Does something sound fishy with property sale?

Question

My husband and I found a nice condo that was a short sale. The HOA is also currently under a lawsuit, but as we were getting a decent discount and as the buy and hold as a rental numbers made sense, we decided to go with it.

We were using the listing agent as our agent. Yes, she was double dipping but with short sales and as the "seller" is anyways basically the bank, using listing agent didn't feel too harmful for us, in our opinion.

This condo did have an offer pending last spring but as the offer was financed, once the HOA went under the lawsuit in May, the bank of that buyer wouldn't finance the mortgage anymore. Hence pending sale got cancelled. So now, due to the pending HOA lawsuit, only cash offers/ private lending financed offers possible on these units.

Now here comes the interesting part:

So few days ago we saw the condo, liked it and were ready to make an offer. However listing agent was very persistent that we need to use this escrow company that she works constantly with, but which we have never heard of and can't really even find any reviews etc when we google the company. Also weirdly, listing agent (= who was also our buyer's agent) messaged us that when we come to sign the offer papers, we should also bring the earnest money deposit check along to be paid to her escrow company....Weird is that the bank hasn't accepted our offer yet, so earnest money deposit doesn't need to be paid at this point. We are not is escrow until the bank approves the offer which can take some time...So why do we need to deposit our earnest money at this point??

So husband and I decided to persist to change the listing agen't escrow officer into this other escrow officer that we've used before and trust. After our message to change escrow officer, we suddenly get an email from the listing agent that she has talked with her seller, negotiator and escrow officer and they decided to go with another offer they had on the table. Until that message we hadn't heard that there was any other offers...and so far the listing is still active. Also, probably due to the HOA lawsuit out of about 280 total units there are currently 8 for sale (from which only one is pending as the price was very low.)

What do you think? We are absolutely ok not buying the condo, it's business and we are always ready to walk away when needed. I just felt there was something fishy in this sudden cancellation and the fact that using her escrow officer seemed to be the deal breaker...

Laura Hamilton · Answer

Oh and actually, we have chosen our escrow company in the past and the short sale bank had no problem with it..

Laura Hamilton · Answer

Thanks for all the answers! We bough a short sale few years ago and that time our agent was very cautious we don't pay our EM before bank accepts offer. Also we had another property pending one point that was also a short sale and the EM wasn't requested then either before bank's approval - hence understood that was the protocol, but I guess was mistaken on that one.

I don't think we were too high maintenance buyers at all actually. Just wanted to use an escrow officer we feel comfortable with when there is a lawsuit against the HOA etc. Just interesting it ended up being the deal breaker. Oh well, live and learn. Will be curious to see how the sale of that unit proceeds though. Just hoping the seller manages to get their short sale and not escalate into a foreclosure (and loose their credit) due to the agent. Unit has been on the market quite a long time already...

Jay Hinrichs · Answer

@Charlie Fitzgerald  Charlie in our area.. If you write a check it has to be cashed if its presented to escrow... in this instance many agents here use prom notes to be redeemed on acceptance that clears that issue up.

I suspect the agent just had another buyer and moved on... I know your absolutely correct about anti steering .. but its just he way it is these days.. try to choose your own escrow when your buying any type of REO banks won't have it.. they won't accept your offer... LOL

Jay Hinrichs · Answer

to echo Waynes.. thoughts... EM in the form of a check MUST be deposited within a certain amount of business days.. it can't be held un cashed.. so that is a non issue and your paranoia on that issue is un founded.

As to Escrow  in So Cal its customary to have separate escrow and title companies.. in Nor cal for instance and Oregon and Washington Title and escrow is all under one roof.

So its common for brokerages to own these.. they must make a disclosure that they own them.

and many times in these type of instances the Seller will dictate who they want to work with.. you could of course have an attorney represent you in this transaction and interact  with the escrow company if your that worried.

Liz Pendance on the condo makes bank loan not feasible until that's cleared .. so unless your paying cash its a non starter anyway... this is one thing that condo associations and those that own condo's really miss the ball on .. they think they will just sue.. but in essence they cook their own goose as their property becomes illiquid ...

The agent probably fearing your going to be a super high maintenance  buyer and had another buyer that was easier to work with .. probably just moved on.. one thing agents are not obligated to do is to represent buyers or sellers they no longer wish to represent.. AS long as your offer was presented when the agent had a fiduciary to you then they are free to recuse themselves.

@Wayne Brooks

Charlie Fitzgerald · Answer

You are under no obligation to use the escrow company preferred by the agent.  If they insist that you do, it's a violation of RESPA (Real Estate Settlement Procedures Act) and us called "steering".  EMD is negotiable as well.  I personally would write my offer to indicate that I will deposit my EMD with the Escrow company within 48 hours of receipt of signed acceptance of my offer.  I would also make sure that the unit you are thinking of buying is insurable (what's the nature of the HOA lawsuit), for additional coverage (landlord liability and walls in coverage for instance).

If the agent insists on using the Escrow company mentioned and will not use one you are comfortable with and can vett to your satisfaction, personally, I'm not making an offer.

Hope this helps.

Wayne Brooks · Answer

To be clear, EM is due upon acceptance by the seller, Not approval by the bank.....otherwise you could tie up the property for the 60-90 days up until approval, then just walk away with recourse....not smart for the seller to agree to this.  While the escrow issue may sound fishy, most agents will use a specific title co., since the title co. may actually be doing the "negotiation", or at the least they will be producing multiple preliminary HUD-1/closing statements for each offer/counter offer.  That may or may not be the case here.