Dealing With a Nightmare Sellers Attorney On A Wholesale Deal

12 Replies

I have been wholesaling for awhile now and have yet to deal with a troublesome sellers attorney until one of my last deals last deal. I am a wholesaler out of Chicago and have met and dealt with lots of people, but non like this certain individual. 

This deal was SFH I got under contract through my Probate Marketing. It was a cheap home on the south side and it was going smoothly at the beginning. I received the call from the executor who was extremely motivated and I offered my services. I met with him the next day at the property, made my assessments, and got a contract signed that same day. We had great report with one another and he was happy to be rid of the property. the number are as follows:

Contract price: $25,000

Repairs: $30,000

ARV: $115,000

I offered it at $35,000

This is 57% of ARV to an end buyer. I found a cash buyer who really wanted it 10 days later. He was going to Rehab it himself and move his family into it.

The seller gave the contract to his attorney and had no problem with it initially until we told him that we were going to assign the contract to another buyer.

This is where it turns ugly. He than proceeded to tell me that it was illegal and that I had no right to assign the contract. He claims he spoke to the attorneys at the Title Company we were closing at (ATG -Attorneys Title Guaranty Fund, Inc). I clearly told the seller we may buy it or pass it on to one of my investors. I also signed the contract Amin Ali and/or assigns. I did everything I was supposed to do but this guy was unbelievable. 

Then I called my attorney to take over on my behalf. The sellers attorney still wouldn't budge on his stance . To make matters worse he told the Executor of the property we were scam artist and said we were trying to violate a list of HUD violations. The seller called me to see what was going on and I explained to him that his attorney was greener than a Jets fan and probably never completed this type of deal before. He said he has to do what his Attorney tells him and the only way we could close the deal was to work it out with him. The sellers attorney said the only way he could do the deal was to put me on title and have me issue a quick claim deal to the end buyer. There is no way the end buyer was going to allow this and I said no thanks to that Idea.

So after a few days of my attorney and the sellers attorney going back and forth we just decided to double close on it and take some losses. 

This next part was shocking and it validates it always pays to have a good attorney on your side. My attorney called ATG's head office down in Champaign, IL and spoke with the lead underwriter. 

This is the exact email I received from my attorney after speaking with the lead underwriter that he sent to the sellers attorney:

Counsel,

I spoke to the head of underwriting at ATG yesterday — Tanya Story. She indicated that ATG has no problem with assignments, flips, double closings or simultaneous closings. She seemed quite incredulous that you suggested otherwise as their office conducts these transactions daily. She seemed shocked that you were hesitant in moving forward with a simple assignment contract…I agreed.

She said she could walk you through how to handle an assignment if you felt nervous or uncomfortable. You can reach her at 217-xxx-xxxx

I will call you later today so we can revisit how to conduct this transaction. Or you can call me at 773-xxx-xxxx at your convenience.

After that I knew the sellers attorney was a liar after saying he spoke to the attorneys at ATG and said it was illegal. 

The sellers attorney had to concede and move forward with the deal. The reason he gave in response left me flabbergasted. He told my attorney he didn't want to move forward with the deal because I said I didn't want the deal on the HUD. He lied again just to not make himself look like a fool. Shameful behavior in my opinion.

In conclusion we closed on the deal 2 weeks later after all documents were ready for closing and I was glad this ordeal was over. 

Sounds like you handled it perfectly. Good thing you had relationships with your attorney and a title company that works with assignments.  Some wholesalers would have bailed when they met with this kind of resistance. I'm curious, how much did your attorney charge for his services?

@Jon Klaus Yes having a "team" around you that can deal with certain situations is critical in the business of Real Estate. I paid my attorney his normal SFH closing rate. which was $450. He told me he didn't want to charge anything upfront to deal with the situation because he wanted all my business, but after all that he did I had to pay something. I also guaranteed I would exclusively work with him on all my deals as long as he is available. He proved himself to be a valuable asset to my business and that is priceless.

I've been doing deals for decades and market primarily to attorneys for my probate deals, who represent over 90% of my Dealflow. 

At any particular time, I probably have about six attorneys working for me.

