Does last-minute addendum to closing paperwork have any force?

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Does last-minute addendum to closing paperwork have any force?

Gary Fritz
Member since 2022 · 9 posts · 2 votes

My son just (yesterday) bought his first house. It turned out I had to co-sign with him. I was honest and told the loan underwriters that I was picking up a new Tesla this week. They said I couldn't get a new loan, as it would push us over the level of qualifying. Fine, I said, I'll write a damn check! They weren't even satisfied with that. They said they would cancel the loan if I bought the car before closing. Finally we got the message that buying the car with cash AFTER the loan funded was OK, as their requirements wouldn't have any force after that.

Then yesterday, at the closing table, I discovered they had slipped an extra letter into the closing documents: "To whom it may concern, I do not have any plans purchasing (sic) a Tesla. I have decided not to move forward with this. Please let me know if you have any questions. Thank you, (signed) Gary Fritz."

I said "I can't sign this, it's not true." They said if you don't sign, you don't close. The deal blows up, my son loses his house and his earnest money, the sellers lose their new house, probably other penalties. I also couldn't delay the closing (again) without breaking the deal. With a gun to my head, I had no choice but to sign.

I'm supposed to pick up my new car on Monday. If I do, I think I risk bank-fraud charges. So after anticipating it for years, I'm going to lose the car I ordered NINE MONTHS ago. If I order another one, it will cost me $9000 more at current prices. But given that overly-broad and vague letter, I'm not sure I can EVER buy a Tesla without them claiming fraud.

It's especially stupid because the car wouldn't put the loan at risk.  My son can handle his mortgage, but if he can't, I have more than enough cash/stock in my accounts to buy my Tesla AND buy his house outright! Plus over $1M in real estate equity that provides $3500/mo rental income (which pays my $3200/mo mortgage), plus a decent-but-declining income that will be supplemented by $2500/mo Social Security in a few months. I think their demand is unreasonable.

So: Does that letter have any validity? Is it enforceable, even signed under duress? Does it apply after loan funding? Am I gonna lose my car? :-(

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @JD Martin:

Buy the car with cash. In that case, who is going to even know that you bought the car? Since you have enough liquid assets to buy the car and the house, I would just pay for the car in cash. 

It would not be bank fraud. You can just as easily say "That's how I felt the day I signed the letter, then a few days later I decided to buy the car with cash" if somehow they were checking vehicle registrations later. Who would be able to say any different? 

You'd only likely encounter any issue if you a) have a Tesla car loan on your credit report or b) your son doesn't pay for the house, and you don't pay for the house and they have to file for repossession. If you buy the car for cash, it won't be on your credit report, and if you make sure your son (or you) keeps your payments current no one is going to file for repossession. 


jsut dont title the tesla in your name put it in a LLC or another kids name or your wife.. my wife owns hers and my company owns mine. I dont own either and my wife lets me know it.

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    The letter is valid. Your loan officer needs to be taken out back.

    A loan closing today will not get sold to whomever in a few days and the secondary market person, the quality control persons and two others will check. They have the inquiries on the credit and they know where you bought the car.

    Your cosigning boosted up son who was not strong enough to buy on his own. Your credit, income, liquid assets (checking accounts) and stability were used to offset something he lacks. Taking $60000 out of your liquid assets is a big change. A car has no asset value in mortgage loans. Equity in other real estate doesn't help as is not verified or secured. Future social security income also not used to qualify.

    Loan officer understood this problem and put you up against the walls, as in a military tactic.

    Say nothing, delete this post, stall on delivery to Tuesday (you have a cough and are getting a covid test).  

    2Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Gary Fritz
    The best thing to do in this situation would be to consult an attorney and have them review this letter you talked about and verify if it's enforceable vs just wondering. 

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    I already talked to a lawyer who supposedly specializes in real estate -- she's doing some other work for us.  She squirmed out of it, saying "I'm not much help on this type of financing issue, don't know anyone who could take it on such short notice."  I even signed up for one of those ask-a-lawyer websites, which is supposed to match you up with someone who specializes in your issue.  He didn't answer my question but answered something else.  It wouldn't work to randomly pick somebody out of the Yellow Pages.  

    It's tough when I signed the closing Thursday afternoon and I'll lose the car on Monday. (Tesla has to deliver the car to SOMEbody by end-of-quarter, next Thursday, and they need time to find another buyer.) Not much time to work.

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    Can't figure out how to quote part of a post without hosing the format...

