Negotiating the terms of your loan can be as important as negotiating the sales price of your new investment property. Interest rates and closing cost a huge part of cash flow and return on investment, with the proper due diligent and negotiations, investors can be rewarded on every real estate transaction.

What can actually be negotiated?

Closing costs and interest rates are probably the first thing investors try to negotiate, but there are others like, time, appraisal and title, volume discounts and pre-payment penalties.

Some investors have lots of money, but very little time, ask about streamline refinance and purchase transactions. They may require more money down, but less documentation and are very quick loans to complete. In some instances it can take half the time as a normal loan.

Just about everyone in real estate is looking for business. Appraisers and Title Companies are no different. I personally have renegotiated my fees with all the vendors I utilize and in turn passed that saving to my investors. Rates have been so good the last few months I had to reduce the cost of refinancing so my investors can break even quicker on their refinance costs.

I am a firm believer in building your power team, remember a loan officer should be part of your team, and ask for discounts only if you can offset that with volume or multiple transactions. Most investors realize that a good relationship with their loan officer usually saves either time or money, sometimes both.

Those investors that are holding on to the property long term ask if there is a prepayment penalty that will help lower your interest rate. Three year prepayment penalties are common on the right loan and could reduce the interest rate .5%-.75%. This is a situation you should have a clear exit strategy. If you try to sell or refinance before the penalty is expired, it could cost you up to six months interest.

Remember, there more than one way to save money in real estate and there is no reason you should not use all of them.

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Tags: closing, closing costs, escrow, Interest Rates, Investor Loans, loan, mortgage, real estate, title, troy schuricht

Although the days of getting cash credits towards closing costs are seemingly coming to an end with the tightening of mortgage regulations, there are still viable ways to accomplish that goal. Both Non-Agency and Dual-Agency arrangements can be used for this purpose.

Often buyers mistakenly believe Dual-Agency is created when buyers approach a listing agent and ask, “if we don’t have an Agent can we receive the selling office commission (SOC) at closing for closing costs”? What’s actually created in this situation is a Non-Agency agreement.

When agents enter into such non-agency arrangements their obligations are to represent the seller and seller only throughout the sale; thus they will write the Purchase/Sale Agreement (PSA) to reflect that the buyer has no representation (they represent themselves). Non-Agency arrangements offer the buyer no professional representation whatsoever, as opposed to Dual-Agency.

These are not a strategies I recommend anyone (buyer or seller) engage in for minor monetary savings or to expedite a sale. If there needs to be a cash credit at closing to cover closing cost, and the seller does not want to pay-out additional monies over and above expenses already written into the listing agreement, these methods can accomplish that.

In the Dual-Agency relationship, The Purchase & Sale Agreement will reflect that the agency and Brokerage are in fact representing both parties and will be crediting a percentage of the SOC to the buyer. With the approval of the seller the buyer and agent prior to negotiating a purchase sign an agency agreement. This insures both parties (buyer & seller) are proceeding with professional advice.

Previously, as a dual-agent I’ve granted as much as two thirds of the SOC to the buyer, and then reduced the listing side of the commission by 1/3 so that the seller may also enjoy a savings.

Upon closing, the seller saved money and the buyer got a substantial amount of cash towards closing cost’s, Structuring a sale like this works well on a newer model or fully refurbished home where controversy over price and repairs are not an issue.

Dual-agency relationships can certainly be a vehicle towards conflict of interest by the agent if not handled properly, and should be avoided as a general practice. Non-Agency relationships can accomplish the same monetary goals, but offer the buyer no professional advice.

Nevertheless, if both parties desire and agree to either Dual-Agency or Non-Agency representation they will accomplish the goal of covering closing cost when other methods are not available.

Tags: closing, real estate closing, real estate investing, realestate, rehab, rehabber

(This is the second and final part to the article. Check out Part I)

The next afternoon I got a call from the buyers’ agent. She told me that the buyers refused to switch title companies as I had requested (the closing was set to take place four days later). I asked her when she was going to fax me a copy of the written refusal with their signatures as I had requested. She countered by saying, “That is ridiculous. I didn’t need anything in writing.”

