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User question: Home listed for short sale in Jan. 2011, foreclosure letter from attorney representing bank received Jan. 2011, options included short sale. Contract to purchase received March 2011, bank counter received April 27, 2011 to include extension on closing date to June 30, 2011, May 2, 2011 purchaser agreed to counter. May 2, 2011... Lawyer for bank foreclosed, selling to third party! Is a contract to purchase, along with the bank's counter and purchaser's agreement to $2,000 + in purchase price, not a binding contract? Any insight would be greatly appreciated.
Answer from blueroof.com: This is a very interesting scenario, but is one that does come up at times. You are not the first nor will you be the last to experience this.
The purchase contract is a binding contract between the seller and the buyer, but not the bank because the bank is neither buying the home from you as the seller or legally allowed to sell the home to a buyer because you are the owner. So yes it is a binding contract, but not necessarily to the bank.
The reason there is so much confusion is likely that the short sale department and the foreclosure department are totally separate and there is sometimes poor communication between the two departments. Of course there should be better communication and they all should be looking at the same information, but the reality is they don't always do what is logical.
Had the property reverted back to the bank, there could be a possibility of the bank rescinding the foreclosure and going through with the short sale. This is a rare occurrence but has been done before. However, since you stated the property sold to a 3rd party, the bank is unable to rescind the foreclosure and take the property back from someone that now legally owns the home.
While this should not have happened, and there could be more reasons it did other than poor communication between the two departments, it is not required of the bank to agree to or finalize a short sale. It is unfortunate that the ball was dropped somewhere. I hope this was useful information.
*Nothing here is considered to be legal or tax advice. Any and all questions regarding tax or legal issues need to be directed to an appropriate and licensed professional.
Broker for Blue Roof Realty