Antonio & Alexia's Blog


Bank Approves Short Sale, Closes Escrow, then Returns the Money and Conducts a Trustee Sale... New Owner is Asked to Leave

Could this possibly happen? Are Short Sales now becoming Long Sales? In this case the escrow closed, buyer moved into his new home and 30 days after that, he received a visit from a Realtor who told him to move out because the bank had acquired the property via a trustee sale.

Once escrow has closed, the issues of the prior owner cannot affect the new buyer of the property. After all, a title insurance company is responsible for the transfer of a clear title to the new owner, and the only lien should be the new mortgage that the buyer acquired in order to buy the property. Every property sold with any type of financing is required to have title insurance.

In a typical transaction when a borrower stops making payments, a Notice of default (NOD) is recorded 90 days after missing the first payment. A Notice of Trustee Sale (NTS) is recorded 90 days after that. In the meantime, the seller can opt to sell the property if the bank approves what is called a short sale, meaning that the total amount of the mortgage owned against the property is going to be short of the full amount. A short sale can only be initiated when there is an offer on the property.


What happened to the money?When there are two or more lenders, like in this particular case, they negotiate an agreement between them, based on how much money from the proceeds each will take in order to sign off the lien and allow the property to sell to a new buyer. During this time, however, the trustee might schedule the sale of the property using the powers granted by the Note and Deed of Trust.

When lenders are negotiating an offer, they postpone the Trustee Sale in order to allow the short sale to happen. The trustee sale can be postponed many times. When a short sale is finally approved and the escrow closes, then the trustee sale is canceled completely. It is the banks responsibility to notify the trustee that the sale has occurred. It appears that in this particular case, the bank failed on this critical last step.

A recording of the new deed should signal the end of the entire transaction, sellers move out of the house, new buyer takes possession and a new lender becomes the only lien holder.
In most cases that is the entire process. No matter what happened before, if the bank accepted a short pay off and the new buyer bought the property, no other procedures should happen for many years to come, and it will be up to the new buyer and lender to do whatever they want, a process entirely independent of the the prior sale.

In this unusual case in Fremont, California, the bank approved the short sale, signed the closing documents, got paid and then conducted the trustee sale anyway ... and become the new owner of the property it just sold. As a matter of fact, the lender send the check back to the title insurance company 30 days after escrow closed and ask to have the sale rescinded. Title company send the check back saying it cannot do that. Meanwhile the title of the property still shows Indymac as the new owner, in other words, it shows as an REO. How can this happen?

No matter how I look at this situation, there is no way that a Realtor or a Home Buyer can see this coming, or prevent it from happening. Escrow closed in December 2009, Trustee Sale happened on January 2010, it is mid March 2010 and we still have no resolution to this problem, the title company says they are negotiating with the bank and that the issue will be resolved soon...

Needless to say, the new buyer is not happy at all, he is receiving visitors that look at the property as an REO and think it will be available for sale. This particular buyer looked at over 50 properties, wrote 27 offers and after almost a year, he moved into his new place... I wonder when he is going to start truly enjoying his new home.


The Realtors In Motion       Antonio & Alexia Cardenas   

                  "The Realtors In Motion" 

         CRS, GRI, E-Pro Certified. SFR (Short Sales, Forclosure Resource) Serving the east shores of the San Francisco Bay, Alameda county: specially the following cities: Castro Valley, San Leandro, San Lorenzo, Hayward, Oakland, Pleasanton & Dublin.

                  Visit us on line at: or call (510) 326-4263

                     Call us, We'll come and TANGO with you!

Comment balloon 14 commentsAntonio & Alexia Cardenas • March 15 2010 09:19PM


That is so sad. I try to have a positive spirit about our current situation with the banks but stories like this one make it very difficult...

Posted by Jami Asanovich, Doing the right thing, every time! (Smart Concept Realty, LLC) over 10 years ago

It is an awful mess for the buyer and everyone involved. Wonder what the agents think about giving their commissions back? I know what I'd like to tell the bank!

Posted by Valorie Stover, Realtor for Casta del Sol, Mission Viejo,CA, Active Adult Community! (Casta del Sol Real Estate / HomeSmart Everygreen Realty) over 10 years ago

Jami, you are right, it is sad to see a first time buyer being accosted by would-be home buyers or investors coming by his property wanting to see it. It is not the celebration of your first home you would expect.