I asked her what their reason for refusing was and she said, “They just didn’t want to.” Now for the readers following along at home, the reason I wanted to change title companies was because when the Realtor gave me the contract, she asked which title company I wanted to use.

I had told her I wanted to use Laughlin Law & Title (the owner is a top real estate attorney who is known for working with investors). The Realtor claimed she tried to look it up online but couldn’t get the spelling right. The end result was the Realtor went to Land America, which just happened to be located across the hall from the Keller-Williams office she worked out of.

Time Out – Check Ego’s at the Door

I want to go over something for a minute before continuing with the story. Most (if not all) real estate investors understand that most Realtors do not like investors. On the flip side, most investors don’t care for the majority of Realtors. To put it simply, real estate investors and Realtors view each other in a manner similar to cats and dogs. They just don’t seem to be able to work nice and play together.

I am a rarity because I am one of the few investors who LOVES Realtors. A good Realtor usually ends up playing an important role in every deal I do. In this case however, the buyers’ agent demonstrated that she was not a good Realtor. Actually, my house was only her second deal as a Realtor.

There are good real estate professionals and there are bad real estate professionals. Surround yourself with truly talented real estate pro’s. Life is easier when you are able to focus on how to do your own job without the added burden of making sure someone else is doing theirs.

The reason for explaining all of that is because I had determined that I was a marked target in this deal. The Realtor was not about to let some real estate investor push her around. The broker seemed to harp on me more than usual because I was not licensed. He spoke to me in an overly condescending manner after he was told that I actually teach distressed real estate. He was out to prove himself it seemed. I got a lot of attitude from the title company as well once they found out I was basically accusing them of stealing from me by padding the fee’s. The buyers’ lender was only too happy to help me spend every bit of the $6,000 I was contributing to closing costs.

It was not a fun place for me to be. It was 4 against 1 in my opinion. I felt added pressure overall because there were so many students and peers monitoring the transaction. My Realtor, Mark, was very helpful to me from start to finish but I had a Limited Service Listing with him. In other words, he took my listing at a discount so I didn’t expect him to speak for me as most Realtors do for their clients.

The Pressure Builds

I called Mark and he agreed that I was in a tough spot. At that point, even some of my peers were encouraging me to break the contract due to the mess that it had become.

I remember saying to Mark, “They are doing their best to prove they are idiots.” Mark laughed and I went on to say, “As my grandfather used to say… When you argue with an idiot, there are two idiots arguing.” Lastly I said, “I have an idea for how to handle this so I don’t get raked over the coals quite so bad. It seems that Dorothy (buyers agent) is keeping her finger on the trigger, just waiting for me to say something she doesn’t like so she can threaten to cancel the contract again. For now, I plan to shut up and not be a distraction.” Mark asked what my idea was and I told him, “I will let you know the morning we are supposed to close.”

I was not getting anywhere by challenging that Realtor, her broker and the title company. I decided I would sit back and wait until everyone had something to lose…Money. The closing was scheduled for December 21, 2006. That left just four days until Christmas. The buyers’ agent could buy a lot of Christmas presents with her hefty commission. Keller-Williams certainly wanted a $253,000 deal to close and people at Land America would welcome extra money right before Christmas as well. Having those folks expecting a paycheck, I figured would play out in my favor in the end. I would need leverage on closing day and I wanted the Buyers to provide that leverage. Yes, the Buyers. They were as stressed as I was and they faced having to move four days before Christmas.

An Impossible Task Over the Next 4 Days… I Had To Shut Up!

Closing Day:

I was scheduled to sign at 11:00 am. At 9:00 am, I called the Texas Real Estate Commission. I asked them where I would be able to find a certain form on their website that I was going to need that morning. They told me that there was not a specific form and they thought a basic addendum would be all I would need. But, they wanted to be sure so they went to the higher ranking people at the commission to confirm I could do what I had in mind. They ended up telling me to use the Addendum to the Contract form and be specific with what I wrote on it.

