Got short sale approved, seller backing out?!

Hey all… noob to the forum here and whatnot. The story is basically this: Distressed property down in San Diego, owner owes like 900k, things worth probly 800ish… I got the guy to agree to $675k short sale price, signed the normal purchase contract with SS addendum (signed by both buyer and seller) and forwarded the offer to the bank. Bank came back with a counteroffer of $725k, best and final, and I immediately said fine, and signed it and shipped it off to seller and to escrow. Days grind by and turn into weeks, and finally I find out that the seller has decided not to sign the final paperwork and has basically backed out of his intention to sell his house short. Not sure how or why he did this, but apparently he didnt win the lottery or anything because house is going to trustee sale in less than a month.

So my question is basically this: The guy signed a purchase contract for 675k and an SS addendum with that ‘cooperation clause’ thing in it saying that seller will reasonably cooperate with the lender, etc, to effectuate the short sale…The bank comes back with a counter offer… Is this guy, who agreed to a price of 675k earlier, actually allowed to now back out of the deal just because the bank submitted a counteroffer of more (which is beneficial to him if accepted obv.), thus providing him with new paperwork that he can refuse to sign off on? Signing the revised agreement with the higher price seems like a minestarial act to me, and seems to me that seller is acting in bad faith if he refuses to sign the paperwork reflecting the counteroffer. Lawsuit for specific performance?? Thoughts?

I probly need a real estate lawyer to answer this, but was wondering if anyone had experience in anything like this…any help appreciated…

PS, nice forum, look forward to talkin with some of you…

Specific performance yes, but what are you going to sue him for? The house he just lost?

Talk to him, talk to the bank, and if you get no joy, move on to the next one.

I can tell you’re a noob, no one ever accepts the bank’s first counter.


Agree with JDS. You have nothing to lose but the seller is in deep. You say distressed property. Is it in foreclosure?

Yeah property’s in foreclosure…trustee sales in like 20 days. I sorta BSed a lil bit, truth is this advice isn’t for me, it’s for a friend of mine whose asking my advice on it (I’m a lawyer, but know jack about this particular area of law)… Couldn’t find the exact answer in a fair bit of research, so figured i’d ask around where there were folks that had experience… As for moving onto the next one, the guys not an investor, he’s lookin to live/raise rugrats there, and his spoiled pain-in-the-ass of a wife is like COMPLETELY enamored of the place, and is more then likely refusing to have sex with him until he gets the sale done—do basically, its THIS place or lifelong abstinence…

I am going to tell him his best bet is actually to consult a RE attorney, instead of hopin his buddy (me) could solve all his problems with free legal advice/research… Still, if anyone actually knows the answer to this little bit of contractual arcana, i’d be interested…

Confirm your state laws on such, but pretty sure everyone is basically the same.

A contract is only binding once both parties agree to the terms of that contract AND sign it. Now, at $675K, the contract would be binding once the lender approved it at that price because both buyer, seller and lender agreed. BUT once there was a counter, the $725K, the initial offer becomes “dead.” Now, the buyer has agreed to the price, the lender has agreed to the price, BUT the seller has rejected it, which is perfectly within his rights to do. It doesn’t matter if it’s “in his best interests” or not.

In short, there is nothing to sue for.


Roger I am not certain that there isnt anything to sue over until we see the purchase contract. The question would be if it is in the highest and best use of asset and time.

This is one reason may want to grab the grant deed, maybe a memorandum of contract, or a recorded POA… These people in foreclosure dont care. I bet a telephone call from someone who knows how to negotiate to the seller would go a long way …

As for the buyer… They are paying way too much for the house… 90 percent of value on SD property is silly. Emotions should never play a part in a real estate transaction. Is too bad that they didnt have a good Investor/Realtor helping them… Contact Daniel Bruckner, he is SDs local expert on these matters and you can find him at the

Good Luck to your friend

Michael Quarles

Roger I am not certain that there isnt anything to sue over until we see the purchase contract.
MQ, there is always more to the story than what we hear, so we can only answer based on the info provided. Here, he has said that there was a counter offer of $725K. That makes the initial offer dead. Since the seller has not signed the counter offer, I can see no way that you can sue for performance of something that they did not agree to do (even if they did agree in the first contract). But, yes, if there is more to the story than that, maybe.

Either way, it’s probably not going to be worth the time/effort/money involved as you’ve already pointed out, it’s too much to begin with, at least from an investor’s standpoint.


Well f*** me sideways with a thousand pinecones…Update on this BS, for anyone who is interested/cares…followed by a question:

Friend of mine is insisting on gettin the place and told me he wanted me to file for specific performance. I toldim we had an ok shot, at it (I’d explain why, but it turns out to be a moot point anyway imho) but the fact the looming trustee sale would moot the whole thing long before the action got heard would complicate matters because we’d need an order shortening time, and/or some sort of order to stay the sale (which i dont think would work)… I dno, basically a total mess.

He told me to go ahead and do it if i wanted a nice retainer… So i said what the hell. Ive known him since high school-- I shipped off to college, ****brick becomes a truck driver, 10yrs later Im $9219821 in debt, and my law career is just barely getting off the ground, and ****brick owns his own trucking company and is pullin 1/2 a mil i bet. So i figure if he wants to throw money at this thing just to make a point or to stay in the good graces of the ole battleaxe or something (future old battleaxe, right now sorta a young n hot, but battleaxe all the same), then 'll go along.

So action gets filed, lis pendens gets recorded, blah blah. I figure ok, ill just talk to this guy and he’ll cave in after gettin papers served on him, etc…INstead sellers really evasive with me (standard, since im the opposing atty and he’s not a lawyer). I tell him to get counsel, he says he’s repping himself, etc. etc. So i call the banks legal and loss mitigation dept, and they basically tell me seller’s gotta sign off. Basically got nowhere, and wasted a few hours in the process.

