Realtor screwed up my check

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Realtor screwed up my check

Domonique Hudson
Real Estate Lender · Los Angeles, CA · Member since 2014 · 20 posts · 3 votes

Hi Guys/Gals,

I have a wholesale deal in place on a bank reo. I got the property under contract at $54,500 and I'm going to wholesale it to my end buyer for 59k all cash using a simultaneous close. My escrow company has no problem doing the simultaneous close and neither does the banks escrow company as long as I pay the owners title policy. Slam dunk right? NOPE. Read below  the email the listing agent sent me as to why I can't do the simultaneous close.

Email: *The issue is not seasoning. The issue is that the original agreement was as-is, cash, non-contingent sale. You provided a proof of funds from one source, and now you want to change the source of your funds to have them come from the proceeds of another sale. In essence, you are making the sale contingent on the close of the other sale. The original agreement also says closing for the seller, at least, will take place at their designated closing company. You are now trying to change that part of the agreement also and have them close with another company they did not choose.*

So that's the email she sent me. She obviously has no idea what a simultaneous close is and that the deal is still going to be all cash, as- is, no contingency. But I'm tired of going back and forward with her about this deal. My agent is so passive that I have to defend myself with the listing agent ..Smh..So Now to close this deal I have to do a double close which is about to eat away at the profits. Talk about a bummer..Anyway, I'll just be happy to close this deal and I've sworn to never buy from that listing agent or her company ever again....

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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@Account Closed The bank purchase addendums specifically tell you that you can Not assign the purchase contract (without their permission, which they won't grant), period.  Doesn't matter what irrelevant language you put in your purchase contract.  Also, the banks don't accept "options to purchase", they execute purchase contracts along with their addendum which supersedes all locally used contracts, so that's an irrelevant idea.

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  • Jeremy Tillotson
    Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
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    @Domonique Hudson I didnt think anyone was doing simultaneous close, and I will let others weigh in, but I have been advised of them being illegal. If there isnt enough money to double close maybe it wasnt that great of a deal. You could also use transactional funding to fund the cash side of your purchase.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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    Well, you Are changing the game. You are trying to use a different title co., it seems like in order to do a "dry closing".  If you are trying to use the end buyers money to close your purchase, that's the problem. That also IS changing the source of funds. This isn't just coming from the listing agent, but marching orders from the bank/agency that owns the property.  You may not see the difference, but welcome to the reality.  My guess is the listing agent knew what a "double close" was, and the problems with them, before you ever heard of them.

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  • Ned CareyPro Member
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    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
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    @Domonique Hudson I would have a talk with the agent and see why this is an issue. Her assertion that a second buyer makes it contingent is ridiculous. "Contingent" would mean you get your deposit bank if it doesn't settle. Obviously you won't get your deposit back if it doesn't settle, so his assertion is simply moronic. I would point that out to her in a nice way.

    The changing of title companies could be a bigger issue if it is in the contract. However I believe there is a law allowing the buyer to choose the title company, However this may be a state law or a law that may not apply to cash transactions. I would look into this. 

    If she tries to stop the deal based on the first point that conceivably would be "interference with contract" You could sue her and her broker. If you find she is doing it because she got a higher offer tell her she could lose her license over that. I would not let an agent push me around.

    I also wouldn't hesitate to spend a couple of hundred bucks and file a specific performance lawsuit. Or at least threaten to do so. 

    Lastly I would tell the title companies to go full speed ahead but not tell the agent. Just send her the check when it is done. Meanwhile I would be stalling and distracting her.

    The above is not to be considered legal advice but simply my understanding of the law and how I might handle a similar situation.

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
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    Here is the issue. It is an REO sale and in almost all REO sales the seller will pay for sellers title policy and customary closing costs if you you use their title company. If you want to use your own title company you have to pay all the closing costs.

    @Ned Carey it is true the seller can't make you use their own title company, but they don't have to pay for title costs if you use your own and you must specify you want to use your own when you put a contract on the house, because the bank REO addendum says the buyer agrees to use seller's title company unless otherwise noted.

    The problem stems from the buyer changing closing companies after he had agreed to use the sellers. If they buyer had stated he wanted to use his own title company and pay all closing costs associated with it from the get go, the seller would not know there was a simultaneous close. 

    If he decides to start throwing out lawsuits the bank is going to get pissed and cancel the deal immediately. They will then blacklist him and never sell an REO to him again an the listing agent will likely never sell a property to him either, which would probably costs him money in the future. The bank addendum's clearly state the seller can cancel the contract at anytime for any reason. The addendum protects the seller and are made to protect against these lawsuits.

    The seller will not sign off on the HUD if their title company was supposed to do closing and now they are not.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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    Here's where an idea from @Bill Gulley might come in handy.  Bill G please correct what I am about to write if I don't quite get it correct. 

    The end buyer puts up the money. The middleman gives the end buyer a promissory note (and the middleman gives the end buyer a mortgage so end buyer has a lien), and closes. Then the second closing happens, and the mortgage gets satisfied and lien goes away. 

    See this post for reference:

    http://www.biggerpockets.com/forums/12/topics/7283...