Valorie. This is a real mess, I have never heard of a situation like this one. I have closed a few short sales before, but this one is dragging on and on and on...  Thank you ladies for your visit.


Posted by Antonio & Alexia Cardenas, "The Realtors In Motion" (Alameda County - San Leandro, CA.) over 10 years ago


I must be too tired to understand this. 

This can't happen.  It's like coming back from the dead.  It's just not done!

I'll revisit this post again tomorrow to see what I'm missing.  Surely I'm missing something!

Posted by Mirela Monte, Myrtle Beach Real Estate (Buyers' Choice Realty) over 10 years ago

Yes, Mirela, it is happening as I write this note. You see it better than me. Coming back from the dead. And it is being done: Indymac is the culprit here. You are NOT missing anything, I am personally dealing with this issue, and the buyer is my client.


Posted by Antonio & Alexia Cardenas, "The Realtors In Motion" (Alameda County - San Leandro, CA.) over 10 years ago

Ahh, you mentioned the evil 'OneWest' by it's better known name.  There are some other posts out there about the FDIC's backing for OneWest and the sweetheart deal that they made.  They are finding that they make more money via foreclosure than they do on short-sales.  Now we have the next logical step - attempts to unwind agreements they've already made.  Tragic turn of events we're seeing here.

This is something that the title company needs to resolve.  Please post a follow-up when you have more news!

Posted by Michael J. O'Connor, Eastvale - 951-847-4883 (Diamond Ridge Realty) over 10 years ago

This is ridiculous.  Once it is all said and done, Onewest or Indymac, needs to be sued for all of the aggravation.

Posted by Rhonda Burgess, Moving to Nashville TN Real Estate Specialist (Southern Living Realty Partners) over 10 years ago

Michael, I promise I will update the post when this is resolved, this file is going to be kept open until then. The ramifications are huge, the buyer cannot do anything financially with the property, and living on an REO is not fun at all.

Rhonda, I believe that is what everybody tells the buyer. The title company however, is the responsible party since they insured the title to the buyer.

Thanks for the visit. Antonio

Posted by Antonio & Alexia Cardenas, "The Realtors In Motion" (Alameda County - San Leandro, CA.) over 10 years ago

I do not see how this could hold up in court. You can not sell something, then change your mind after you have closed. Please keep us updated.

Posted by Alan Grizzle, Full Time Realtor, Lifelong Resident of Dahlonega (Chestatee Real Estate) over 10 years ago

Update. March 27/10 It does appear that the second lien holder conducted his Trustee sale, we received news that the trustee sale has been rescinded, we are waiting now for the title company to change the title back to the buyer...


Posted by Antonio & Alexia Cardenas, "The Realtors In Motion" (Alameda County - San Leandro, CA.) over 10 years ago

All's well, that ends well, then?

What an amazing story!

Posted by Anonymous over 10 years ago

Glad to hear that this nightmare is once again turning into a dream for your buyers. Quite a story --- got us all excited. Bet the title company was shaken as much as everyone else.

Happy ending?

Posted by Pacita Dimacali, Alameda/Contra Costa Counties CA (Alain Pinel) over 10 years ago

Glad to hear that it seems to be working out.  The whole story reminds me of a property in which I represented the buyer.  On the day of closing when we went to do our final walk-through of this bank owned home we found a notice of trustee sale on the front door from the previous junior lien holder.  We brought it to the attention of the title company and the sale was cancelled.  But it would have been the same nightmare you had if they actually 'foreclosed' as the second.  Wouldn't have held up in the long term I'm sure but something that none of us actually would have wanted to go through.

Posted by Michael J. O'Connor, Eastvale - 951-847-4883 (Diamond Ridge Realty) over 10 years ago

Update. April 17/10Granted the bank rescinded the sale, the title as of today still shows as an REO, what the hold up is? We do not know, and are still waiting final resolution. For the owner that means his name on the title. Thanks for your visit.

Michael, thanks for sharing your story, I have learned that I must keep an eye open the next time I do a short sale with two or more lenders, at least I will ask more specific questions, I must. This escrow closed 5 months ago and I am still dealing with it, not fun at all.



Posted by Antonio & Alexia Cardenas, "The Realtors In Motion" (Alameda County - San Leandro, CA.) over 10 years ago