Good News - Bad News on the Short Sale Purchase

My misadventures in purchasing a condo in short sale goes on. Like life, there are ups and downs. And for every good news I get, it seems to have a twin of bad news.

Goods news - I was approved for a conventional loan. I locked in a 3.875% interest with 20% down and 2.125 points. The lock is good 'til 1/20/12 (or so).

Good news - The appraisal for the property came back at $365,000. My accepted offer was $342,500.

Bad news - I noticed a $3600 State tax lien on the condo in the preliminary title report. When I reviewed the 1st mortgagee's consent to short sale letter, it gave an allowance of up to $6,000 to satisfy any liens on the property. The consent letter specifically identified the HOA lien and and the 2nd mortgagee's lien but nothing about the State tax lien. I brought this to my agent's attention. Apparently, the Seller neglected to disclose the fact that she hadn't paid her state taxes on her HUD-1.

The Seller is now scrambling to get a partial lien release from the State. According to the State of California website:

A partial release of lien releases a state tax lien from a specific piece of property. However, the lien remains in effect and will encumber the transfer of title of any other properties owned or subsequently acquired by the taxpayer. Reasons to request a partial release of lien include a need to transfer the rights to the property when there are insufficient funds to fully satisfy the state tax lien or the party with the lien has no rights to title of the property.

As part of the request, the Seller requested that I forward the appraisal (that I paid for) to the Franchise Tax Board. I gave specific instructions to the escrow company that it is only authorized to release the appraisal to the FTB and not to anyone else.

Hopefully, when the FTB sees that the condo was appraised $83,000 less than what she owes, it will release the lien off the property. I am hoping that the State does not demand that I increase my offer to cover the lien.

Bad News - Due to the deadbeat Seller's failure to disclose her State tax delinquencies, I probably won't be able to close on this condo before the end of the year, much less before the 2nd mortgagee's consent expires on 1/15/2012. My locked interest rate will likely also expire and knowing my luck the rate will probably increase. Oh... did I forget to tell you that this Seller will get $3,000 bucks if this deal goes through? Yes, you read that right. This woman who took out a "Liar's Loan" and hasn't paid her taxes will get $3,000 from this sale. I'm really starting to resent this Seller and I will be pissed if I end up paying her State taxes.