Part #2: Two Sides to a Back to Back Short Sale Closing

Part #2:  The Title Company Almost Made it NOT happen

This is part 2 of a blog about a recent back to back short sale closing.  In the first part, I discussed the Realtor, and how his extraordinary efforts were instrumental in getting this done.  There is a flip side however, and that is the Title Company whose ineptitude, mistakes, and general unresponsiveness almost torpedoed the closing.   

A good Title Company is essential in a back to back closing.  It’s also important that you as the investor thoroughly understand the process, can read and figure out a HUD, understand the requirements of an approval letter, and generally understand all the bits and pieces of the closing.

If you read Part #1, you know that this was complicated.  We had to switch buyers a week before the closing, and weren’t positively sure until 3 days before the closing which buyer we would end up with.  I asked the Title Company to prepare docs for both buyers so we were covered either way.  They agreed, but didn’t do it.  Closing was scheduled for Thursday.  On Tuesday, we knew who our buyer was going to be, and we got the A-B HUD.  It was full of errors.  Taxes were figured incorrectly, some expenses were in the wrong columns, the payoff to the short sale lender was incorrect and didn’t match the approval letter, and it showed the seller bringing money to the table.  I rewrote the HUD and sent it back to them for corrections.  Wednesday morning, the Title Company began preparing the B-C HUD and documents for signatures.  The plan was to get all signatures late in the afternoon, and close the next morning.  However, at 3:00 that afternoon, they decided they could not get it accomplished, and asked that we move the closing to Friday.  Luckily I had scheduled the closing a day earlier than we absolutely had to have it per the approval letter in case something like this happened.   The plan now was to have everything done and ready for signatures by noon on Thursday.  The end buyer would wire their funds to the Title Company as soon as they signed.  Signing would be done by email and fax since the VP at the Title Company said they didn’t like to have people come in and sit around a table……it took too much of their time!  The seller would go to the Title Company at 1:00 to sign, and the Title Company was sending a runner to the hospital to get another signature that was needed.  

The end buyer got the docs via email and called me to explain them since the Title Company wasn’t answering their phone.  Since I double and triple check things, I called the seller’s cell at 1:05 to be sure they were there to sign.  They had just finished signing everything and getting ready to leave.  I asked….. “Did you sign the approval letter?”  The seller didn’t know what that was, and the closing agent said they didn’t know it needed to be signed.  It got signed….crisis averted.  After the runner got back from the hospital, it was discovered they had forgotten to have the HUD signed.  Back to the hospital again for the signature.  At 5pm the signed A-B HUD was faxed to the short sale lender for approval.  All docs were signed and notarized, and our funds were there as well as the end buyer’s funds.  Just needed short sale lender’s approval of the HUD, and wires could be sent and the closing would be completed.

Thanks to our negotiator, we got an email approving the HUD at 8:30 AM on Friday.  We had had a problem with the Title Company VP who was overseeing the closing, and with the closing agent not answering their phones, returning calls, or answering emails.  This got worse on Friday.  We couldn’t get a response to phone calls or emails asking when the wires would be sent.  Once I even got an email saying….  “I don’t have time to call you.”  After repeated phone messages and emails we finally got confirmation about 11am that the payoff had been wired, but it was 4 hours after that before they wired our negotiator his payment and wired the proceeds.

The next Monday we received an email from the lender saying a service fee they charged had been placed on the wrong side of the HUD, and we owed an additional $1400 or they would nullify the closing.  We probably could have fought this since we had email approval of the HUD before the closing, but since the end buyer had moved into the house over the weekend, we had a profit over $21,000, and the Title Company was still not answering phones and only sporadically answering emails, we decided to simply wire the money and be done with it. 

Lessons Learned:

-          Choose a title company that is responsive, answers phone calls and emails, and can prepare documents and HUD’s in a timely manner.

-          Read the approval letter and understand it.  Also understand the HUD.

-          Stay on top of the title company and double check everything.  You can NOT rely on the Title Company to take care of your business.

-          Even when you do everything right, you may find a poor title company.  Don’t use them again!