    @Caroline Gerardo, I definitely agree with the second part of your first line (take the loan officer out back).

    My son qualified for a smaller house, but that range is hyper-competitive and he'd been making offers for months. So I co-signed so he could get into a slightly higher but far-less-crowded price range, and it worked very well. But then the underwriters bent me over.

    I think it's ludicrous that they put that restriction on me, especially in such a coercive manner. In the unlikely event my son can't honor his commitment, I can. I have enough liquid assets to write a check for the car AND another to buy my son's house outright, AND I'd still have a 7-figure net worth and a reliable income!! The car does not endanger the loan in any way. The restriction is entirely unnecessary.

    I can't stall the car purchase. We already stalled it 10 days for the (twice-delayed by underwriters) closing. They have to deliver it to SOMEbody by end-of-quarter (next week), so they won't give me any more time past Monday.

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    Feel free to call me there is always a fix

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    Thank you!!  That's very kind of you.

    I found your number in your profile.  I don't want to presume -- is it OK if I call you tonight?  Or tomorrow?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Gary Fritz:

    Can't figure out how to quote part of a post without hosing the format...

    @Caroline Gerardo, I definitely agree with the second part of your first line (take the loan officer out back).

    My son qualified for a smaller house, but that range is hyper-competitive and he'd been making offers for months. So I co-signed so he could get into a slightly higher but far-less-crowded price range, and it worked very well. But then the underwriters bent me over.

    I think it's ludicrous that they put that restriction on me, especially in such a coercive manner. In the unlikely event my son can't honor his commitment, I can. I have enough liquid assets to write a check for the car AND another to buy my son's house outright, AND I'd still have a 7-figure net worth and a reliable income!! The car does not endanger the loan in any way. The restriction is entirely unnecessary.

    I can't stall the car purchase. We already stalled it 10 days for the (twice-delayed by underwriters) closing. They have to deliver it to SOMEbody by end-of-quarter (next week), so they won't give me any more time past Monday.

     cancel the loan buy the house with cash and the car..  then sell the house to your son on contract or wait 6 months and do a cash out refi I suspect Caroline can help you with something like that..  PS welcome to the Tesla ownership I have owned 4 of them and currently have and X and my wife has a Y  we are looking pretty smart here on the west coast with 5 to 7 dollar gas.. In Oregon electric goes to 4cents at 10pm so to put 50 killowatts in ( 200 miles of range.  cost 2 dollars  LOL.  so at this point saves about 300 or more  a month on gas alone not to mention no maintenance etc. 

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    That's... a very interesting idea!  Sure wish I'd thought of it before we went through all the braindamage with the lenders, paying the loan & points costs, etc.  But they dropped the damn letter on me at the last second, during the closing -- didn't NEED to self-finance before that.

    I'll go read through the 91-page closing docs and verify my rescission rights.  I'm not sure I could pull it off in time, since it's already more than 24 hours past the closing.  

    What does that do to the already-closed sale?  I'm not sure what happens when you cancel a loan.

    It may not be fair to drag my son through this...

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Long time reader here but this would be my first post / reply. Fits perfectly as i went through this nearly identical scenario. Pretty funny. That was 2012. At that time, the Tesla has been on order for 3 or 4 years. I was in the process of purchasing a property. The car was scheduled to be delivered after all the financing, etc but before closing. Same message from the lender - don’t make major purchases. I am buying a Tesla. Don’t. Why? We may need to redo some paperwork. OK, do what you need to.


    I bought the Tesla. It was going to be all cash to begin with anyways plus financing for Tesla’s was nearly nonexistent back then. Lucky for me, nobody slipped me any last minute papers at closing (sounds like a shady lender or some other party involved in your transaction) and nobody really cared before or after closing regardless. The purchase had no impact to my credit, the debt to income or any other ratios, my ability to close on the real estate purchase, or own it and service the debt after closing.

    The question is - what is that letter that you signed?

    Just a random “to whom it may concern I wanted a Tesla yesterday but i changed my mind today and may instead buy a Ferrari or maybe I’ll change my mind again tomorrow and go for a Toyota Prius? No, a scooter sounds better if i think about it for two more days. Or maybe a jet so i can bypass TSA when I travel. We’ll see next week. I may get run over by a bus in the meantime”.

    Or if it is not the above, was the warranty deed changed to say your ownership of the property is subject to you never owning a Tesla? Or was the deed of trust changed to say buying a Tesla puts you in default? Not sure how a random to-whom-it-may-concern letter changes the legal side of things.


