Short Sale Legal Advice

[Justin Wing]

Hello all,

I recently went to buy a short sale property that was advertised as a "Fully Approved Short Sale". The house is financed on an FHA mortgage, and is being sold as part of a bankruptcy. The seller's agent said that they had an approved short sale letter from HUD as well as short sale terms from the bankruptcy court, although they weren't willing to share the approval letter with my agent. In order to meet the approval requirements of HUD and the bankruptcy court, I sold my house and my family and I moved in with my in-laws.

2 months later and and the seller's agent informed us that there have been "Extra eyes on the property and it's undergoing further review". He said at this point the deal isn't going to happen and said that if we sent a recision, we could have our Earnest money back ($5k).

We sent the recision and immediately offered on another house, which was accepted. Since my loan was already underwritten and the house was vacant, we went for 3 weeks to close. 

It has now been a week and a half. We have not had any response on our recision, and the seller's agent for the short sale has refused to return any emails or phone calls. My lender is asking for the signed recision in order to close on the loan for our new offer.

At this point, I'm looking for some legal help.

1. I think that the house was falsely advertised. I uprooted my family which has created and enormous amount of stress, that I believe I should be able to receive some compensation for.

2. Do I really need the recision to get the next house? If so, should I surrender the earnest money and then sue to get it back.

3. Any other advice on how to get this situation to move foward?

Any legal advice anyone has would really help.

[Brett Goldsmith]

A short sale isn't fully approved unless if you have a valid approval letter in hand for said buyer. There are no guarantees in a short sale. Marketing as a fully approved short sale isn't technically correct in my opinion as even if it was approved, any new buyer is subject to further review. Would be more correct to say " This short sale was approved with previous buyer at "x" terms, but any new buyer is subject to further review."

I do agree though that accepting a contingent offer on a short sale is typically not a wise move for a seller or listing agent.