Legal Question in Real Estate Law in California

We are currently purchasing a home. This home is a shortsale and has been quite an ordeal. After several months final escrow papers have been signed by both parties. We had wired the down payment and closing cost the next morning. That same day the owner decides to cancel the sell. Can she legally do that? Everything I hear is no but the escrow company is affraid they are openning themselves up to a lawsuit from her if they contine to recording. I don't understand why she would do this because the house is scheduled to go into foreclosure later in the week. She has made the comment before that if she lets the house go into foreclosure she can stay in the house longer. What are our rights as the buyer and also the bank who will loose out on money if they have to foreclose??


Asked on 4/22/12, 4:09 pm

3 Answers from Attorneys

You need to contact a lawyer directly first thing tomorrow morning. This is a serious situation with a very short time to deal with it before it gets far far worse. If all the facts are accurately described in your question, you have the right to force the transaction to close, but if the foreclosure sale goes through you will have a huge mess on your hands even if you have a legal right to the home.

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Answered on 4/22/12, 5:39 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Without detracting in any respect from Mr. McCormick's advice, I think the seller's strategy may be visible here. She wants to stay in the house as long as she can. She has engaged in a time-consuming short sale negotiation in the belief (probably correct) that this might delay the foreclosure. Now, to continue in possession, she's scuttling the short sale and will now wait until the day before the foreclosure and file bankruptcy. Or something of this sort.

You may have a suit for breach of contract and perhaps a right to get specific performance of the short sale contract as a remedy.

As Mr. McCormick says, if the sale is worth preserving, you need to have a sharp lawyer giving this his or her full-time attention PDQ.

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Answered on 4/22/12, 8:31 pm


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