auctioned home - seller won't sign paperwork and won't refund auction fee

[criticalthinker]

What is the name of your state (only U.S. law)? MA

Lived in the same home several years as renters. Home went into foreclosure and to auction. Auction was run by a local attorney representing the seller (a bank we'd never heard of prior to the auction).

Won the auction. Required a $5k deposit that was non refundable in the event that we're "unable to obtain financing" for *any* reason.

Went to a local bank. We easily qualified for an FHA loan which requires all parties to sign specific lender documentation (amendatory clause) in order to process the loan. In order to stay in compliance with FHA that document must be signed:

http://www.ehow.com/about_5143813_fha-amendatory-clause.html

Seller (that bank) refuses to sign the documentation in order for us to obtain the loan AND is telling us they will not refund our deposit.

What options do we have, if any?

We do not know why the institution that owns the property will not sign the documentation. And it seems strange that they can refuse to sign the very paperwork necessary to complete the loan then turn around and use that as an excuse for why we were unable to obtain a loan and, consequently, why they have the right to keep the deposit.

Any insight would be appreciated.

 

[Zigner]

What reason do they give for refusing to sign the document?

 

[nextwife]

A purchaser at Sheriff's Sale is supposed to be prepared to pay CASH at confirmation. An auction purchase is NOT supposed to require appraisals, FHA work orders. Where I work, we sometimes buy at auction from second position. I have NEVER heard of any foreclosure auction allowing a financing condition, it's strictly cash.

Did you READ all the auction terms before bidding? Who do you expect to pay for any pre closing FHA work orders required? The foreclosing lender sure won't, they don't even own the property, and the foreclosed borrower won't.

 

[criticalthinker]

What reason do they give for refusing to sign the document?

Apparently they didn't like the terms of the clause. According to the lender the home will appraise at ~$50k more than the selling price so the terms of the clause are irrelevant, but signatures are still required by the government for compliance with its FHA program.

 

[criticalthinker]

A purchaser at Sheriff's Sale is supposed...

We did read the terms but unfortunately it seems we fell victim to our own inexperience. Had we hired someone with experience to explain what we were reading in simpler terms we would have avoided this mess. Unfortunately we were under the impression that we could finance but I understand now that we were wrong. One very expensive mistake...and a lesson learned.

Thank you both for taking the time to answer my question. I really appreciated it.

 

[FlyingRon]

I have NEVER heard of any foreclosure auction allowing a financing condition, it's strictly cash.

It didn't, that's his problem. He paid the deposit at sale and now he's unable to complete the rest of the sale. As you know, if you're going to do this you need to have access to the funds (independent of the property you are purchasing) to pay the terms of the sale and THEN you can try to (re)finance the property once you've bought it.

You're screwed, you're lucky they are willing to settle for the deposit as damages for your contract breach.

 

[OHRoadwarrior]

Finance it somewhere else.

 

[nextwife]

Finance it somewhere else.

Huh?

This was a foreclosure auction, posters are in default of the auction terms if they don't have the CASH.

First the auction was NOT held by the "seller". The lienholder foreclosed, so it was THIER auction. They are not legally able to enter into representations that lenders require of sellers- they don't own the house.

This is NOT a house "sale" where one can shop for financing. Balance is due upon finalization of the auction.

 

[OHRoadwarrior]

That is exactly what they are attempting to do, via FHA. I did not say it was intelligent that they put themselves in this situation.

Huh?

This was a foreclosure auction, posters are in default of the auction terms if they don't have the CASH.

First the auction was NOT held by the "seller". The lienholder foreclosed, so it was THIER auction. They are not legally able to enter into representations that lenders require of sellers- they don't own the house.

This is NOT a house "sale" where one can shop for financing. Balance is due upon finalization of the auction.

 

[nextwife]

That is exactly what they are attempting to do, via FHA. I did not say it was intelligent that they put themselves in this situation.

One CANNOT generally finance a Sheriff's Deed transaction, funds are due, in entirety, upon confirmation. A purchase money mortgage cannot usually be executed in conjunction with a sheriff's deed transaction, there are all sorts of logistical barriers to doing so, having to do with the process of getting the sheriff's deed issued (they don't issue the deed UNTIL payment is made in full).

So WHY would you advise them to take this to a different lender? To ANY lender? They need to be liquidating any holdings where there are sufficient funds available, and or borrowing from family.

 

[OHRoadwarrior]

Because they are apparently desperate at this point.

 

[justalayman]

OHRoadwarrior:

Finance it somewhere else.

Most foreclosure sales that I see where the purchase is financed, the buyer is able to obtain a signature loan or sometimes able to borrow against other assets (often other real estate holdings) so it is in effect a cash purchase at the auction.

speed is important. If proceeds are not due the day of the sale, I am sure there is a fairly short window to pay off the purchase price. As nextwife stated, the logistics of borrowing against a house you are purchasing generally do not allow you the time to finance the house you are actually buying.

FHA is a very unlikely possibility. It takes longer than private sourced financing and is just about guaranteed to take longer than a person has to pay the purchase price per the rules in place. As well, there are rules required by FHA that the seller is not likely to want to deal with. The home was auctioned to speed the process of getting rid of it. If they wanted to mess with all the issues of financing, they would have simply put the house on the market. They accepted, probably, less money in exchange for speed of the sale.

 

[nextwife]

. . . there are rules required by FHA that the seller is not likely to want to deal with.

Just a reminder to all:

There is no "seller" to sign an FHA or other lender addendum. The foreclosed borrower is the "owner", until completion, and the foreclosing lender is merely the lienholder. The transfer is by Sheriff's Deed, so there is no way to have the party who is "conveying" sign an FHA or any other Seller ammendment a lender might normally require.

 

[FlyingRon]

I'm not sure this was a foreclosure auction. Sounds more like a sale of an REO property by auction.
In a foreclosure or even a power-of-sale auctoin, the seller is NOT the bank.

 

[Zigner]

I'm not sure this was a foreclosure auction. Sounds more like a sale of an REO property by auction.
In a foreclosure or even a power-of-sale auctoin, the seller is NOT the bank.

It might have been...in 2011