As I said previously, I read that contract, word for word, over and over, hoping I would find my “out.” I had a valid contract but walking away from the deal at that point would have been a horrible move on my part. Given my status in the local real estate scene, I was sure I would end up being sued by someone if I decided to breach the contract.

I Saw the Light!

While reading the contract for the 5th or 6th time, I saw something. I reread that part of the contract a few more times to make sure I understood it correctly. I knew I had found my way out. In the State of Texas, the standard practice in the event of a contract dispute is for the seller and buyer to agree to mediation rather than a law suit.

At 9:30 am, I faxed a formal request to go to Mediation to my Realtor, the buyers Realtor and the title company. I have to admit though, I was nervous at that point. What I had done was put the entire deal on hold. I knew that it could take several weeks to agree on a mediator. I stood to lose thousands of dollars in added holding costs if it went to mediation. Within minutes, my Realtor, Mark, was calling me.

He said, “How in the hell did you come up with mediation on closing day?” I replied, “Mark, I didn’t have any options. Had I requested it a few days ago, there is no way it would have carried the same weight as it will today.” He laughed and said, “Jim, that’s genius! You know that they are going nuts!”
I sure hoped that was the case.

“Move Over! I’m in the Drivers Seat Now!”

I had brought the sale to a complete halt. What I am most proud of was the fact that I was able to stand my ground and fight back without breaking the contract. It was 100% legal. I never heard of anyone requesting mediation before (I am certain it has happened but I never knew anyone that did it) nor have I heard about anyone doing it since.

It has been great being able to tell my students exactly how the mediation “loophole” can protect them in their own deals AND it is LEGAL!

C Y A… Always Cover Your Asset!

At 11:00 that morning, I walked into the title company to close. The Escrow Agent was stunned that I had shown up. I told her, “I was scheduled to close at 11:00 and now it is on record that I appeared as instructed with the intention to close.” She gave me the HUD-1 and I sat down to review it. None of the numbers had been changed so I got up and told her that I had requested mediation and since my dispute involved the figures on the HUD-1, I would not sign it and I left.

An hour later, I got a phone call from a person who identified himself as an attorney with Land America Title. He quickly made it clear that he was not affiliated with the Land America branch that was doing the closing and he asked me what I was demanding with the mediation.

I paused a few seconds and said, “It is my understanding that the mediator is to be a neutral, 3rd party observer.” He said that was correct. I continued by saying, “I have to ask that you have Dorothy (buyers agent) call me right away so we can agree on a mediator.” He then said, “I understand that but I am trying to help work this out as a neutral observer so we don’t have to pursue mediation.” I smiled real big and said, “I am sorry sir but, I am having a hard time understanding how you consider yourself a neutral observer when you are an attorney who is paid by Land America. This is very unprofessional of you and Land America to essentially ignore the addendum I submitted this morning in hopes that I won’t know any better and withdraw my request.” I said I was done talking with him and hung up.

Within minutes, I got a call from Dorothy. She was very polite and asked me what I was seeking thru mediation. I grinned and said, “I want the cost of the title policy to come out of the $6,000 I am paying for the buyers and I want the added fee’s Land America is charging to be credited back to me. I don’t have the HUD-1 in front of me right now so why don’t I just make it simple and tell you that I want a total of $4,000 credited back to me.” Dorothy was quiet for a few seconds and sounded like she was crying as she said, “This is just horrible. All I wanted was for to have a nice Christmas in their new house!”
I was quick to fire back at her and said, “I sure would hate to be in your shoes when you have to go to the buyers and tell them they can’t move into their new house because you screwed up and copped an attitude.” She quietly cried into the phone and said she would call me back.