    I would definitely reconsider who I am doing business with for the next transaction 

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    Hah!  That's funny you had the exact same situation, even with a Tesla.  But yours worked out a lot better.

    The letter was just an added-in one-pager, exactly word-for-word what I posted in the OP:  "To whom it may concern, I do not have any plans purchasing (sic) a Tesla. I have decided not to move forward with this. Please let me know if you have any questions. Thank you, (signed) Gary Fritz."  Oh and "06/22/2022" at the top.  Period.  Not even any letterhead.

    Yes I agree the last-minute shenanigans was unethical, what what ya gonna do?  They had a gun to my head.

    Oh I will NEVER do business with these ***holes again.  Trying to figure out how I can lodge a really effective complaint / black mark.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y

    Buy the car with cash. In that case, who is going to even know that you bought the car? Since you have enough liquid assets to buy the car and the house, I would just pay for the car in cash. 

    It would not be bank fraud. You can just as easily say "That's how I felt the day I signed the letter, then a few days later I decided to buy the car with cash" if somehow they were checking vehicle registrations later. Who would be able to say any different? 

    You'd only likely encounter any issue if you a) have a Tesla car loan on your credit report or b) your son doesn't pay for the house, and you don't pay for the house and they have to file for repossession. If you buy the car for cash, it won't be on your credit report, and if you make sure your son (or you) keeps your payments current no one is going to file for repossession. 

    PS: Forget about the complaint/black mark. What you want to do is get your car and fade into darkness. If you do anything in real estate long enough you're going to run into sleazy people. I once had a seller claim straight to my face at the closing table that he had the appliances, which were supposed to come with the house, taken to the dump because "they didn't work and I thought you'd rather have them gone", when I knew for a fact the refrigerator at a minimum worked. The guy sold them for a couple hundred bucks sometime right before closing, no doubt. I could have walked - they were part of the closing papers - but I liked the deal and just said "OK, thanks" to the liar and signed anyway. Since I've made well over $100k on that house, the last laugh is on him. There's no revenge better than living well :)

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Gary Fritz:

    That's... a very interesting idea!  Sure wish I'd thought of it before we went through all the braindamage with the lenders, paying the loan & points costs, etc.  But they dropped the damn letter on me at the last second, during the closing -- didn't NEED to self-finance before that.

    I'll go read through the 91-page closing docs and verify my rescission rights.  I'm not sure I could pull it off in time, since it's already more than 24 hours past the closing.  

    What does that do to the already-closed sale?  I'm not sure what happens when you cancel a loan.

    It may not be fair to drag my son through this...


     did not realize the loan closed.. but there is some sort of recission these days but i think that is prior to recording / IE full settlement again Caroline is the expert in this arena. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @JD Martin:

    Buy the car with cash. In that case, who is going to even know that you bought the car? Since you have enough liquid assets to buy the car and the house, I would just pay for the car in cash. 

    It would not be bank fraud. You can just as easily say "That's how I felt the day I signed the letter, then a few days later I decided to buy the car with cash" if somehow they were checking vehicle registrations later. Who would be able to say any different? 

    You'd only likely encounter any issue if you a) have a Tesla car loan on your credit report or b) your son doesn't pay for the house, and you don't pay for the house and they have to file for repossession. If you buy the car for cash, it won't be on your credit report, and if you make sure your son (or you) keeps your payments current no one is going to file for repossession. 


    jsut dont title the tesla in your name put it in a LLC or another kids name or your wife.. my wife owns hers and my company owns mine. I dont own either and my wife lets me know it.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    Quote from @Jay Hinrichs:
    Quote from @JD Martin:

    Buy the car with cash. In that case, who is going to even know that you bought the car? Since you have enough liquid assets to buy the car and the house, I would just pay for the car in cash. 

    It would not be bank fraud. You can just as easily say "That's how I felt the day I signed the letter, then a few days later I decided to buy the car with cash" if somehow they were checking vehicle registrations later. Who would be able to say any different? 

    You'd only likely encounter any issue if you a) have a Tesla car loan on your credit report or b) your son doesn't pay for the house, and you don't pay for the house and they have to file for repossession. If you buy the car for cash, it won't be on your credit report, and if you make sure your son (or you) keeps your payments current no one is going to file for repossession. 


    jsut dont title the tesla in your name put it in a LLC or another kids name or your wife.. my wife owns hers and my company owns mine. I dont own either and my wife lets me know it.


