What happens if a home you signed to purchase goes into foreclosure before the closing date?

Question:

We were supposed to close on a home in Apr. On the day of closing we get a call from the seller's realtor that the sellers owe 22K and need time to figure out negotiations w/the mortgage company. We go through a series of extensions & hear a variety of excuses from the sellers realtor (sellers haven't turned in paperwork, wrong forms filled out &new ones were overnighted, etc) In June, a Lis Pendens was filed & our realtor checked it out. He talked to the sellers realtor & found out that it had been filed but has been negotiated off &was no longer in effect. On 8/9 our realtor gets a call from the sellers realtor that they have finally been in contact with the mortgage company &there is 1 more paper that needs to be completed & they are "on top of it". After not hearing anything last week, I check with the online courts to see if anything else has occurred to see that a foreclose decree was noted for 8/4. What happens now? Can we purchase the home from the bank?

Answer:
Somebody has not been on top of it. Probably at least two somebodies, and they're not exactly fulfilling full disclosure requirements, either.

Yes, an Notice of Default adds thousands of dollars to fees due. But what do you think the lender would rather have: An already negotiated sale that is consummated and they get their money, or go through that whole dismal foreclosure process?

So what is going on here is an undisclosed short sale. What this means is that the lender isn't going to get all of their money, or the transaction would have closed by now.

So what's most likely going on is that the bank is taking their own sweet time about approving it, but your realtor has allowed the selling realtor to feed you a line of BS. Indeed, they've probably actively cooperated. They're probably afraid of losing the commission, but if they keep it open "just a little longer" maybe the lender will approve it.

It's the listing agent's job to talk them into approving the sale. Perhaps the bank is imposing some conditions that the seller can meet, but does not want to. Perhaps the bank is demanding some money, or that the realtors reduce their commission, and they don't want to Perhaps they're just clueless.

The person with the power to break the logjam is you. Talk with a lawyer, but if you put in a 48 hour notice to perform, the lender is likely to suffer a sudden attack of rationality, especially in this market. They'll likely net more money through the sale than through the foreclosure process. There are possible issues with the deposit, and damages they could owe you and you could owe them, which is why you need to be careful. But this is the thing that is going to break the logjam one way or another, and your agent should probably have done it months ago. You're stuck with them for now, but if this transaction doesn't close you should probably find a new agent.

That sounds like a question for your realtor. If they can't answer it, you need to find a more experienced and knowledgeable realtor.

Yikes, seller's realtor seems to have dislexia. Have your realtor contact the lender and get the real information.

I would contact the mortgage company directly and let them know that you are trying to buy the house. Explain to them the delays. They may be willing/able to work with you directly. In some states, homeowners have the right to buy the house out of forclosure for a certain period of time after the foreclosure. Check with your agent. If the seller's agent is not forthcoming, contact your state's realty board and file a complaint.

I agree with Searchlight, you've been fed a bunch of BS. Both agents seem to have committed misrepresentation or negligence to say the least. Also it does not sound like you have an attorney looking out for your interest or he would have resolved this for you a long time ago.

If the court has entered a foreclosure decree, the property has already gone through a fair amount of proceeding. You need to be concerned with your good faith deposit. You also need to look at the fine prints involving default. Usually, if seller cannot deliver clear title, in this case, a foreclosure, you will get your deposit back and that is that. Next time around, get your own attorney. The bank attorney or the title company will look out for their clients only, not you.

You may try to cloud the title for filing a law suit seeking specific performance. That should put the fear in the bank because now they cannot sell the property as well until you go away. That is if you still want the house. Then you can proceed to talk to the bank because they have no desire to own real estate. They need to sell it to recover their loan. Remember the real estate market is not hot anymore. Negotiate from the position of strength. The bank needs to get the bad loan off their books before the next financial reporting period. Don't pay more than its worth. My gut feeling is walk from it. Chasing it may cost you more.

wait until it goes back up for sale as a foreclosure and you can buy it cheaper chances are they wont list it if they have a potential buyer.

What happens if a home you signed to purchase goes into foreclosure before the closing date?

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