At 5:00 pm that same day, Dorothy called back again and said she had a proposal for me. She said, “Jim, this can’t go to mediation. That would ruin everyone’s Christmas.”

She went on to tell me that the buyers’ lender had agreed to waive $750 they were charging for an origination fee. The title company had removed over $600 from the HUD-1 and credited the $600 to me. She had given up $750 from her commission (it had been over $7,000 before that) and Keller-Williams had agreed to credit me additional money from their profits as well.

The Shake-Down Worked!

I told her I would be there in 20 minutes to sign and I headed over to Land America.

It should have only taken a few minutes for me to sign and be done but I was greeted by Donald, the arrogant broker. He asked if I was okay with the offer and I told him I was but, I had one request. Since the sale had been in constant question from the start, I had not found another place until the day before and I would need until the next morning to have all of my things out of the house. Actually, the house was empty but I had moved all of my remaining things into the garage. He got pretty annoyed when I told him that and he said we won’t be able to close as long as I have any belongings at the property.

I remember shaking my head (as I lost my temper and any respect I may have had for him) and said to him, “You are just determined to foul this deal up any way you possibly can, aren’t you? SO! MY advice to YOU, is to lose that ego of yours and give me a simple Residential Lease-Back for one day and I will be out in the morning. This way the buyers can get start moving tonight.” In other words, the deal still closes but the buyers actually give me a one-day lease to allow me to finish moving.

Donald seemed a bit surprised at the aggression I displayed and said he would go talk with the buyers. Only now he didn’t see a problem with the one-day lease. He walked out of the room and into the room right next to the one I was in. I was surprised that I could hear everything he was saying to the buyers. He actually went on babbling to the buyers for 4-minutes about how serious the liability could be for them if they allowed the extra day. Pretty much what he was doing was trying to look smart by convincing them that allowing the lease-back could be a huge liability and they should seriously take that into consideration.

My jaw was nearly on the floor in disbelief as the Escrow Agent walked in with the updated Hud-1. I stood up and said to her as I walked towards the door, “When Mr. Trump decides to stop pounding his own chest and comes back in here, tell him I went home.” She didn’t say a word but her body language suggested she was stunned.

30 minutes later, Dorothy called me and was frantic and asked why I left. So, here I was, finally at the end of a 6-month project I had taken on (oddly enough, it was my ego that got me into it after those two students made their smart ass comment) and the past 5 weeks had been so trying with all the attention and added stress I had to deal with that, well…. I was just tired and really didn’t care what Dorothy had to say. I was mentally exhausted.

I let out a sigh and said these exact words using a very calm and quiet voice….

“Dorothy… Shut up.” She didn’t make a sound. I continued by saying, “You have made my life hell the past 5 weeks because you were unwilling to take responsibility for mistakes you made and your half-assed attempt to cover them up has made you a laughingstock. The sad part is, you are being paid a lot of money for being an idiot. I hope will be happy in their new house. I am sure they haven’t enjoyed the grief you have put them through. So please, just shut up! I will be there in the morning to sign and I hope I never have to deal with you again. Have a good night, Dorothy.” I hung up.
The following morning I signed and it closed.

Was the Gamble Worth It?

Was it really worth it for me to go to the extreme of requesting mediation on closing day?

Well in the end, after it was all said and done… Keller-Williams, the Realtor, Land America and the buyers’ lender, managed to give me just under $4,000 that otherwise would have gone to all of them.

I remember feeling as though a massive weight had been taken off of me. I smirked as I walked to the car and thought to myself, “Maybe Dorothy isn’t an idiot at all.”

I laughed as I asked myself, “Who would buy a house, rehab it themselves, move into it, subject themselves to some of the most critical people in the business, only to face 5 weeks of hell while trying to get it sold?” I shook my head as I got in my car and I said out loud… “Only an Idiot!”

Ahh… Real Estate! You gotta love it!

