Seller did not pay prepaid rents or deposits
I recently purchased a cashflowing 4 plex. Since I am using my VA loan, and since the seller is covering closing costs, as is common in the area, I end up without any cash out of pocket, and also receiving deposits and prepaid rents from the seller (since the seller self-managed and did not use a property manager.)
However, when I arrived at the closing it was just me, my realtor, and the title agent. My realtor told me this was common, and what would happen is a notary would have the seller sign the paperwork remotely, and collect the checks for prepaid rents and deposits. He even went out of his way to include language in the paperwork stated explicitly that the seller was to provide prorated rents and deposits at closing.
A week later I received an amount from the agent for the closing. Enclosed were two personal checks, one with "deposits" in the memo, for an amount roughly half of the contractual deposits, and another with no memo, for $100.
Since closing was on the 9th, deposits were $400 per unit, total rents for the month were $2200, I should have received $1600 in deposits, and $1561.29 in prorated rents.
What are my moves? I have an address for the seller, however it is out of state. I have followed up with the selling realtor three times, and plan to file in court, however I'm not sure if I should file at the location of the property or the location of the address on the seller's personal checks. So far I am out $2300 more or less and I'm not sure of the right moves.
Always assume you are never going to see the seller after closing, so get everything you need before you sign the papers.
Thanks! Okay, so, @Percy N., if you were me, you would not have signed until you had the checks in hand?
It depends on how badly you want the place. You signed the documents without the money in hand, so you must have wanted it badly enough to risk not getting your money. Why does the seller send the money to you and not send it via the title company? Aren't they paid to make sure this sort of thing doesn't happen? I've been to closings that didn't happen because the seller failed to bring the $ to the closing that they had agreed to bring. I suppose I could have said "that's OK, let's close anyway", which is essentially what you did. But ordinarily, the title company says we can't close because both parties have not met the terms of the agreement.
That said, you are out of pocket ~$3000. And the seller probably figures it isn't going to be worth your while to chase him. Have you talked to the title company about recourse? What does your agent say? You file in the jurisdiction where the transaction occurred, not where the seller may or may not be living.
Daniel, thanks for the comments. I have only spoken to my Agent, I haven't talked to the title company, I'll give them a call in the morning.
Have a lawyer send everyone a stern letter of demand. You'd be surprised how scared people get.
Joel Harris , I would have asked the title company to add this on the HUD1 or hold it in escrow.
The suggestion to have an attorney send a letter is a good one. You should also have your title company call them.