Is There Liability For Compensation For Short-Selling Defects?

Short sales can be very lucrative for investors and homebuyers who want to save a lot of money and are willing to put in a little effort. The problem is that these incredible deals may not be exactly what is advertised. In fact, homeowners who make short sales offers may omit a significant amount of information or attempt to change the deal after the earnest money deposit has been paid.

At first glance, buyers may see this as malicious activity—a petty attempt to secure a better deal—but if you look a little deeper, you'll find that many of these home sellers are trying to secure a better deal. It may become clear that you're being forced into this situation because you're setting yourself up with bills you can't pay, you've lost your job, or some other major life event has happened. Therefore, their actions and lack of full disclosure are not necessarily due to malice but rather a desperate and misguided desire to stay in their homes a little longer.

What recourse is available to the buyer?
Many buyers understand that a short sale is not a great experience for homeowners, but patience has its limits, and money is all that matters. This is always the bottom line for short sales. The bank will approve the short sale and require the current resident to take all reasonable precautions as part of the short sale process. I recently realized that somewhere in the process, a short sale completely failed. The buyer had $5,000 in escrow as a down payment and was moving toward closing. The current homeowner then said he couldn't afford to move and asked the buyer to cover two months' rent. The real estate agent agreed to pay the amount to enable the sale.

The homeowner then asked for moving expenses. Additionally, the homeowner will no longer allow the buyer to enter the property. He was suspicious of their actions and wondered what he was doing at home. For all he knew, they could remove all the equipment and anything else worth money and sell it.

I've been thinking about what recourse short sellers have if something goes wrong. A quick search online showed that it doesn't just happen every once in a while. It happens quite often. In some cases, the tenant living in the home does not disclose this to the purchaser until after closing. Of course, the tenant has the right to stay in the home for several additional months until the end of the rental period and every month thereafter, unless a formal 30-day notice is given.

The last thing the homeowner said was that the HOA fees were several months late and the new buyer would have to pay them. So what methods are available?
In the agreement, 

Anything not included in the original contract must be approved by the buyer. If they do not agree, the homeowner has no legal authority to charge additional fees, moving costs, or rent. If theft occurs, make sure your purchase contract clearly states what can remain in the home and what can be taken from the home. If the device is scheduled to be kept and this is stated in the contract signed by both parties, then removing the device is considered theft. As far as the rental situation is concerned, the tenant has the right to remain there after the end of the rental period until a formal notification is sent. There are many cases where a short sale fails and an attorney is needed to recover the earnest money, damages, and losses. Unfortunately, this is a byproduct of a great buying opportunity.

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