Townhouse under contract sold in foreclosure - not disclosed

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Latest post Sun, Mar 12 2017 9:34 AM by karen2222. 20 replies.
  • Wed, Mar 8 2017 10:33 PM

    • Lotzaspotz
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    Townhouse under contract sold in foreclosure - not disclosed

    My daughter's had a townhome for sale under contract for the last three weeks.  Prior to that, the home had been on the market for six months.  The home was advertised as for sale, not a foreclosure, and was listed by the realtor owner of his own agency representing the seller.  It was not bank-owned, not sold "as is" or anything that would have tipped my daughter off.  She paid $800 for a very thorough home inspection, as well as $500 in an escrow account with the title company.  Her realtor called her today to say the house had, unbeknownst to my daughter's realtor, been under foresclosure and was sold the day before.  There were no indications on the listing that it was under foreclosure.  The seller's realtor called my daughter's realtor with the news this morning so the listing realtor is acting like this was news to him as well.  As a result, my daughter lost the house.  She will get her escrow money back, but can she take the seller AND the listing realtor to Small Claims Court, suing the seller for not disclosing he had not paid his mortgage for months and was in foreclosure, plus the listing realtor for lack of due diligence and publicly misrepresenting the status of the listing?  My daughter wants her $800 back.  The state is Texas.

  • Thu, Mar 9 2017 4:47 AM In reply to

    • Drew
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    Re: Townhouse under contract sold in foreclosure - not disclosed

    LA law and her contract might differ ...but odds are the fine print of contract limits sellers liability to return of escrow and limitis buyers options to do much of anything ...rare that there is a specific performance clause .

     

    Its not a suggestion for a greenhorn..but the lender probably wants cash out  and may be willing to sell for even  less if it covers thier amount .....but that takes some local  street skills to sort out ..... 

    Might help if you knew the supposed amount due on foreclosure .

    UNless there is something ultra ultra special about this unit..my suggestion ..suck it up and move on...



  • Thu, Mar 9 2017 8:57 AM In reply to

    Re: Townhouse under contract sold in foreclosure - not disclosed

    Lotzaspotz:
    Her realtor called her today to say the house had, unbeknownst to my daughter's realtor, been under foresclosure and was sold the day before.

    I think what you're saying is that your daughter entered into a contract with the owner of the home.  However, before that sale could be completed, the owner of the mortgage foreclosed on and sold the home

     

    Lotzaspotz:
    can she take the seller AND the listing realtor to Small Claims Court, suing the seller for not disclosing he had not paid his mortgage for months and was in foreclosure, plus the listing realtor for lack of due diligence and publicly misrepresenting the status of the listing?

    Anyone can sue anyone for anything, and small claims court is (or is supposed to be) quick and easy.  In order to prevail against the seller "for not disclosing he had not paid his mortgage for months and was in foreclosure," she would have to establish that the seller had a legal duty to disclose those facts.  Whether Texas law imposes such a duty on sellers of real property is something I don't know, but I'm skeptical since foreclosure status is a matter of public record.  She has no valid claim against the seller's realtor for "lack of due diligence" because the seller's realtor owed no duty to your daughter.  Nor does your post indicate any "misrepresentation" about "the status of the listing."  However, if Texas law imposes a duty of disclosure regarding foreclosure status, that might bind the realtor as well as the seller.  Keep in mind that YOUR DAUGHTER'S REALTOR ought to have been able to discover quickly and simply that the house was in foreclosure, so she ought to have a frank discussion with him/her about this.

  • Thu, Mar 9 2017 9:00 AM In reply to

    Re: Townhouse under contract sold in foreclosure - not disclosed

    Drew:
    LA law and her contract might differ

    Seeing as how the original post clearly identifies Texas as the relevant state, I don't see that makes the slightest difference what LA law has to say about this.

     

    Drew:
    odds are the fine print of contract limits sellers liability to return of escrow and limitis buyers options to do much of anything

    Odds?  This isn't Vegas.

