Profile picture for natriciayee

Can BoA sell a property in auction as foreclosure when I was already in contracts for short sale?

A property was listed as a short sale. I submitted an offer and was accepted by the seller's bank. It was ratified... did all that paperwork. Then today, I was told that Bank of America's short sale department and foreclosure department dont talk to each other and in the mean time the property actually went into foreclosure without the short sale people ever knowing and thus never informing me, and the property was sold today in an auction as a foreclosure. Can they do that after everything was ratified and signed?  Can I do anything to get the property?
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May 02 2011 - San Bruno
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Yep.... short sales are a real headache.

Unfortunately, your agreement to purchase was ratified with the defaulted owner. That the bank "accepted" the purchase amount doesn't mean anything when it comes to ownership. They are just agreeing to take a short payoff from the seller. Until the home foreclosures, the old owner is the legal owner. Once the bank forecloses, they are now the legal owner and have no obligation to sell to you and are certainly not obligated by a contract the previous owner signed.

You do have a couple options.

1) the old owner does have a brief period after the auction to make good on the loan and regain possession. It's only a few days, but depending on where you were in the sale process, you might be able to work out a simultaneous closing that a) gets the old owner the house back and b) transfers the property to you in a second, simultaneous transaction. The odds of making this happen are really slim.

2) Option two is wait for the entity that bought the house at auction (often the bank buyer it from itself) to list it on the market and go for it then. In fact, you may be able to contact them and offer to purchase it direct.

Hope this helps. Sorry you had to deal with that.
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May 02 2011
Profile picture for Pasadenan
The lenders can collect on the mortgage insurance if it goes into foreclosure.  They can't on a short-sale.  Thus, they really don't have much motivation to accept a short-sale, even if it is slight more money.
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May 03 2011
Becoming very common with B of A. I had an offer on a B of A short Sale and I knew before the Seller and the Listing agent that it was sold at auction... And guess who the buyer was... B of A!!! Or at least it was the beneficiary...

We went to put an offer on another home my client liked and as I was drawing it up, the agent said B of A foreclosed.

We are now on another short sale that the seller accepted and they weren't even in default yet, so this may be a ride, but at least they are no where near foreclosure yet...

Good luck, that would be very frustrating...
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May 03 2011
Profile picture for natriciayee
Thank you for the info Micki. Very informative. 
Yea... it was a hard blow.. We really wanted it and thought we basically had it, and then it got taken away right from under us. Im graduating nursing school this month and was excited to move in and start "my life"
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May 03 2011
They can and do- often. It appears that the listing agent may not have been staying on top of the situation.
B of A is one of the best at giving extensions for postponement of foreclosure sales as long as the agent pays attention and follows up with the negotiator to get it postponed. This is especially the case with a short sale that has an offer already in their system being worked.

Unfortunately, at this point I think your only option is to wait until it shows uup on the market as an REO.

Best of luck to you.
Micki
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May 02 2011
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Cool Cool; watch out in here (pretty crazy?)
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May 02 2011
Peter:

You didn't upset me at all. Email doesn't have tone! I have been getting called Jerry, Jimmy, Jamie and all other manner of "J" names since childhood. I know Jon...sorta. We have friends in common. Tell him"hi" for me. 
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May 02 2011
Profile picture for natriciayee
Thank you for your answers everyone. I really appreciate it.
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May 02 2011
All the time. I listed this property on Friday. If you look at the previous listing, you'll see the short was approved at $190K. BTW, it's Jeremy.
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May 02 2011
Jerry

Since you seem to have experience in foreclosed homes, (more than me) how often does a foreclosed home end up being priced and then sold for less what it was originally listed as a short sale.

I use to notice a trend that foreclosed homes tended to end up at least being priced below short sale prices, but I'm not sure if that is true anymore. Could the buyer end up paying even less as a foreclosure?
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May 02 2011
Absolutely! I list homes for sale for B of A, Chase and Met Life. The fact is that you had the property under contract with the former property owner. Until you have a written agreement with the bank accepting the terms of the agreement, they are under no obligation to postpone a foreclosure auction or accept the terms of the deal that the seller made. Truth be told, about half of the properties that I list for the bank are under contract to be sold short. 
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May 02 2011
I was told that Bank of America's short sale department and foreclosure department don't talk to each other

Sometimes the short sale dept and foreclosure dept are not even in the same state much less the same building. Sadly, this scenario is all too common.

Can I do anything to get the property?

Yes, you can buy it when the foreclosure dept lists it for sale.
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May 02 2011
 
Related Questions
Can BoA sell a property in auction as foreclosure when I was already in contracts for short sale?
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May 03 2011 | 12 answers
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