So im now wondering wtf the guys problem is, and trying to figure why he wont sign. I know its not because theres a better deal out there, because the lis pendens now makes any conveyance impossible. Then i remembered something i read here about tax consequences of short sales so i looked it up and BOOOM there it was. He’s like 400k underwater, All that taxed like normal income, which = short sale costs him like 160-180k. In the event of foreclosure, he only pays capital gains tax on his debt forgiveness (about 300kish) is only like 20%, or 60k. Ok, now i get it, he signs that SS agreement, he signs his own death warrant.

I immediately call my client and tellim to call the seller (It looks bad when an attorney deals directly with a defendant, especially one whose [presumably] in as dire of straits as this guys in) and askim if tax consequences are the reason he backed out, and etc.

So client calls me back a bit later, and relays to me the guys long sob story about how he got approached by a smooth talkin broker and his agent, who convinced him that an SS would get his life right outta the gutter and back on track, and made short shrift of any sort of tax consequences, assuring him that everything would be fine, etc. So the guy signs, then later he figures out that he’s about to be brutally and unrepetentedly sodomized in more ways than he ever presumed possible, so then refuses to sign the final paperwork.


This means a few things:

First, it means that even if i’m right about why the guy has to sign off, he’s got a pretty damn good defense to the formation of the contract in the first place, namely that he was the victim of fraud and misrepresentation.

Secondly, it means that unlike what we thought in the first place, a suit and a couple of motions are not gonna muscle this guy into signing. This guy will die before he agrees to the SS, and i dont blame him.

Thirdly, even if i can proceed against him and manage to win, it makes me a real peice O crap imho. I mean, the guys got kids. I dunno.


I am for now giving up on trying to negotiate/muscle a short sale. However clients spoiled thorn-in-the-balls of a wife really wants the property still, and consequently, client himself still wants it (obv).

I wanted to get him to bid at the trustee sale, but the trustee says that the guy has to bring cash or cashiers checks in the full amount of the offer in order to make any bids at the sale, and as well as ****brick has done for himself, he cannot come up with the $ in cash, at least not feasibly. Hes already got financing in place though, all ready to go from the initial agreement.

ALso, I know that the bank tends to bid the house out at the amount of the outstanding loans (1.1mil onna house worth 700ish at least), and there is obv no way anyones gonna outbid the bank there, cash or otherwise.

So my basic question is what should i do?

I have heard murmers of a ‘closed trustee sale’ where they arrange to take a bid from one person and one person only @ the sale (basically, a short sale without tax issues or brokerage fees, lol). Or hell, just not bidding the thing out at 1.1mil and letting ****brick go and make his bid with say, $300k and a loan commitment for the rest in hand rather than cash.

So basically, I am wondering what the best approach to take with the bank on these matters are, and if theres anything special a noob like myself who knows…well, not that much about this stuff (to put it charitably) ought to do in order to not blow this.

It seems to me that an offer like this is one the bank cant really refuse, i mean its almost market, and it saves them the huge pain in the ass of takin the place, gettin the tenants out (they moved back in), cleanin the place up (place in disrepair now) and then spending money/effort to market it later, when the things probably decreasing in value every second it continues to exist. All that taken into consideration though, i have read/heard 100000 stories of banks rejecting offers that seem like no brainers to me…

Last Question, do brokers agents really do this?? And if so, do they get away with it? This seems like pretty clear cut fraud to me, and its really hard to beleive that people can pull these sorts of shenanigans and get away withem, unless there is applicable law that i dont know…I mean yeah, the whole ‘consult a tax professional’ is in like 912012 different places on the SS agreement, but a misrep by a broker/agent will outweigh that by a mile…

Anyway, any help re: the do’s and don’ts of this is greatly appreciated…




EDIT: Edited a little cause ynever know who reads stuff on the interwebs…

All this for 90% LTV? in California? in today’s market? am I missing something?

Uhm… yeah, I think you are-- the fact that these buyers are not investors but rather just over-emotional and slightly unreasonable homebuyers who are in love with the property and are deadset on getting it, even if they have to spend what little money they were going to save in the first place on legal fees to do it, and are probly willing to spend even more than that still… I obv. toldem this was a dumb decision but what can i do, im just thier lawyer, i pretty much do what they tellme, even though i constantly tellem theyre bein lame about it… Anyways, clients that come into your office with cash before you even mail a bill are pretty hard to come by these days, lemme assure you…

And what about 2 years down the road when the place bleeds him dry and the shitbrick sues you?

EL @ ****brick suing me… he gave his informed consent to retaining an intellectual property attorney to rep his arse inna real estate matter… And anyways, ****bricks too dense to figger to try and sue there, + ****brick is one of my best buddies, so it aint gonna happen… ALthooooooo… now that you mention it ****bricks wife is 800% capable of doing somethin like that…Still, they wouldnt have a leg to stand on…Im hopin the “JD” in JDS doesnt stand for juris doctor, sir…cause if it does, id like to personallly congratuilate you for bearing the ignoble distinction of being the one member of the bar more likely than me to mistake his pinky finger for his ballsack…WOOT…

In any case, sales cominup… Anyone have any thoughts on the best way to get one of them “closed” trustee sale thingies? Or for gettin the bank to allow ****brick to bring a loan commitment to the auction instead of a suitcase fulla hundreds? I mean, i cant make an actual OFFER without the support of the seller…should i prepare some sorta package simmilar to the shortsale one, where i show that it’ll cost the bank $930120 more to take the property back than to let us have it at the sale, etc.?