     

    Drew:
    rare that there is a specific performance clause

    What does that have to do with anything?  The OP clearly said that the daughter is seeking to recover the cost of inspection.  Moreover, specific performance is (almost) ALWAYS an available remedy when a seller breaches a contract to sell real property.  Of course, it's not applicable here since the seller cannot go through with the sale, but, again, it's irrelevant to the OP's inquiry.

  • Thu, Mar 9 2017 9:12 AM In reply to

    • Lotzaspotz
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    Re: Townhouse under contract sold in foreclosure - not discl...

    All real estate listings in the Houston area are publicly listed online at the Houston Area Realty (aka har.com) website, operated by the Houston Association of Realtors.  That's where the status of the listing was publicly misrepresented.  Although it appears to have been deleted at the current time, I have a snapshot of the listing when it was out there, and nothing says "foreclosure."  

  • Thu, Mar 9 2017 10:15 AM In reply to

    • Arthur3
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    Re: Townhouse under contract sold in foreclosure - not discl...

    This is what I found on the har.com website

    "All information is subject to change and should be independently verified"

    Listed publicly is not the same as public record. For example where I live you would find information about a property at the county registry of deeds.

  • Thu, Mar 9 2017 10:58 AM In reply to

    • Lotzaspotz
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    Re: Townhouse under contract sold in foreclosure - not discl...

    Understood.  It's the parties responsible for independently verifying the information that we're trying to identify. Non-realtors hire realtors to do this independent verification as part of what they're being paid to do, no?  Non-realtors don't have the access or ability to do this, or may not know how to do this, which is why we hire realtors. Would the title company carry any liability?  

    My daughter just told me she's out $1400, total.  $800 for the inspection and the balance for the appraisal. The lender was supposed to be reimbursed at closing, but since there isn't going to be a closing, she's going to pay him out of personal funds, since she intends at some future time to use the same lender and try to find another house.

     

     

  • Thu, Mar 9 2017 11:17 AM In reply to

    • Arthur3
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    Re: Townhouse under contract sold in foreclosure - not discl...

    Lotzaspotz:
    Non-realtors hire realtors to do this independent verification as part of what they're being paid to do, no?

    No, realtors are not lawyers. Where I live people hire  lawyers to do title searches and closings.

  • Thu, Mar 9 2017 1:28 PM In reply to

    • Lotzaspotz
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    Re: Townhouse under contract sold in foreclosure - not discl...

    Guess we don't need realtors then, just lawyers.  

  • Thu, Mar 9 2017 1:52 PM In reply to

    • Lotzaspotz
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    Re: Townhouse under contract sold in foreclosure - not discl...

    So the realtor is basically getting a commission for unlocking and re locking a property to show, and the only protection a buyer has from detrimental reliance on the contract all parties and realtors signed is to personally contact a real estate attorney each time the buyer is considering making an offer.  The title company has no liability?  That's what I guess we really need to know.  Time to speak with counsel, I guess.

  • Thu, Mar 9 2017 2:31 PM In reply to

    Re: Townhouse under contract sold in foreclosure - not discl...

    Lotzaspotz:
    All real estate listings in the Houston area are publicly listed online at the Houston Area Realty (aka har.com) website, operated by the Houston Association of Realtors.  That's where the status of the listing was publicly misrepresented.  Although it appears to have been deleted at the current time, I have a snapshot of the listing when it was out there, and nothing says "foreclosure."

    Even if the listings on that site are created by the sellers' or their agents, what you're describing is not a misrepresentation.  If the listing had said something like, "no foreclosure pending," then that would be a misrepresentation.  However, that's not what you've indicated.  You've indicated, simply, that the listing did not say anything about foreclosure -- i.e., there was no disclosure.  In order for a failure to disclose to be legally actionable, there must be a legal duty that requires the disclosure.

  • Thu, Mar 9 2017 2:35 PM In reply to

    Re: Townhouse under contract sold in foreclosure - not discl...