     There you go. Problem solved :)

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    would that be double bank fraud? None of us have the full picture or know all the details but Gary is clearly concerned. And the fix is - it is ok, just hide it better and make sure whatever it is you are going to do next is not done in your name?

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    Quote from @Sergey A. Petrov:

    would that be double bank fraud? None of us have the full picture or know all the details but Gary is clearly concerned. And the fix is - it is ok, just hide it better and make sure whatever it is you are going to do next is not done in your name?


     The only answer to that is in a court of law. Anyone can sign or declare anything. It's what happens in court that makes it legal or unenforceable. Only the OP can decide how much he wants to buy the car. He's been given several options for purchasing the car that may be exploiting loopholes or circumventing the spirit of the letter he signed but are unlikely to rise to the level of bank fraud. 

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    Well, that's VERY interesting.

    I just got a call that reassured me that this isn't a problem.  Won't go into details, but I trust the source.

    And I had been thinking about titling it under my LLC anyway. :-)

    Thanks y'all for your help!

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Good to hear! It sounds like the worst case could’ve been the lender finding you in default and calling your loan at which point you either appeal / do something or just pay it off and refi later. Still an unlikely scenario in my mind since a random one sentence letter describing how one might have felt at any given moment doesn’t change the terms of the loan or the ownership of the property. If they need to redo some paperwork to account for the Tesla, let them. That’s what I told mine at the time - I am doing what I am doing, you do what you need to do on your end although I don’t understand how that cash purchase makes any significant difference in any way, shape, or form.

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    Part of the problem was that our loan application was complicated for a variety of reasons, and they omitted some of my assets to prevent it from dragging out forever.  That brought us much closer to the edge, apparently close enough that the car purchase made the underwriters twitchy.  Unfortunate, maybe not the right decision, but hopefully water under the bridge.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @JD Martin:
    Quote from @Sergey A. Petrov:

    would that be double bank fraud? None of us have the full picture or know all the details but Gary is clearly concerned. And the fix is - it is ok, just hide it better and make sure whatever it is you are going to do next is not done in your name?


     The only answer to that is in a court of law. Anyone can sign or declare anything. It's what happens in court that makes it legal or unenforceable. Only the OP can decide how much he wants to buy the car. He's been given several options for purchasing the car that may be exploiting loopholes or circumventing the spirit of the letter he signed but are unlikely to rise to the level of bank fraud. 


     this while technically could be bank fraud but you know they have FAR larger fish to chase than something like this. I mean really they going to spend thousands investigation and litigating someone who bought a darn Tesla when they said they would not.

    Just think about all the real fraud out there. 

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  • Harish V.
    Investor · Fremont, CA · Member since 2015 · 209 posts · 124 votes
    4y

     It's very strange they wrote such specific letter. Bank only needs to care that you do not take additional debt and should ask for that " I don't have plans to take additional debt, bla bla".

    I don't they prevented you from taking a vacation that costed similar amount or buy any other electric/luxury car. Don't make sense. I think you  argue many ways, that your situation changed if you bought car,.

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    @Gary Fritz - did you get your Tesla yet?

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  • Gary Fritz
    OP
    Member since 2022 · 9 posts · 2 votes
    4y

    I did!  Picked it up last Monday, drove it (slowly) straight to the detailers, where I paid a stupid amount of $$ to cover it in PPF.  Got it back on Friday.  :-)

    I looked closer at the stupid letter and decided I was panicking over nothing.  As @JD Martin mentioned, it doesn't say I could never buy the car.  It says "I do not have any plans to buy a car, I have decided not to move forward with this."  Well that wasn't true when I walked into the closing, but with that gun to my head, I had to change my plans.  So it was true when I signed it.  But gee, then my plans changed again!  I don't think it violates the signed agreement at all.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Gary Fritz

    Pay cash for the car and title it in someone else’s name.

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y
    Quote from @Gary Fritz:

    I did!  Picked it up last Monday, drove it (slowly) straight to the detailers, where I paid a stupid amount of $$ to cover it in PPF.  Got it back on Friday.  :-)

    I looked closer at the stupid letter and decided I was panicking over nothing.  As @JD Martin mentioned, it doesn't say I could never buy the car.  It says "I do not have any plans to buy a car, I have decided not to move forward with this."  Well that wasn't true when I walked into the closing, but with that gun to my head, I had to change my plans.  So it was true when I signed it.  But gee, then my plans changed again!  I don't think it violates the signed agreement at all.


    Now you get to enjoy your Tesla and your son his new house! Congrats! 

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