Buy and Bail in California

driftwood

LoanSafe Member
Sep 17, 2012
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Offer accepted but wait... not exactly?? Need some purchase advice

Not sure if I am asking this question in the right forum but seems close enough. I briefly tried to search other similar topics but didn't find anything to help with my question. I submitted an offer on a property that is being offered as a short sale. The seller accepted and I have copies of the contract with signatures. The seller I am referring to is the current resident and who is liable to the lender for the mortgage. Now I was told up front that this is a short sale so the bank will need to weigh in and approve the sale but I assumed having the seller accept my offer then it would move to the bank and as long as I could work out the details with the bank then I would get the house.

However my confusion started today, a week or so since everything was signed and I got an email from the seller's real estate agent essentially stating that the seller has decided to accept and submit two offers to the bank and let the bank decide on which offer they want to accept. Something seems fishy to me here since I am not sure how they could do that since they essentially signed and accepted my offer already. I could see if the bank rejected my offer but now to submit two offers and let the bank decide? I really have to wonder if the seller's agent is trying to wiggle herself a better deal in this sale.

Any thoughts, suggestions or advice? Especially if this is allowed or does it cross into a grey area? I guess what I really want to know is if I have the legal grounds to push back and tell the agent no you accepted my offer and you are more than welcome to keep the other offer as a back up but we already have a deal assuming the bank approves.
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
Not sure if I am asking this question in the right forum but seems close enough. I briefly tried to search other similar topics but didn't find anything to help with my question. I submitted an offer on a property that is being offered as a short sale. The seller accepted and I have copies of the contract with signatures. The seller I am referring to is the current resident and who is liable to the lender for the mortgage. Now I was told up front that this is a short sale so the bank will need to weigh in and approve the sale but I assumed having the seller accept my offer then it would move to the bank and as long as I could work out the details with the bank then I would get the house.

However my confusion started today, a week or so since everything was signed and I got an email from the seller's real estate agent essentially stating that the seller has decided to accept and submit two offers to the bank and let the bank decide on which offer they want to accept. Something seems fishy to me here since I am not sure how they could do that since they essentially signed and accepted my offer already. I could see if the bank rejected my offer but now to submit two offers and let the bank decide? I really have to wonder if the seller's agent is trying to wiggle herself a better deal in this sale.

Any thoughts, suggestions or advice? Especially if this is allowed or does it cross into a grey area? I guess what I really want to know is if I have the legal grounds to push back and tell the agent no you accepted my offer and you are more than welcome to keep the other offer as a back up but we already have a deal assuming the bank approves.
If there is an addendum to the contract making the approval of the lender a contingency of the contract, which there should be, then submitting multiple offers to the lender would be acceptable in many states. The lender will then select the offer that is most favorable to it and the additional offers, if the buyer accepts, should be placed in a backup position.

Do you know who the lender is on the property? With BofA, their is a system for short sales.
 

driftwood

LoanSafe Member
Sep 17, 2012
315
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Thank you for the response Cat Damiano, I do not know who the lender is but I plan to ask. There was a short sale addendum and I did read through point 7 Buyer Considerations with keen interest. I do see where it says that sellers have the right to continue submitting offers to the lender but I guess I just assumed since our offer was accepted and submitted to the lender for consideration, if it met their criteria the lender would approve it rather than waiting around to see what else would be submitted. We really liked the house so I think we were disappointed to hear there is a chance we may not get it after all. I guess we just have to wait a week or two and see what comes back.
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
Thank you for the response Cat Damiano, I do not know who the lender is but I plan to ask. There was a short sale addendum and I did read through point 7 Buyer Considerations with keen interest. I do see where it says that sellers have the right to continue submitting offers to the lender but I guess I just assumed since our offer was accepted and submitted to the lender for consideration, if it met their criteria the lender would approve it rather than waiting around to see what else would be submitted. We really liked the house so I think we were disappointed to hear there is a chance we may not get it after all. I guess we just have to wait a week or two and see what comes back.
Unfortunately this is the process when dealing with a lender on a short sale, it is basically out of the sellers hands. Good Luck with the acceptance of your offer! Please keep us posted on how it goes.
 

driftwood

LoanSafe Member
Sep 17, 2012
315
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Just curious if there are any thoughts on the following two questions:

1. If property taxes are late or unpaid (and there is no escrow amount included in the monthly payment to the lender), will that late or unpaid amount show up in a credit report? I am assuming the bank would pay the property taxes and then demand payment from the borrower, so I guess in time it might show up as late payment or past due?

2. If the primary mortgage is current but property taxes go unpaid, would the primary lender foreclose on the property?

Thoughts?
 

driftwood

LoanSafe Member
Sep 17, 2012
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So while I am trying to find more answers about property taxes, I have been reading up on the credit impact partially for me and partially to keep my wife informed about what we can expect as we go through this process. I am not so concerned about the FC since I realize that will impact me for a couple of years before things really improve. I am considering more about the 2nd which will become a SOJL after the FC. Everything I have read says the derogs will be around for 7 years or so, but more importantly Green Tree will likely show a charge off for the 2nd. Again from what I have seen the CO is worse than derogs for late payment.

