Expert: Todd C. Menard - 11/21/2009

Question
Hi Todd, my husband %26 I were supposed to purchase a home in AZ on 11/13/09. This is (for now) an investment property as we currently live in MT and will be retiring in about 10 years.  On 11/19/09 it was discovered that the home we are supposed to purchase is in a short sale.  It was never marketed as a SS property.  Our agent has since discovered many AZ Realtor laws which the listing agent has broken.  Our purchase agreement says we will close by 11/20/09.  We did not close today, and the listing agent has changed title companies FIVE times in the last 10 days!  We are fairly certain she is trying to do a third party short sale, and the title co's are not willing to participate.  She did not disclose that she has an interest in this property. In the meantime, we are out inspection fees, appraisal fees, loan fees, travel fees, etc.  AND, according to the tax records, a foreclosure sale is set for 11/25/09! Because our purchase agreement deadline has expired, do we have any rights?  Our agent requested an addendum to extend the closing date but did not receive anything back from listing agent.

Answer
Hello Paula - There is a practice called a double closing. This is where the property is still in the sellers "A" name, but they contracted with another party "B" where party B is intending to sell the house for more than they acquired it from party A. Usually Party B will not close on the property until finding the new buyer "C" also known as YOU. They may even be anticipating an 'assignment' of their interest. Simply put... transaction A-B then transaction B-C. Usually the first red flag is that the 'purported' seller "B" has recently acquired the property yet there name is not on the city assessor record. So the listing shows one owner of record but the tax assessors office shows another. This is usually discovered by the buyers agent prior to writing an offer when they pull the tax record to verify ownership. Another situation is, depending on the method of acquisition, party B may have to wait to 'flip' the property to allow a certain number of days to expire. Since at this point this is pure speculation action based on my representation, of what it might be, would not be the correct approach. Rather, I recommend that you begin by contacting an Arizona 'real estate' attorney. While you are in that process you should contact the other escrow agencies and ask why they referred or rejected the transaction. This can provide insight into the true situation in which you are involved. It may also provide a more clear understanding of what course of action you should take. Finally, have your agent contact the listing agent. The listing agent may not have been aware up to this point and may be trying to protect their interest as well although they are obligated to "be honest with all parties" by statute and the National Association of REALTORS Code of Ethics. I would caution that you should not purport that any party has violated the laws of Arizona unless you are aware of the exact statute and you have clear and convincing evidence supporting your claim. Even your agent should refrain until such evidence is collected. Without evidence these claims could result in possible defamation or slander. It is my hope by the time you read this the situation has unraveled to the point of complete disclosure by the seller as to what is going on. If not, you should immediately follow the prescribed course of action mentioned. Finally, in the event the seller is unable to close you would probably have the possibility of recovering your costs as damages. There are a few venues to accomplish this if necessary. I hope this has answered your question to your satisfaction. Please reply if you are in need of additional assistance. Please remember I am not a real estate attorney and this is not to be construed as legal advice, rather it is to be considered real estate information that any experienced REALTOR should be able to provide - Todd Menard