Legal Question in Real Estate Law in California

In Oct 2011 we extended an offer on a short sale which was later accepted March 2012. Immediately after we opened escrow, deposited earnest monies, and completed both a home and termite inspection. A week later the VA appraisal was completed and in alignment with our offer. During this time we discovered that the second lien holder was a defaulted HELOC subsequently transferred from Citibank to Pencro collection agency. Over a three week period (after extending the escrow deadline) negotiations were proctored by the listing agent with an agreement that the funds would come out of both agents commission, application of the primary lien holders allowable funds, with the remaining balance paid by my husband and I. Original amount agreed to contribute by the selling agent was $2000 and later decreased to $1000. During these negotiations the seller�s agent listed the house as active and entertained multiple offers despite us never canceling or eluding to cancel escrow. He was subsequently reported for MLS violations after which he did change the status to pending. Last week the sellers completed their closing process and vacated the property taking with them the refrigerator that was to contractually convey. This was pointed out to the selling agent and after a futile discussion we agreed to a settlement of $500 in hopes of completing this deal. Today, we signed our closing documents and wired the remaining funds to escrow. Two hours later it came to our attention that the listing agent was no longer willing to contribute to the agreed upon collection agency settlement with the reason being that he negotiated such a great settlement he no longer had to pay (10% payoff amount). After much back and forth and just after the close of business today the selling agent proffered an addendum dated January 31, 2012 outlining 7 stipulations that we must agree to or he is threatening to stop the closing process. Essentially this addendum states that the selling agent is not contributing to the short sale payoff �inside or outside� of escrow and �no other amount is due buyer from seller�s broker inside or outside of escrow, weather expressed or implied and buyer agrees to hold harmless seller�s broker in this regard�. Is this legal or merely extortion attempting to force us to sign under duress? Can the seller�s broker uphold and stop the sale of the house at this point in time?

Asked on 4/14/12, 2:49 pm

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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I'd be inclined to think it is a breach of contract (rather than extortion) and designed to squeeze you when you are likely to make an expensive concession. However, I've only heard one side of the story and haven't seen any of the deal documentation. Also, it is somewhat difficult to advise you without knowing your objectives and degree of interest in buying this particular property. Whether you really want this particular house or are just making investments might affect your options, as well as whether you have your own agent or are handling the deal yourself, how patient the foreclosing bank is likely to be, and other factors will affect your options. More likely than not, you should consult with a local real-estate attorney who can look at the contracts in some detail, but maybe you should break escrow, collect your deposit and look elsewhere, maybe you should go along with the agent's proposed deal (and possibly sue him after the closing?) or report him to the Dept. of Real Estate, or ??? -- there are other options. Are you experienced in real estate? Have your own agent?

Answered on 4/14/12, 5:11 pm

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