I have a buyer for a REO property that was set to close last week. Down payment is in escrow and buyers funds were about to be wired from lender when I receive a call from escrow who advises me that "Bank ABC" may not have a legal right to sell this asset. Apparently in 2005 a fraudulent reconveyance of title was done and now "Bank XYC" says they are in first position and have filed a NOD. What?? Now everything is on hold until the legal departments of "Bank ABC", Bank XYC" "Title 123"(current co trying to insure), "Title 321" (insuring co from 2005) can figure this out. I have re-read the bank addendum and it says if seller can not convey a clean title they shall have 30 days to remedy. If they can not buyer can take as is with no adjustment to sales price or any future liabilities against seller. Now my questions are: If this does not work itself out, does my buyer have any legal recourse against seller? Since the contract is with seller and buyer and if seller does not have legal right to sell home, is seller in breach? I know buyer will receive EM and deposit back but what about appraisal and inspection fees? Also now they have to find a new place to live as they only have 2 weeks left at their rental. HELP. I am hoping that the title company that insured the policy back in 2005 will pay off the claim which is about $50K plus interest for the past 4 years. Note this properties value is under $100K. Thank you for any insight you have.
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