    Lotzaspotz:
    It's the parties responsible for independently verifying the information that we're trying to identify. Non-realtors hire realtors to do this independent verification as part of what they're being paid to do, no?  Non-realtors don't have the access or ability to do this, or may not know how to do this, which is why we hire realtors.

    Right.  Your daughter hired a realtor of her own.  As I indicated in response to your original post, THAT is whom she should be talking to about this.

     

    Lotzaspotz:
    Would the title company carry any liability?

    What title company?  In your original post, you wrote that your daughter paid "$500 in an escrow account with the title company" (you also wrote that this money has been or will be returned to your daughter).  I assume this title company was to act as the escrow company for this transaction.  If that's correct, then it owed your daughter no duties whatsoever, except in connection with the handling of the money and documents relating to the transaction (or as otherwise might have been spelled out in the escrow agreement).

  • Thu, Mar 9 2017 2:38 PM In reply to

    Re: Townhouse under contract sold in foreclosure - not discl...

    Arthur3:

    Lotzaspotz:
    Non-realtors hire realtors to do this independent verification as part of what they're being paid to do, no?

    No, realtors are not lawyers. Where I live people hire  lawyers to do title searches and closings.

    I'm guessing you live in the eastern part of the country.  While some states in the east handle real estate transactions in this way, most do not, and the OP is correct that one of the things a good realtor does is check the title (typically via a title insurance company, but not the company that is handling the escrow) on behalf of the client.  If you're going to respond on a national board, you need to understand that other states don't necessarily do things the way they do in your state and that saying "this is how they do it in my state" is particularly unhelpful if you don't even identify your state.

  • Thu, Mar 9 2017 2:39 PM In reply to

    Re: Townhouse under contract sold in foreclosure - not discl...

    Lotzaspotz:
    Time to speak with counsel, I guess.

    Obviously this is up to your daughter, but hiring a lawyer over $1,400 isn't likely to be cost effective (unless she only hires the lawyer to write a demand letter).

  • Thu, Mar 9 2017 4:39 PM In reply to

    Re: Townhouse under contract sold in foreclosure - not disclosed

    Does your daughter know who now owns the home?  It is common practice for foreclosing lenders to bid at the foreclosure auction themselves, to make sure the property doesn't get sold for too low a price.  Think of it as effectively setting a reserve price.  If the seller's lender did this, it may well now own the home - and it might be happy to sell that home to your daughter if she gets in touch and asks.  Could be worth a shot.

    Lotzaspotz:
    The state is Texas.

    I looked it up, and apparently most foreclosures in Texas are nonjudicial (carried out by the lender without any outside participation such as from the court system).  I found this description of the only public notice requirement for nonjudicial foreclosure sales on this webpage courtesy of a Texas lawyer:

    "Notices of foreclosure sales must be filed with the county clerk and posted (usually on a bulletin board in the lobby of the courthouse) at least 21 calendar days prior to the intended foreclosure date. Notices are entitled "Notice of Trustee's Sale" or "Notice of Substitute Trustee's Sale." They provide information about the debt, the legal description of the property, and designate a three-hour period during which the sale will be held. In larger metropolitan areas there are foreclosure listing services which publish a monthly list of properties posted for foreclosure."

    Except possibly in times of extraordinary foreclosure activity, I doubt that checking the foreclosure/non-foreclosure status of listed properties repeatedly (it would need to be at least every 21 days if the goal is to prevent what happened here) would be considered a requirement for real estate agents to do a proper job.  I'll guess this seller kept his problems secret from the realtors (who would probably have refused to represent him if they'd known), and sellers like that are probably fairly rare.  I think listing agreements typically have a clause where the seller warrants that he/she has the right to sell the home on the terms in the agreement - mine (in WA) certainly did.

    Unfortunately, that leaves the seller as the one clearly at fault here.  The problem is, he might not have any money to pay your daughter if/when she wins her lawsuit.

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