Tags: closing, real estate, real estate investing, texas, title

Last year, I bought a house, rehabbed it and finally sold it. When I got a contract to sell it, the experience I endured was simply gut-wrenching. I got “sand-bagged” just about every way possible until I fought back… And WON! Here is what happened…

This house was the first house deal I had done since 2003.

The reason I had not done any deals since then was because I began my teaching career and started my mentoring program soon after that. During a class I was teaching in May of 2006, two students arrogantly challenged me by saying, “Are you one of those people who tell others how to do it but never have the stones to do it yourself?”

I took it rather calmly but, I was on fire on the inside. I made two phone calls to wholesalers and was informed about the house. I looked at it the next day and made a phone call to the hard money lender that afternoon. I closed three days later. I set out to prove I practice what I preach and figured it would be a great thing to involve students in.

I got a call from a Realtor around 7PM last November and they wanted to show my house that night. I met her and the buyers at the house and they loved it. I offered to pay $5,000 towards closing costs and they agreed to a sales price of $253,000.

The Realtor told me I would have to wait until Monday (this was on a Saturday) to get the contract and earnest money because the buyers currently had a contract on another house to secure their interest rate. She told me they wanted my house and would cancel the other contract Monday morning. She then said that they wanted to close in one week. My response was, “No problem.”

On Monday, she called back and told me they would not be able to offer a contract because the buyer’s lender informed them that they would lose the interest rate if they pursued my house. I told her to call the lender back and inform them that the buyer’s would get funding elsewhere and the lender would buckle under and give them the same rate rather than lose the loan. She refused. I then offered to increase my contribution by $1,000, for $6,000 total. She refused.
I didn’t have a contract. I had nothing.

The following week the same Realtor called back. She asked if I would still accept the same terms. I agreed and she sent the contract over to Mark, my Realtor. From the start, I had been factoring the title policy cost being included in the $6,000 I was going to contribute to the closing costs.

Mark sent the contract over to me and we briefly went over a few points that I should contest, etc. The Realtor had checked the box which said the seller was to pay for the title policy. She had also added in the Provisions section that the seller was to pay $6,000 for closing costs. I saw nothing out of order so I signed it and sent it back to Mark. MISTAKE! That was one of the big mistakes I made. I should have written in specifically that the title policy expense was to be included in the $6,000. Instead, I ended up paying $1,700 for the title policy PLUS $6,000 for closing costs. I went nuts when it was pointed out that title policy costs are not considered part of closing costs. I went on to ask several title companies, escrow agents & real estate attorney’s what they thought. It was split. Half said it should have been included and half said they were separate.

When I went to the buyers agent to get it right (in my opinion), she countered by saying that it was not part of the agreement and she would “cancel the contract” if I pushed the issue. I asked my Realtor (Mark) if she could do that. He told me that she represented the buyer but it appeared that she took that to mean that she had Power of Attorney for the buyers. She refused to bring my concern to the buyers. I wanted to cancel the contract as it was still in the Option period but I had not had any other offers in three months so I backed off and in a way, allowed the Realtor to bully me on the issue. In other words, I would be coming out of pocket $7,700 now.

A few days later, the buyers had the inspection and the appraisal done. The buyers agent handed me a complete copy of the inspection report and said there were several items that needed to be fixed. I called Mark and told him the inspection was complete and she had given me a copy of the report. Mark told me the agent should soon submit a list of repairs the buyers want done and we would go over them together before sending them back to the buyers agent. In other words, the inspection would reveal flaws in the house and the buyers then request which ones they would like me to fix in order for them to proceed to buy the house. In Texas, this is the Option Period.

Once the Option time passes, the contract is set and if the buyers back out after the option expires, then they lose their Earnest Money ($2,000).

