Legal Question in Real Estate Law in California
On March 12, 2009 I made an offer of $210,000 on a duplex. Proceeds for down payment will be from sale of a rental house I sold, subject to 1031 exchange.
On May 19 I accepted the short-sale lender's counter of $212,000.
A June 5 email from the short sale negotiator says in part regarding the BofA negotiator "the notes from customer services shows she obtained all of the documentation and forwarded to the investor for approval"
A June 30 e-mail from the short sale negotiator says in part "Spoke with the short sale department today. File was submitted to the investor for final approval on June 19th. They state the investor can take up to 20 business days. We will have an approval by July 17th."
On November 19, 4 days before the time limit on my 1031 exchange ran out BofA says they will give me short sale approval if I pay $30,000 more.
I declined and now face capital gains tax and loss the of property. Do I have any recourse?
1 Answer from Attorneys
I would have to examine the entire set of documents and communications between you, the seller and the lender to determine the strength of your case, but you certainly have enough to plead a case for some form of breach of contract or estoppel cause of action. Your biggest problem, however, is your failure to mitigate your damages. By just sitting there from June 19th until November 19th, and by rejecting the offer of $30,000 more and walking away, instead of accepting and then suing, they can argue that you caused your own loss. Again, whether that would stand up would depend on getting into all the details, but it is a problem. I'm also curious about why you are stuck with the capital gains. Isn't the time limit on a 1031 exchange to "identify" the exchanged property, not close? Or did you blow past a separate deadline to close? All in all you may have a case, but you have some big issues to deal with as far as not protecting your own self-interests.
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