Buyers can back out of short sale if bank has not yet accepted deal
Q. My son wrote an offer on a short sale with a $5,000 deposit with real estate agent. The offer has a termination date of Nov. 30 so he wouldn't get hung up with the short sale taking an inordinate amount of time to be accepted. Now my son has second thoughts about the house and has seen one he likes better and would like to cancel the contract. Obviously he can wait until the expiration date of the offer and hope the bank doesn't respond by then, but, on the other hand, can he withdraw the offer since the bank has not accepted it yet?
If that doesn't fly, I hear an attorney can get him out of it just by saying he or she doesn't approve of the contract within the attorney approval contingency period. His agent told him he could cancel anytime but he doesn't have anything in writing. Your thoughts?
A. Basic contract law states an offer can be revoked before acceptance. If the bank has not yet accepted (signed) the contract and conveyed the signed contract to your son, your son may withdraw the offer. In writing, send it to the real estate listing agent and the bank's attorney, if known, something along the line of "I hereby revoke my offer of (date) regarding the property known as (address)."
Sign the revocation and make sure you have proof the revocation was conveyed to seller, by a fax receipt if allowed per the contract or other method in which you could show proof of the revocation. Read the contract to understand what constitutes appropriate notice.
Your attorney can generally cancel a contract within the attorney review period, which is usually five business days from the date a seller accepts the offer. The only qualification is that the cancellation must be made in good faith. An example of bad faith would be a seller canceling a contract and then accepting a similar offer from a similarly qualified purchaser for more money.
Q. I am interested in buying a short-sale property because I feel I can get a good bargain. However, should I try to find out about any liens on the property or unpaid real estate taxes or association fees, etc., before making an offer? What do I need to be concerned about?
A. If you have a lot of patience and are not under any time constraints, short sales can yield wonderful bargains for purchasers. Just be aware the process often takes a long time to complete and many purchasers end up terminating these transactions after waiting months due to very slow or no response from the seller's mortgage company.
The good news is that defects in title, such as back taxes or other liens, are generally not a concern. One of the provisions of your contract will be that the seller will convey an acceptable title commitment to you, which is provided before closing. In the event the title contains unacceptable defects that the seller is unable or unwilling to cure, the contract provides that you may terminate the transaction and receive your deposit back.
Outstanding association dues should also not be an issue in a short sale. At closing, you will be provided a statement from the association stating either that the association dues are current or stating a certain amount of money must be paid to the association to bring the dues current. You, the purchaser, will insist the seller satisfy any outstanding association dues before or at closing.
On a related note, outstanding association dues are a little trickier when you are purchasing previously foreclosed property from a bank. The Condominium Property Act provides that the purchaser of foreclosed property may be liable for up to six months of outstanding association dues. Just something to remember when purchasing property from a bank.
• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by e-mail to firstname.lastname@example.org or call (847) 359-8983.