The repair list never came. I called Mark and asked if they ever sent it. He confirmed that it had not been sent. Three days later, the Realtor came by to give me the Option check (which she should have given me the day the contract was offered) and asked me “How are the repairs coming along?” I was stunned. It quickly dawned on me that the Realtor actually thought that the inspection report she gave me was also the list of repairs the buyers wanted me to fix. When she did not get the report back from me, she assumed I had agreed to repair everything the report had listed. I said to the Realtor, “What repairs?” She got very annoyed and told me I didn’t respond to the report and I have to make the repairs. I replied, “The option period is over and you didn’t send us the list.” She then raised her voice and said, “The deal is off. I am canceling the deal.” As she got in her car, I said, “Okay but the buyers will lose their earnest money.” She shook her head and said, “Oh, no they won’t.” She drove off.

I quickly called Mark and he was beside himself. Since I am not a real estate agent, I depended on him to tell me what the buyers’ agent could and could not do. He told me that she could not threaten to cancel the contract without consulting with the buyer first. I had a problem now. The buyers Realtor didn’t know the rules and had messed up by not getting the requested list of repairs to me during the option period and to make it worse, was now threatening to cancel the contract if I didn’t agree to make any repairs. People that know me personally all know that I go out of my way to “C Y A” or in other words, “Cover Your Asset.” I went into CYA mode.

Later that night, the Buyers Agent called me but I let it go to Voice Mail. I was rewarded when she left a message and in it she said, “You need to make those repairs because if you don’t, I am going to cancel this whole deal.” I later found out that she left the same message on Marks voice mail. Since I was in CYA mode, I got out my computer and recorded the voice mail message and made it into a .wav file on my hard drive.
That’s when the fun started. Actually, that is when the stress started for me.

I had called TREC (Texas Real Estate Commission) and confirmed that the buyers’ agent did not have the authority to cancel a contract without the buyers’ consent.

I took my laptop to the buyers’ agents’ office and I asked to speak to the Broker. For the novice, the Broker (in this case it was Keller-Williams) is the top dog. They owned the Keller-Williams office and the buyers’ Realtor worked under the Broker.
The person who came in was not the Broker but they confirmed they were the highest ranking manager in that office. I sat with her and said, “I am sorry to come to you like this but I need this house to close on time and I am not confident that it will happen because your Agent is being a Cowboy.” I then played the recording of the voice mail. The office manager’s eyes began to widen and she shook her head. She said under her breathe, “Oh no… she didn’t.” The message ended and she said to me, “Mr. Watkins, I am sorry that this has happened. You have my word that I will get involved in this transaction and see to it that it closes without any further incident.”

I thanked her and left. I wish there had been no other incidents after that but, plenty followed.

The next day the buyers’ agent called me and had lost her attitude. She apologized for the confusion and said she had made a mistake. She then asked me if I was willing to move forward with the sale. I asked if I was going to be required to make the repairs and she said that it was her mistake and informed the buyers that she had messed up and the buyers still wanted to buy the house. I agreed and since I had met the buyers and had liked them the first night they looked at the house, I offered to make several repairs as an act of good faith. I figured the buyers had not made the mistake so I would not penalize them for their Realtor’s mistake. They were all grateful.

The Realtor then said her “Boss” was with her and was I willing to talk to him? I said “Sure” and her boss got on the phone. He identified himself as the Broker (I later found out from another agent in that office that he was a minority owner of that office).
He asked me, “What is your intention at this point?” My reply was, “I want to get this deal done but I was not willing to allow his agent to walk all over me because she didn’t know the rules.”

He then asked if I could come by his office to talk face to face. I said I would be there in 20 minutes.

When I arrived at his office, I saw the buyers’ agent was there as well. The three of us sat down and we made small talk. Let me stop for a second and talk about one of the biggest problems that exist in real estate (in my opinion)… EGO’S! That’s right… EGO’S! That Broker (I’ll call him Donald) was the most egotistical person I had met in real estate. He snapped his fingers all around, flailed his arms as he spoke, gave me details of his record of success he had enjoyed while he lived in Maryland and he kept going and going. I concluded that he loved hearing himself talk. Looking back on it, I think if he had not gotten involved in the deal, it would have closed without incident.