So then I started thinking, which granted is probably not a wise thing :) but couldn't I fight Green Tree if they label my 2nd as a CO? Under 580b I am not liable for any deficiency on the 2nd so therefore how can it be listed as a charge off, shouldn't it also be listed by Green Tree as satisfied for less than the amount owed or along those lines? I need to do some more digging...
 

RexMorgan

LoanSafe Member
Jan 25, 2013
56
0
0
2. If the primary mortgage is current but property taxes go unpaid, would the primary lender foreclose on the property?
Thoughts?
My theory is that they *could* but won't FC because the amount they would lose in FCsure (because it's underwater) is more than what they're losing by paying the property taxes. Plus, they will bill you for the taxes so they think they're getting that back. If they FC, they're taking over liability for the taxes (I think).

However, I have no experience at all and I too am hoping someone does or that some of the more knowledgeable pros has an opinion. I'm contemplating stopping paying my escrow and second mortgage while I rent my underwater place out. That will make the rental cash flow positive and I'm hoping that it won't trigger the first FCing (here's my situation: http://www.loansafe.org/forum/stop-foreclosure-tell-us-your-story/59055-underwater-ca-worried-about-recourse-second-i-know-i-shouldnt.html)

Anyone?

Josh
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
Just curious if there are any thoughts on the following two questions:

1. If property taxes are late or unpaid (and there is no escrow amount included in the monthly payment to the lender), will that late or unpaid amount show up in a credit report? I am assuming the bank would pay the property taxes and then demand payment from the borrower, so I guess in time it might show up as late payment or past due?

2. If the primary mortgage is current but property taxes go unpaid, would the primary lender foreclose on the property?

Thoughts?
A lender would not let the property taxes go unpaid if there is not an escrow for them in order to avoid having a tax lien levied on the property.

If you do not have an impound account, and you fall behind in paying your property taxes, the mortgage lender stands to lose thousands of dollars. In the event of a foreclosure sale, property taxes jump to the front of the line and take priority over all other liens on the property. Even if your mortgage is delinquent, often banks will step in to pay property taxes to remain in the senior lien holder position. The costs and late fees will be passed on to you.
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Hi driftwood

So while I am trying to find more answers about property taxes, I have been reading up on the credit impact partially for me and partially to keep my wife informed about what we can expect as we go through this process. I am not so concerned about the FC since I realize that will impact me for a couple of years before things really improve. I am considering more about the 2nd which will become a SOJL after the FC. Everything I have read says the derogs will be around for 7 years or so, but more importantly Green Tree will likely show a charge off for the 2nd. Again from what I have seen the CO is worse than derogs for late payment. So then I started thinking, which granted is probably not a wise thing :) but couldn't I fight Green Tree if they label my 2nd as a CO? Under 580b I am not liable for any deficiency on the 2nd so therefore how can it be listed as a charge off, shouldn't it also be listed by Green Tree as satisfied for less than the amount owed or along those lines? I need to do some more digging...
Thanks for your post. It seems you're confusing two different topics, the non-recourse situation in CA pursuant to CCC Section 580b, and credit reporting which is governed by a federal law, the FCRA. Pursuant to the provisions of the FCRA, a lender can report a derog for as long as 7.5 years from the date of first delinquency (fist 30-day late), regardless of creditor's legal ability to collect on the debt. In other words, the debt doesn't go away, even though the creditor is legally barred from suing the debtor.
 

driftwood

LoanSafe Member
Sep 17, 2012
315
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28
Thanks for your post. It seems you're confusing two different topics, the non-recourse situation in CA pursuant to CCC Section 580b, and credit reporting which is governed by a federal law, the FCRA. Pursuant to the provisions of the FCRA, a lender can report a derog for as long as 7.5 years from the date of first delinquency (fist 30-day late), regardless of creditor's legal ability to collect on the debt. In other words, the debt doesn't go away, even though the creditor is legally barred from suing the debtor.
Thanks TomEason appreciate the clarification. I kind of thought they were independent, but I was trying to be clever! LOL I was going to try and make the arguement that if the SOJL cannot enforce the collection of the debt through the court system than technically there is no legal obligation? I know its a stretch, but I so want to sock it to GT!
 

driftwood

LoanSafe Member
Sep 17, 2012
315
38
28
A lender would not let the property taxes go unpaid if there is not an escrow for them in order to avoid having a tax lien levied on the property.