Attorneys are like cars: some are unreliable, break down frequently and don't get you where you want to go. Others are pretty good, reliable and get the job done (think Toyota Camry). Occasionally, I need a tow truck to pull me out if I'm stuck. As a Ferrari guy, I can appreciate speed and sometimes need an attorney who moves fast. I can go on, but you get the idea.

This is why I'm so adamant about learning WHO the attorneys are that represent new prospects. All Attorneys are NOT all the same. Out of the thousands of CA probate attorneys that work in my field, I have a short list of attorneys that I will not work with because they are either incompetent, deceitful or obsessed about my profits. Also included are those who refuse to treat me as a peer. 

Smart attorneys (99.7%) recognize that I the guy that makes it possible for then to get paid. I learned early the golden rule of investing: the guy/gal with the gold makes the rules.

@Amin Ali  Sounds like you worked through that perfectly and your attorney is a keeper. 

One suggestion, A lot of people say to not put anything about assigning in your contracts because it is ambiguously known to be assignable if it not mentioned. One thing you may want to do to get around this is to put clearly in the contract that it is assignable. 

So many gurus say that the only extra clause you need is "contingent upon financial partner approval" but, I add something about them recognizing I am an investor and some other key clauses to my contracts to make sure that people know, up front that I am there to make money and that if I have to assign to do that, I will.

Good job on this one. and hopefully your seller realizes what a terrible attorney they have and will seek better counsel after this ordeal. 

@Rick H.  I totally agree with you. Majority of attorneys are good to deal with but you do have to watch out for the knuckleheads.  I target my marketing directly to the executors so I have to deal with a variety of Probate attorneys. Do you think it would be more beneficial to market directly to Probate attorneys?

@Mike Flowers Yes my attorney is definitely a keeper.  And that is a great idea to put that the contract is assignable directly in the contract. 

Thank you 

For the most part, I don't think investors benefit by directly marketing to attorneys.

Attorneys prefer their fiduciary clients (executors and administrators) get maximum market exposure by listing through an MLS.

This also, in theory, means the attorney has a better cgance if dealing with a professional rather than a rogue operator. 

Lastly, real estate brokers are licensed and regulated and held to a certain standard. Falling short means someone else to sue and possibly E&O insurance to pay the tab.

If you are licensed and have reached the "10,000 Hour" pilot criteria, and operate as an agent rather than for your own account, marketing to attorneys for listing may make sense, but not until then as your mail will be shredded and calls go unreturned. 

@Amin Ali   first, thanks for posting such detailed chain of events, interesting post and how you prevailed. I just added an attorney to my team last month. This one came to me from a solid referral. So far, he is reviewing contracts and representing me when needed. I hope I don't come across anything like you explained above but just in case I think we are ready (I hope). So far I see in my attorney a guy who is very diligent, professional and knows what he is talking about. If you don't mind I would like to share your story and keep a sharp eye on him when he answers my "what would you do in a scenario like this" question... All the best

Attorneys are often put up on a pedestal, for no reason IMHO.  We just bought a property we were wholesaling and the sellers attorney told the seller NOT to give us keys for a lockbox until closing.  I had built fantastic rapport with the sellers, every time I talked to her she was almost giddy that we were helping them out.  

My point is I see attorneys who don't specialize in real estate give real estate advice ALL THE TIME.  They are literally just the most conservative people in the world because they don't know what they're talking about but don't want to be on the hook for anything.

Instead of doing some research they will just say "No, they can't do that."

I just setup 2 new LLC's and my attorney put a wrong first name in multiple place on multiple documents... and this is the guy who I am trusting with my asset liability???

@Rick H.  Good advice and I will just stick to marketing directly to executors.

Thank you

@Brian G.  Thank you for reading my post. I figured it could help someone out in case they run into a situation like this, but I hope you dont.  And by all means share it with your attorney. 

Thank you

@John Horner  I find that attorneys are the hardest part of my"team" to nail down. So many of them specialize in one thing and does not fit well with what I am trying to accomplish. That is why when you find a good one, hold on to him/her. I definitely agree with the part about Attorneys being conservative but I guess it is because they have seen involved, directly and indirectly, in many lawsuits on both sides during their career. It just makes them overly cautious.  

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