I closed on an investment house in February this year. I was scheduled to close at 4:30pm on a Friday. When it reached 8:00pm and I still had not signed, I told the escrow agent to call me when she “got it right.” The following Monday, I went in after the mess had been cleared up and signed.
The purpose of this article is to show how valuable real estate attorney’s are to investors.
A wholesaler friend called me in January and told me he had a house that I should look at. I looked at it and told him I wanted it. He had it under contract so we decided to just have him assign it to me. I did what I had to on my side by pulling the comps, securing the hard money and was ready to close when the seller was.
The terms with the hard money lender was up to 18 months, 14% annual interest and 4 points. As long as the total LTV is under 70%, the points can be rolled into the note (meaning I didn’t have to pay 4% of the loan up front).
So why was I at the closing table nearly 3 and a half hours and end up not signing?
In my opinion, it was a poor escrow agent.
I was there with a friend of mine, my wholesaler friend, his partner and the escrow agent.
I kept looking over the HUD-1 and kept telling everyone that the numbers were wrong. Just about everyone there took a turn with trying to explain it and all of us ended up more confused.
You see, the escrow agent had it on the HUD-1 that the loan was for $78,500 and I was supposed to bring $3,500 to the table. The $3,500 was the 4 points for the hard money loan. “No, the purchase price is $75,000 and the $3,500 was for the 4 points plus a few fee’s.” The total amount of the loan was $78,500 and that included.
“No” the escrow agent said again. “You need to have $3,500.”
I finally called the hard money lender and he explained it to the escrow agent. She said she understood but once she got off the phone, she told all of us that he was wrong.
With a disgusted tone, she said, “Look, I am only going to explain this ONE LAST TIME!”
I started to laugh and turned to the others and said, “Okay guys, listen up… This is where she explains legalized theft.”
Everyone except the escrow agent laughed and she went on to go over the HUD-1 again. I got up and that is when I said to call me when she “got it right” and went home.
I called the hard money lender Monday morning and he told me that he had called the title company and everything was cleared up. I went back in to sign and the escrow agent was very quiet and never once looked me in the eyes.
The end result was I signed a HUD-1 with the total loan amount being $78,500 and I did not have to bring the $3,500 as I was told on Friday.
The escrow agent was trying to double-dip me on the points. Don’t get me wrong, I am not saying she did it on purpose. I am saying that she thought that was the way it was supposed to be and everyone else was wrong.
After that mess, I called a real estate lawyer friend of mine and told him what had happened. He got a laugh out of it and said that sort of thing is so easy to avoid. He suggested I bring him along the next time I go to the closing table.
Recently I went to a closing (with a different title company) and took my lawyer with me.
It was amusing because he approached it as though he was a defense attorney and I was his client. I was to sit and not say anything unless he said to.
I didn’t say anything but I have to admit that I had a huge smirk on my face during the time I was there. Why shouldn’t I have had a smirk? It was amusing to watch. He was all over the escrow agent. I kind of felt bad for her because I thought she was doing her job fairly well but the lawyer kept at her, having her explain how she came up with the figures she was showing. The closing didn’t last that long and the lawyer ended up catching several errors that would have cost me around a thousand dollars.
The point I am trying to make is just because someone is a professional (escrow agent), it doesn’t mean that they are a “good” professional. In fact, what makes someone a professional is they make money at what they do.
There is a difference between the NFL’s MVP and the worst player on the worst team in the league. They are both professionals in the NFL but the difference in talent is not comparable. The same is true in real estate. I consider myself good at what I do but I can’t say that I am talented enough to tell everyone else how to do their job.
So protect yourself when it counts and have a good real estate attorney review your deals, documents and go with you to your closings. It’s worth it.
As I say in my classes, “You never realize how much you love lawyers… Until you need one.”