Expert: Lisa Webber - 6/25/2010

Question
My husband and I decided to buy a property; we are first time home buyers. We found a short sale and we decided to submit an offer on. It was not our first option, but there were not good inventory on the area at that time and we were afraid of not finding another property before the tax break expires.
That was in December 2009. The seller has two mortgages on that property. We have been waiting for the second lender to approve the contract. About 45 days ago the second bank approved the contract and our agent mentioned that the seller did not have money to go to the closing. We accepted to put an extra 4,500 for closing which it should be pay to the seller’s second lender. We selected the settlement company and started to be ready for the closing. The process continue and at the time the inspector went to evaluate the property, we found out that the heat pump (compressor) was removed from the property which was included in the contract. This has been a trend, currently, the house does not look as the house we saw at the beginning, considering the items that have been changed and removed.
Our closing date is supposed to be on June 29th, but so far the letter from the second lender has not been released and the name for the second lender has not been provided(to make the check payable to the second lender)
At this point, it seems that not closing will be done, but we need to know our rights as buyers and why in case the sales go through the sellers can remove items from the property.

Answer
This is a common scenario.  Normally when a home is sold as a short sale it is because the seller doesn't have any money and has exhausted all of their finances.  They have to prove to the bank that they have a hardship and any additional funds in any bank accounts they have are required to go to the bank to offset any loss the bank is taking. This is why they asked you to bring the additional $4500; that happens sometimes.  The second has to get enough money to sign off to transfer the deed and sometimes the first mortgage holder won't give up any of the amount.  The $4500 you will not pay in advance to the second mortgage company.  That will be done through the title company and will show up on the HUD-1.  Any money that transfers hands has to be shown on the HUD-1 or settlement sheet and is not allowed to be done as a hidden transaction or it would be illegal.  Most motivated sellers will not remove items from the house after it goes under contract but some do and it's unfortunate because it can derail the transaction.  Sometimes it is so bad that the buyer walks and the if the seller can't get another acceptable offer, the house could foreclose. The compressor may or may not have been taken by the seller.  More likely than not, if the outside compressor unit is missing, it has been stolen and sold for scrap.  We see this happen all the time in Baltimore City.  Many sellers if they are coming in and rehabbing a property and buying a new A/C unit will not install the outside unit until after the house sells because theft is so bad in some neighborhoods.  You don't mention the other items that have been changed or removed so I don't know how to address that.  Basically what normally happens is if the buyer is getting a good deal and still wants the house, they will proceed to closing and just accept the changes. When sellers remove items like that, they are in breach of contract and you can choose to not purchase the house if they don't put the items back.  That is a reason for breaking the contract and not follow through with the purchase if you choose not to.  Other than that, you don't have any recourse but possibly to break the contract and take them to court.  The odds of winning in court are very slim though.  I'm not an attorney and cannot give you legal advice but you could consult with an attorney and discuss the possibility of doing that.  The other problem there is the sellers don't have any money so there wouldn't be any real money to get as far as "damages" go.  At this point you can certainly back out of the contract as the house is not in the same condition as you initially saw it or you can ask your agent to ask the sellers agent to put back the items that are missing or changed and see what they say.  It can't hurt and the worst they can do is say no. As far as your closing date, that can be extended by an addendum, or you'll be out of contract and can choose a different home.  I hope this gives you some food for thought.  I know these things aren't always easy or fair, but hopefully you'll get a good deal in the end!