What Should I Do Now?"

[Tony T.]

I made a cash offer on a house that was listed as a short sale with settlement within 45 days. My agent told me that the seller's agent told him that the bank approved the offer. We then signed a contract for sale with the buyers and all title work was completed and ready to go.

While waiting for the bank to close, my agent got a call from a new agent saying that he now represents the house and Freddie Mac took over the house and my contract isn't going to be honored.

WHAT? I spent over $2500 on getting financing in place and another $1000 on appliances based on the info that the original selling agent told my agent that the bank approved the short sale.

I don't know enough about short sales (very little actually) to know if someone acted inappropriately or fraudulently. I would like to get my losses back. The new agent representing Freddy Mac said that he thinks the bank never really did fully approve the short sale.

I don't know where to start as to finding who is at fault here. I would think that the original seller's agent telling my agent that the bank approved the short sale is where the fraud is.

Any advise or help is very appreciated.

[Ibrahim Hughes]

Tony it sounds like what you're saying is that when you were under contract the house was a listed short sale still owned by the owner being foreclosed on. Then during the time you were under contract, the house went to sheriff sale and ownership of the house changed hands.

Here in NJ, even if the bank agreed to your short sale offer, it would still be junior to the foreclosure in play. Thus it could be wiped out at sheriff sale much like a junior lien would be.

Personally, I think the real incompetence here (not necessarily fraud) is that your agent should have been on top of the process completely. Unfortunately many agents working short sales and foreclosures (including those being certified in such areas by state sanctioned companies) are not really knowledgeable enough on the process to do basic research on such situations.

First, your agent should have received a copy of the short sale approval letter by the foreclosing bank. Without that there was NO proof that you even had a deal and thus no indication that you should have been putting an additional dime into this deal.

Second, the foreclosure case should have been examined to determine where in the civil case the two parties (plaintiff and defendant) were.

Next, the sheriff should have been contacted to ensure that the property had not yet been scheduled for sale. This, regardless of what was found in the first two steps.

And finally your agent should have been on top of the listing agent contacting him regularly to make sure he was on top of this as well.

Between the two agents involved, this should not have gone to sheriff sale without you knowing way ahead of time. With only hearing your side and not having ALL of the facts I'd say that there was serious negligence on the part of the two agents involved. My professional 'opinion', of course. Please keep us posted on how it goes as I do hope for the best for you in this.