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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    @Account Closed - have you ever tried using an option to purchase REO property that a bank has listed on the MLS? My guess is you have not ...

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  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
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    In reality you are supposed to have transactional funding available for double closes.  Many closing attorneys are not doing the, " lets use the end buyers funds to let the middle man close with the seller ", anymore.  

    You are only sacrificing a few hundred bucks, shouldnt be a huge deal.

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  • Joel OwensBusiness Member
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    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
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    I guess when you get to a point when you can buy a ton of properties all cash and then resell them yourself then you do not need all of these techniques right??

    It seems a lot of these techniques are for wholesalers that do not have the cash to take down the properties themselves.

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
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    What Ned said.  As I see it, the lesson to be learned here is to make sure that in future your original contract allows you "OR CONSIGNEE" to be the buyer upon closing ie. a standard assignment clause.  Did the Seller even know that you intended to be a middleman only? Cheers...

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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    @Account Closed The bank purchase addendums specifically tell you that you can Not assign the purchase contract (without their permission, which they won't grant), period.  Doesn't matter what irrelevant language you put in your purchase contract.  Also, the banks don't accept "options to purchase", they execute purchase contracts along with their addendum which supersedes all locally used contracts, so that's an irrelevant idea.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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    @Wayne Brooks - Thanks for explicitly stating what I was about to tell @Marvin S. There are some things that work with unsophisticated sellers, but banks are a bit more sophisticated. Sure, there will be an occasional bank that does not include that language in the addendum, but that is such a minority of banks that the suggestions from Marvin do not apply with REO listings. The banks will allow use of HML as Marvin explained above, so that is still OK to do.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
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    Here is another more recent link from @Bill Gulley describing how to do the simultaneous close his way:

    http://www.biggerpockets.com/forums/12/topics/1711...

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  • Ned CareyPro Member
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    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
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    Originally posted by @Mark Ferguson:

    @Ned Carey it is true the seller can't make you use their own title company, but they don't have to pay for title costs if you use your own and you must specify you want to use your own when you put a contract on the house, because the bank REO addendum says the buyer agrees to use seller's title company unless otherwise noted.

     Mark,

    My understanding is it is a law that the buyer gets to chose the title company. (Unfortunately I have never seen the law nor do I know of it's specifics. I would truly appreciate a reference) If it is the law, than the addendum Shouldn't  matter. You cannot enforce a contract for something illegal. Furthermore I would presume this is not a material breach of the contract.

    Is this worth fighting/ Probably not.  But it really frustrates me that banks get away with this stuff because they are able to throw their weight around.

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
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    Thanks for that update Wayne; I hadn't latched on to the key word on your opening post:- 'reo'!  Then it took a few minutes to remind myself (or learn for the first time) what on earth reo even means? ('Real Estate Owned' basically means the property in question is owned by a Lender - usually a Bank - and therefore it's: yes sir, no sir, three bags full, sir! regarding their buying rules).  So it seems that it should have come as no surprise Wayne that you couldn't 'get away' with a simultaneous close?  Cheers...

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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    @Ned Carey Odd that there be a law about that, but perhaps.  Don't think it's relevant though, since in the contract addendum usually there Is the choice for the buyer......"use our title company and we pay title insurance, use your own and you pay", the choice is given.  With the hassles usually associated with the bank's title co., and to avoid "exceptions" in the title policy for things like unrecorded utility liens, unrecorded code violations, etc., I always recommend paying for your own title co.  Most buyers don't listen, then complain later.

    1Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
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    Originally posted by @Ned Carey:
    Originally posted by @Mark Ferguson:

    @Ned Carey it is true the seller can't make you use their own title company, but they don't have to pay for title costs if you use your own and you must specify you want to use your own when you put a contract on the house, because the bank REO addendum says the buyer agrees to use seller's title company unless otherwise noted.

     Mark,

    My understanding is it is a law that the buyer gets to chose the title company. (Unfortunately I have never seen the law nor do I know of it's specifics. I would truly appreciate a reference) If it is the law, than the addendum Shouldn't  matter. You cannot enforce a contract for something illegal. Furthermore I would presume this is not a material breach of the contract.

    Is this worth fighting/ Probably not.  But it really frustrates me that banks get away with this stuff because they are able to throw their weight around.

     The buyer has the right to choose their own title company. But they don't have the rIght to agree to use the sellers title company in the contract, essentially choosing the Title company the seller wants to use and then switch right before closing.  Which is a breach of contract. There is no law that says the seller has to pay for the title company fees either. If the buyer wants to use their own title company they have to stipulate that from the get go.  

    1Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Wayne Brooks:

    @Account Closed The bank purchase addendums specifically tell you that you can Not assign the purchase contract (without their permission, which they won't grant), period.  Doesn't matter what irrelevant language you put in your purchase contract.  Also, the banks don't accept "options to purchase", they execute purchase contracts along with their addendum which supersedes all locally used contracts, so that's an irrelevant idea.

     Exactly. 

    0Reply
  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    11y

    All real estate laws are local.

