap around loan on the new house until you sell the old house. These loans tend to have a high interest rate, but it might help your current situation.

See if you can rent with an option on a vacant house currently on the market and move in immediately. With houses not selling well right now, a seller might be willing to give you a three to six month lease.

8

It doesn’t appear to me that any of the parties are all that negligent (IANAL). Nobody does a title search before they go to contract. Real estate agents never do a title search. When you went to your lawyer and told him/her that you were selling your house, I seriously doubt that he did a title search. If you had defects in your title that you were unaware of, they would not have come to light until your buyer’s lawyer did one. It appears to me that the process worked and you were informed of the problem in a timely manner. This is not to say that it is not incredibly inconvenient and costly for you, but it could have been much worse. I have heard of sellers (and their lawyers) concealing these defects until the closing, where they attempt to get the buyer to eat the defects (I don’t think that would work in this market).

It may well be that the owner was unaware of some of the leins against his property. When my father sold a property, he was informed shortly before closing of a defect in his title. He blamed his lawyer, but it was really my father’s fault for not using a lawyer when he bought the property. He was able to repair the defect & sell the property, but it was a huge pain in the ass.

9

I ran into much the same problem last year, on my first attempt to buy a house. Basically, all I recovered was my earnest money (after two months of badgering the seller’s agent). I ended up eating the cost of a home inspection and a slightly higher rent on my existing apartment because I went from an expiring six-month lease to a month-by-month rental until I found another property to buy. I still got the better of the situation in the end, as the deal I did make was considerably more advantageous than the one that fell apart. Near as I can tell, there is not much in the way of other recourse; in the case of the OP at least, as someone else mentioned, the problems were detected before closing, and the old house has been sold.

One thing the OP might consider is filing a complaint against the seller’s agent with the state real estate licensing authority, although it seems to be a gray area: the seller’s agent apparently isn’t legally responsible for the seller’s failure to disclose problems with the deal, but there is an ethical responsiblity to not go about offering deals that can’t actually be made. Won’t be likely to get you any money, but at least it may nudge the agent toward better behavior.

10

No way no how, not from what my lawyer told me. Seller has been less than forthright about this. These are IRS liens on his business, not some mechanic’s lien for repairs or anything.

Fuck him.

11

I will probably do that. The seller was acting shady about a couple of the home repairs that came up in inspection as well. While she is not bound to run a title search, it was clear from dealing with her that she did not want to bring up anything negative to her client. She was cowed by him, which leads me to believe all she wanted was the listing, and did barely any due diligence on her end.

12

I work for a title company and everything that’s been said so far is spot on. Depending on what county and state you live in, sometimes this kind of information is available on line, free of charge (ie, the Cook county Illinois recorder of deeds has a searchable database available to the public) so it doesn’t hurt to poke around on line and Google a few things.

That being said, most title companies will sell you a tract book search for pretty cheap ($50 to $100) which will disclose all the same things that the title commitment will and they can be done very quickly. Not that you’d want to do one on every house you looked at, but if you were serious about a property it doesn’t hurt to find out about any potential bumps ahead of time.

13

I don’t know how it works for your agent’s company, but my company has access through our Multiple Listing Service to the County tax records, which list the liens on every property. We are required to pull them before listing aproperty to verify proof of ownership and any liens.

14

While I understand why a two-week window might not be enough to get two banks plus the IRS to work out the kinks over the sale of a house, I don’t see why the IRS would be against it in principle. I mean, isn’t the best (if not only) way the IRS will ever get their payment out of the debtor’s equity on the house (which is what the lien represents) by having the debtor sell the house, and then to take their cut out of the proceeds of the sale? Unless the debtor actually has LESS equity in the house than he owes the IRS (depending on what the “order in the buffet line” on the debt would be between the tax liens and the two mortgages), in which case it’s still the best (maybe only) way they’ll see even that much of the money any time soon.

15

Were that you were seller’s agent :slight_smile:

Turns out that seller’s agent knew ahead of time at least about the short sale issue without telling anyone. Not sure if she knew about the liens as well. Don’t know if a selling agent has obligation to disclose short sale issues, but if she knew about the liens as well…

16

From what I understand, that is the case. Seller has ZERO equity in house because they actually owe as much as $40K above sale price just to pay off the two mortgages. And also have the IRS tax liens that, while I don’t know the number, according to my agent are “imprisonable” (whatever that means…but they are seriously up there, probably to the tune of six figures plus)

I don’t know who gets first cut either at the money from the sale though…

17

Very wrong.

Agent here. When I list a property, I have a title search done IMMEDIATELY, just to avoid these kinds of problems. (They’re only serious problems if time is short.) The title search is done as a courtesy by the title companies we work with, at no cost (it’s only a simple computer operation for them, and they’ll probably get the title work eventually).

The title search is useful to agents on all sides of the transaction in so many ways – it may include easements, surveys, covenants, restrictions, tax records, permits and more. It’s one of the best tools we have even though some of this data is available elsewhere.

Of course, things can crop up between the time the property is listed and sold, but at least you have a head start.

I don’t have any quick solutions to the OP’s problems (sorry), but now you know.

18

The selling agent ABSOLUTELY has a responsibility to reveal any adverse fact that might affect the saleability or value of the property. This is both a legal and ethical requirement.

Certainly the need for a short sale falls squarely in the adverse fact department.

The days are long gone where it’s totally caveat emptor.

Our maxim is, if you know about it, and are in doubt, disclose it. That way, no one can ever sue you for misrepresentation. And it’s only fair, isn’t it?

Disclaimer: what I just said applies to Wisconsin. YMMV in other states.

19

Well, plenty of people have answered the technical questions; I’ll give you some advice, which I’ll bet you’re already thinking in the back of your head. You’ll get your earnest money back easily - this screw-up isn’t your fault, therefore, you get your money back. You could fight to get some of your other money back on moving deposists and such, but it’ll cost you more to fight it than you’ll get back. Like **Annie-XMas ** said, try to rent your current house for a little while, if not get an apartment. You’re the one in control here, though you might not realise it. This is a buyers market and you’ve sold your house! Take this opportunity to identify 3 houses that you really like. Offer 85% (how high up you go is up to you, I wouldn’t go above 90%) on house number 1 - if they accept, great, if not go to house number 2. If house number 3 doesn’t accept, then go back to #1. Rinse, lather, repeat. I’m sure this sucks right now, but you can turn this into a winning situation for you. Don’t waste your time fighting to get too much back from this house, just get your earnest money back and get out.

20

My parents rented an RV and toured the lower 48 for 2 years between homes.

They had a blast.

Two weeks, two months, two years…might be a solution to make lemonade out of lemons.

I know…I have offered nothing in regards to legal or contractual advice, but it is a temporary living solution…might even be cheaper than renting an apartment.