If you do not have an impound account, and you fall behind in paying your property taxes, the mortgage lender stands to lose thousands of dollars. In the event of a foreclosure sale, property taxes jump to the front of the line and take priority over all other liens on the property. Even if your mortgage is delinquent, often banks will step in to pay property taxes to remain in the senior lien holder position. The costs and late fees will be passed on to you.
Thanks Cat Damiano, thanks for the feedback. I had expected should I fail to pay property taxes that the lender would pay them and seek recovery from me. Once that happens though and I do not pay back the lender, is that considered late payment and will it show up as late on my CR? Secondly if I dont repay the bank would the lender initiate a FC process? For both of these questions I am assuming the loan itself is current, just not the property taxes. I know its a strange question....
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
driftwood

Thanks Cat Damiano, thanks for the feedback. I had expected should I fail to pay property taxes that the lender would pay them and seek recovery from me. Once that happens though and I do not pay back the lender, is that considered late payment and will it show up as late on my CR? Secondly if I dont repay the bank would the lender initiate a FC process? For both of these questions I am assuming the loan itself is current, just not the property taxes. I know its a strange question....
Thanks for your post. Unpaid property taxes isn't reported to the CRAs. Yes, a lender can FC for unpaid property taxes. The lender won't initiate FC immediately - in my state it normally takes the lender about 3 years.
 

driftwood

LoanSafe Member
Sep 17, 2012
315
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Well looks like things are going to start moving along, I was just informed that my loan received final approval, I am cleared to close. Our walk through inspection is scheduled for late next week, so assuming things go as expected the buy portion will be closed by end of March / early April.

I already have a couple people interested in renting the current house and I have decided to do a modified version of the bail. The first is currently I/O with a low rate. Market rent in the area will generate sizable positive cash flow provided I don't pay taxes and the 2nd. Considering how under water the home is even with the recent run up in prices locally the 2nd is in no position to FC. So keeping the 1st current for now, I can stretch out the cash flow for a lot longer. Plus I am curious to see what might happen in the next 6-12 months if any new solutions are brought to resolve severely underwater mortgages. State AGs are lobbying the federal government to extend programs and I believe there is still a large group of homeowners like myself that are holding on based on hope of some other solution but are suddenly going to give up and dump a bunch of inventory or non performing loans on the system.

I really think there is a good chance for a second dip in the mortgage / real estate market because in my opinion the first one while pretty bad was controlled to some extent. The market pulled out of it faster than most people expected and likely a result of these mass market investors coming in and buying up significant inventory of FC homes. Had they not been around I wonder how much longer this situation would have lingered. I recall people saying at one point there were years of inventory sitting there and then it vanishes in about a year or so and we now have a shortage of supply?

Anyway what do I know, I bought at the very peak of the market in 2007.
 

RexMorgan

LoanSafe Member
Jan 25, 2013
56
0
0
Well looks like things are going to start moving along, I was just informed that my loan received final approval, I am cleared to close. Our walk through inspection is scheduled for late next week, so assuming things go as expected the buy portion will be closed by end of March / early April.
Congrats and good luck. We just saw some houses last week so are at least a couple if months behind you.

We're planning the same thing: keep our 1st (I/O variable (low) rate) current and stop on our 2nd. We can rent it out for cheap and still make money for about a year when we have to start paying principle.

Rex
 

driftwood

LoanSafe Member
Sep 17, 2012
315
38
28
Good luck on finding what you want Rex. I started back in September/Oct time frame and if nothing else I learned a lot from my experiences of making several offers and dealing with many different listing/selling agents. My agent remained the same throughout. But bottom line I really don't trust listing agents anymore especially in this market. There are so many games being played out there I have to wonder who is worse, the banksters or the real estate agents.
 

driftwood

LoanSafe Member
Sep 17, 2012
315
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28
Well its official! Yay! The new home closed and recorded on Thursday afternoon. Today a contractor will start, changing out some of the flooring and painting, hopefully we will move in by mid-May. We are very excited but strangely enough I have been feeling a tinge of sadness with regard to letting go of the current house. Frankly I never did before, its only that it has become more real now.

In about 15 days I will become officially late on my current home's 2nd. Its with Green Tree and based on everything I have read I am expecting fireworks lol. I warned my wife and close relatives that they might get calls. Green Tree has a Google voice number as my home number as I switched that out months ago. In fact I even disconnected my old former home number and just use Google voice so they can't even try to use that one.

We will keep our our 1st current for a while and rent the house out. The 1st is such a small payment at the moment, I/O with low variable rate for the next 12 months and cant really adjust much each year so we have some time to enjoy positive cash flow. Who knows what will happen in the interim.

Anyway I will document my "battles" with Green Tree in the coming months and let everyone in on the "fun".
 

driftwood

LoanSafe Member
Sep 17, 2012
315
38
28
Well after today I am officially late on the 2nd mortgage from the bail house. My Google voice number has received several unknown calls starting around the 8th or 9th but no where near the volume I expected. Green Tree services my 2nd and they usually start calling around the 7th if I haven't sent in a payment so I am surprised they have been calling more. I guess it will pick up even more starting tomorrow, oh well.

On a positive note, the work going on with the new home is moving along at a good pace. The flooring will be installed later this week so we will start moving smaller items some time next week. The movers are scheduled for mid-May, they get to handle all the big stuff!