Deal graveyard, early March edition

A couple of deals fell apart last month and I'm here to dish the dirt.

The first was 2912 Buena Vista in Burbank, pictured above.  This sharp flip is owned by a group out of the Inland Empire who have their own real estate company.  My buyer clients originally submitted a full-price offer in January, but had to go through all sorts of gyrations to get the sellers to accept it a month later.  As many of you know, all real estate contracts must be in writing, and the Department of Real Estate and California Association of Realtors have contract forms.  These forms have been vetted by many generations of attorneys.  There is no reason not to use them.  So I was surprised to get back the sellers' personal contract for my buyers to sign.  No surprise -- the sellers' contract took away all of the buyers' rights.  And also removed all of the sellers' responsibilities.  I advised the buyers not to sign the contract, and predictably, the sellers sold it to somebody else.  Yes, we're disappointed.

The second deal-gone-bad was on 702 E. Olive in Burbank, another flipped home.  My buyers (not the same ones as on BV) loved this home and initially I could see why -- there were huge spaces for entertaining and nice character details. Yes, it is next to an apartment building, but still. The buyers came in over the (then) purchase price and were in escrow for $620k.  For a 2-bedroom in Burbank.  But as I said, they loved it.

Then we did the inspection.  The inspector noticed that there were no vents in half the house. Chimney had cracks.  Roof tile was falling off.  And best of all, there was a lot of loose asbestos in the semi-finished basement, which is a very, very serious health hazard.  The sellers-flippers refused to remedy anything (really? asbestos? You're gonna leave it just lying there?) and after very careful deliberation, the buyers decided to move on.  This house, too, went right back into escrow at a higher price.  To add insult to injury, the escrow company decided to keep $200 of my clients' money for opening escrow and receiving the buyers' deposit (reputable escrow companies don't usually do that).  Needless to say, these buyers are also sadder, but much, much wiser.

Beware of the evil clowns of Los Angeles short sales

Of course I couldn't go a month without saying something about short sales, right? Lately, I've been made aware of new and different scams perpetrated on short sale sellers in Los Angeles and the San Fernando Valley.  If you or anybody you know is thinking about selling short, there are a few things you should know to protect yourself. 

First and foremost, you shouldn't pay any money to anybody upfront to handle a short sale for you.  They get paid through the commission when the sale closes.  This is California law.

Second, you need to sign all legally binding contracts, starting with the listing paperwork.  No matter how dire your straits are, please take the time to review the paperwork your Realtor gives you.

Third, you'll need to disclose everything you know about your property in standard forms.  Your Realtor can help you fill these out, but don't let him/her do it for you.  You're liable for non-disclosure long after escrow closes.

Fourth, yes, you do have a say in who buys your place, and the terms and conditions of the sale.  You'll sign off on this paperwork, too.  You're probably thinking, "But I'm walking away with nothing in a short sale; why should I care?" Well, there are many contractual terms that still concern you besides money, such as when possession will be given to the new buyer (negotiable), what appliances stay, whether leases are still in force, etc.  One thing to know: you can't short sale your property to a relative.  The bank will insist that the transaction be "arms length."

Five, and this is important, you can take your property off the market (just in case, say, you get a windfall and no longer have to short sale it).

Remember, sellers, your short sale negotiator/Realtor is working for you, first and foremost.  Don't be afraid to ask questions.  If you'd like to educate yourself more about the process, the California Department of Real Estate has lots of info on its website, as does the California Association of Realtors.