He asked me what my concerns were. I was blunt and told him I was not happy with how the Realtor was trying to bully me and I was not happy with having to spend an additional $1,700 for the title policy. Further, I had reviewed the HUD-1 and was disgusted at how the title company had padded their fees. He was surprised and asked me to show him what I meant.

I put the HUD-1 from when I bought the house in June down and then put the preliminary HUD-1 from the current sale next to it and told him to look for himself. To let the readers know what I was showing him… I had closed six months earlier with LandAmerica Title. It was being closed by LandAmerica as well but it was not the same branch.

The fees were very different when compared side by side. In fact, they were well over $1,000 higher and I wanted to know why. Donald, stood up and said, “That was in June. We are in a different County now and it has been six months. I can assure you that they are not padding the numbers.”

I asked, “Do you work for Land America Title? How can you tell me this as a fact?” He went on to tell me more of his great resume and never answered the questions. I looked at the buyers’ agent and told her I wanted to change title companies and she said, “The buyers won’t agree to that.”
I got mad and said, “Listen Dorothy, you represent the buyers, you do not have Power of Attorney for them. You HAVE to bring them my request.” She shook her head and the Broker told her I was right but said, “I am going to recommend to them that we stay with the same title company.”
I wanted to switch title companies so I could have someone in my corner who wouldn’t pad numbers.

That is when the Broker and I butted heads. The Broker then said to me, “Look Jim, it’s only a few hundred dollars. In the big picture, it’s really not a big deal. My advise to you is to let it go and let’s get this thing closed so we can all move on.” I sat up and fired back… “Donald, do you have a hundred dollars on you now?” He nodded his head, yes. I continued, “I want you to take it out of your pocket, place it on the table in front of you and go get a cup of coffee. When you come back, it will be gone! And guess what? You will be pissed!” He looked at me with a blank look.

I went on to say, “It is legalized theft. Period! You can’t give me an answer to why the figures are higher and you are defending the title company. It is legalized theft and it’s not right!”

He just shook his head. I then said, “Wait a minute… You are the Broker who is representing the buyers, correct?” He said he was. I said, “Surely as the Broker who represents the buyers, you are NOT GIVING ME, THE SELLER, advice… Are you?” His eyes widened, his mouth opened but nothing came out. I stood up, gathered my things and walked towards the door. I stopped at the door and turned around. I said, “Both of you have made mistakes that should not have been made. The effects of those mistakes will hurt both me and the buyers in the end. I have signed the contract and I will honor my end, even though I made a mistake on the closing costs. I expect both of you to honor your end and I expect this deal to close as planned. The only issue at hand now is where it will close. I will expect to hear back by tomorrow, what the buyers said about changing title companies. Oh, and Dorothy, I want the buyers answer to be in writing with their signatures. I want verification that you asked them as you were directed.” I turned and walked out.

I am bringing Part 1 to a close at this point but I wanted to make sure people understand what I was facing at this point.

I was being watched by a lot of students and there were several local “guru’s” watching over this transaction as well. I felt I was being bullied and I had wanted to withdraw the contract and place the house back on the market. I didn’t think the buyers would pursue the matter and sue me (as that would have been their right). However, if I had done that, I would have breached the contract. As an instructor in real estate, I knew that breaking the agreement would not have been an ethical thing to do. In other words, I had made mistakes thus far but I was not going to breach the contract and set what I felt would have been the worst example of my career, to my students and peers. I decided to move forward and I would take responsibility for the mistakes I had made and I was going to honor the contract.

Remember CYA? I read the contract over and over and over at that point. I was going to find a way for me to recoup some of the money that I was going to lose and I was going to do it legally.

The answer was in the contract.

Please look for Part II of this article as I will explain exactly how I stood up for myself against the Realtor, Broker, Title Company and the Buyers’ Lender…. And WON!

Tags: closing, real estate closing, real estate investing, realestate, rehab, rehabber

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.”

Tags: closing, escrow, hard money, law, loan, real estate, real estate lawyer