    In CA, closing costs are negotiated between sellers and buyer. Local traditions dominate. 

    Tradition is that seller pays title in NorCal and seller and buyer split in SoCal.

    In Northern CA, closings are performed by the escrow division of title insurers. In So Cal, independent 3rd party escrow companies (under Department of Corp. Rules) and broker escrows are common. I'm not keen on the service levels of title escrows and my early experiences with broker escrows taught me valuable lessons that, while they may be neutral, they're more 'neutral' in favor of the broker. 

    Hence, I prefer 3rd party DOC escrow. When I'm the seller, I pick both escrow and title. If I must give up one, I'll let buyer use their title but ALWAYS my escrow. 

    It sounds like most all posting on this thread are sympathetic of the OP's position. I'm big on looking at the lesson. 

    "Wholesaler" is trying to carve out a profit from an REO listing without really acquiring the asset. Absent having an ability to close in their name and resell, "wholesaler" (really just an intermediary here) needs to engineer a better plan from the start. The Option to Purchase techniques works if secured. Bill G's method works.

    I'm in favor of spending the money and learn how to do this right from the start. There are at least five ways to do this that come to mind, probably more. 

    While I'm in the 'just write a check and close the deal' camp, if I wanted to tie up a deal in order to carve out a piece of it, I might ask what my buddy Mike Cantu (wholesaler extraordinare) would do vs. Pete Fortunato. 

    I orefer simple.

    1Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    11y
    Originally posted by @Brent Coombs:

    Thanks for that update Wayne; I hadn't latched on to the key word on your opening post:- 'reo'!  Then it took a few minutes to remind myself (or learn for the first time) what on earth reo even means? ('Real Estate Owned' basically means the property in question is owned by a Lender - usually a Bank - and therefore it's: yes sir, no sir, three bags full, sir! regarding their buying rules).  So it seems that it should have come as no surprise Wayne that you couldn't 'get away' with a simultaneous close?  Cheers...

    Oops! After my thanks to Wayne, the rest of my comments were meant to be addressed to the OP, Domonique! So to reiterate:- So it seems that it should have come as no surprise Domonique that you couldn't 'get away' with a simultaneous close? Cheers...

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
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    @Steve Babiak 

    sorry I'm late to the party.

    Didn't go to that link but I believe that is using a note from the seller at 100% then paying the note off with an end buyers funds in the last transaction, here, a bank is the seller it seems and they won't be doing that.

    A cash offer does not hold any buyer to a specific source of funds, they can borrow against their bond portfolio instead of selling the bonds or borrow it from granny, the issue with a cash offer is that there is no financing contingency, show up with good funds or lose your money.

    The title issue seems to have been ironed out, the bank has already paid for title work that is updated for settlement, that cost goes to costs of obtaining the collateral and it's already paid for. A buyer has the right to obtain their title policy anywhere they want to, doing so means they will have another search done if they don't accept the bank's title company.

    I've not seen the option in a purchase contract with a bank allowing an agent to buy, was that it? The comment is as the broker/owner isn't clear to me.

    Sounds like the agent wants the deal to die to sell at a higher price. The claim of use of funds is bogus IMO, the place of closing is not an issue, just close there.

    You could (or can you still?) use the HML funds as transactional funding, close as agreed, then go to your other closing. Seems that if you stay to the letter of the contract as seen by that agent, they can't kick about it, that's the easy way. Otherwise, while you may be right, the deal won't close, you'll need an attorney and you'll just have a mess of a fight. Then, you also have that Realtor's number too, now you know. :)

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
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    I'm having trouble understanding where the agent is coming from.  Indeed you are changing the game from your original offer.  You DO have a contingency, as your end buyer's funds must show up in escrow before your closing can happen. My escrow company requires that such a contingency be disclosed to both the buyer and seller.  And they call it a contingency because it is.

    Regardless, what's the agent's problem? She's getting paid, right? Does she have a better offer and want to cancel your PA?  Or is she mad you're making more on this sale than she is?

    @Wayne Brooks Assuming everything thing else looked good, would you have a problem with this sale? 

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Ned Carey:

    Lastly I would tell the title companies to go full speed ahead but not tell the agent. Just send her the check when it is done. Meanwhile I would be stalling and distracting her.

    Not gonna lie.....this is exactly what I would do if the funding and the title companies were ready.  I would ignore the agent if the necessary docs were already signed and I thought I could get it closed. 

    1Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
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    @Joel Owens  Bingo

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  • Broderick Campbell
    Houston, TX · Member since 2015 · 57 posts · 8 votes
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    I thought the whole point of wholesaling is making a deal without the hassle of dealing with a listing agent. I'm guessing this is why I've heard that getting a "deal" that's already on the MLS isn't the smartest way to finding a suitable deal regarding wholesale. Am I missing something guys?

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  • Richard Allen
    Specialist · Orlando, FL · Member since 2015 · 117 posts · 89 votes
    11y
    Try adding these words to your next contract in the notes section "buyer may take title to property and land trust". If you take title to the property in a land trust, you can assign the beneficial interest and avoid the double closing fee.
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