Seller canceled on day nine and my 8,400 of diligence didn't come back
Put money behind an operator on a pre-foreclosure in a state I hadn't worked before. Owner about six weeks from a trustee sale, payoff around 214k with 11k of arrears, agreed price 249k on a house we both had at 320 to 330. Owner would have walked with something like 30k after costs. Clean file on the face of it.
The contract was signed on a Tuesday. Because we were funding the payoff and closing fast, I authorized diligence immediately. Title 1,650, survey 900, an appraisal I insisted on at 700, local counsel 2,400 for the closing package, and a 2,750 commitment fee to the bridge lender that was non-refundable once they opened the file. 8,400 out the door in six days.
On day nine the owner's daughter flew in, and they canceled. The state has an equity purchase statute that gives an owner in default a right to cancel a sale contract for a period after signing, and the period runs from when the required notice is given in the required form. Our packet gave notice, and counsel's view afterward was that the form was arguably defective, which would have kept the window open well past the date we'd assumed. Nobody wanted to litigate that against a homeowner in default, and I wouldn't have wanted to either.
So the money's gone. Not the operator's fault in the sense that he didn't hide anything, he'd used the same packet in his home state where the rules read differently.
What I'd do differently. I'm staging diligence spend now. Title and a payoff request are cheap and go first. The appraisal, the survey and any lender fee wait until the cancellation window has closed and I have counsel in that state confirming in writing that it has. And I won't fund an operator's standard contract packet across a state line again without a local attorney reading it before the seller signs it, not after.