A Nightmare Closing Saga: Part II

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(This is the second and final part to the article. Check out Part I)

The next afternoon I got a call from the buyers’ agent. She told me that the buyers refused to switch title companies as I had requested (the closing was set to take place four days later). I asked her when she was going to fax me a copy of the written refusal with their signatures as I had requested. She countered by saying, “That is ridiculous. I didn’t need anything in writing.”

I asked her what their reason for refusing was and she said, “They just didn’t want to.” Now for the readers following along at home, the reason I wanted to change title companies was because when the Realtor gave me the contract, she asked which title company I wanted to use.

I had told her I wanted to use Laughlin Law & Title (the owner is a top real estate attorney who is known for working with investors). The Realtor claimed she tried to look it up online but couldn’t get the spelling right. The end result was the Realtor went to Land America, which just happened to be located across the hall from the Keller-Williams office she worked out of.

Time Out – Check Ego’s at the Door

I want to go over something for a minute before continuing with the story. Most (if not all) real estate investors understand that most Realtors do not like investors. On the flip side, most investors don’t care for the majority of Realtors. To put it simply, real estate investors and Realtors view each other in a manner similar to cats and dogs. They just don’t seem to be able to work nice and play together.

I am a rarity because I am one of the few investors who LOVES Realtors. A good Realtor usually ends up playing an important role in every deal I do. In this case however, the buyers’ agent demonstrated that she was not a good Realtor. Actually, my house was only her second deal as a Realtor.

There are good real estate professionals and there are bad real estate professionals. Surround yourself with truly talented real estate pro’s. Life is easier when you are able to focus on how to do your own job without the added burden of making sure someone else is doing theirs.

The reason for explaining all of that is because I had determined that I was a marked target in this deal. The Realtor was not about to let some real estate investor push her around. The broker seemed to harp on me more than usual because I was not licensed. He spoke to me in an overly condescending manner after he was told that I actually teach distressed real estate. He was out to prove himself it seemed. I got a lot of attitude from the title company as well once they found out I was basically accusing them of stealing from me by padding the fee’s. The buyers’ lender was only too happy to help me spend every bit of the $6,000 I was contributing to closing costs.

It was not a fun place for me to be. It was 4 against 1 in my opinion. I felt added pressure overall because there were so many students and peers monitoring the transaction. My Realtor, Mark, was very helpful to me from start to finish but I had a Limited Service Listing with him. In other words, he took my listing at a discount so I didn’t expect him to speak for me as most Realtors do for their clients.

The Pressure Builds

I called Mark and he agreed that I was in a tough spot. At that point, even some of my peers were encouraging me to break the contract due to the mess that it had become.

I remember saying to Mark, “They are doing their best to prove they are idiots.” Mark laughed and I went on to say, “As my grandfather used to say… When you argue with an idiot, there are two idiots arguing.” Lastly I said, “I have an idea for how to handle this so I don’t get raked over the coals quite so bad. It seems that Dorothy (buyers agent) is keeping her finger on the trigger, just waiting for me to say something she doesn’t like so she can threaten to cancel the contract again. For now, I plan to shut up and not be a distraction.” Mark asked what my idea was and I told him, “I will let you know the morning we are supposed to close.”

I was not getting anywhere by challenging that Realtor, her broker and the title company. I decided I would sit back and wait until everyone had something to lose…Money. The closing was scheduled for December 21, 2006. That left just four days until Christmas. The buyers’ agent could buy a lot of Christmas presents with her hefty commission. Keller-Williams certainly wanted a $253,000 deal to close and people at Land America would welcome extra money right before Christmas as well. Having those folks expecting a paycheck, I figured would play out in my favor in the end. I would need leverage on closing day and I wanted the Buyers to provide that leverage. Yes, the Buyers. They were as stressed as I was and they faced having to move four days before Christmas.

An Impossible Task Over the Next 4 Days… I Had To Shut Up!

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Closing Day:

I was scheduled to sign at 11:00 am. At 9:00 am, I called the Texas Real Estate Commission. I asked them where I would be able to find a certain form on their website that I was going to need that morning. They told me that there was not a specific form and they thought a basic addendum would be all I would need. But, they wanted to be sure so they went to the higher ranking people at the commission to confirm I could do what I had in mind. They ended up telling me to use the Addendum to the Contract form and be specific with what I wrote on it.

As I said previously, I read that contract, word for word, over and over, hoping I would find my “out.” I had a valid contract but walking away from the deal at that point would have been a horrible move on my part. Given my status in the local real estate scene, I was sure I would end up being sued by someone if I decided to breach the contract.

I Saw the Light!

While reading the contract for the 5th or 6th time, I saw something. I reread that part of the contract a few more times to make sure I understood it correctly. I knew I had found my way out. In the State of Texas, the standard practice in the event of a contract dispute is for the seller and buyer to agree to mediation rather than a law suit.

At 9:30 am, I faxed a formal request to go to Mediation to my Realtor, the buyers Realtor and the title company. I have to admit though, I was nervous at that point. What I had done was put the entire deal on hold. I knew that it could take several weeks to agree on a mediator. I stood to lose thousands of dollars in added holding costs if it went to mediation. Within minutes, my Realtor, Mark, was calling me.

He said, “How in the hell did you come up with mediation on closing day?” I replied, “Mark, I didn’t have any options. Had I requested it a few days ago, there is no way it would have carried the same weight as it will today.” He laughed and said, “Jim, that’s genius! You know that they are going nuts!”
I sure hoped that was the case.

“Move Over! I’m in the Drivers Seat Now!”

I had brought the sale to a complete halt. What I am most proud of was the fact that I was able to stand my ground and fight back without breaking the contract. It was 100% legal. I never heard of anyone requesting mediation before (I am certain it has happened but I never knew anyone that did it) nor have I heard about anyone doing it since.

It has been great being able to tell my students exactly how the mediation “loophole” can protect them in their own deals AND it is LEGAL!

C Y A… Always Cover Your Asset!

At 11:00 that morning, I walked into the title company to close. The Escrow Agent was stunned that I had shown up. I told her, “I was scheduled to close at 11:00 and now it is on record that I appeared as instructed with the intention to close.” She gave me the HUD-1 and I sat down to review it. None of the numbers had been changed so I got up and told her that I had requested mediation and since my dispute involved the figures on the HUD-1, I would not sign it and I left.

An hour later, I got a phone call from a person who identified himself as an attorney with Land America Title. He quickly made it clear that he was not affiliated with the Land America branch that was doing the closing and he asked me what I was demanding with the mediation.

I paused a few seconds and said, “It is my understanding that the mediator is to be a neutral, 3rd party observer.” He said that was correct. I continued by saying, “I have to ask that you have Dorothy (buyers agent) call me right away so we can agree on a mediator.” He then said, “I understand that but I am trying to help work this out as a neutral observer so we don’t have to pursue mediation.” I smiled real big and said, “I am sorry sir but, I am having a hard time understanding how you consider yourself a neutral observer when you are an attorney who is paid by Land America. This is very unprofessional of you and Land America to essentially ignore the addendum I submitted this morning in hopes that I won’t know any better and withdraw my request.” I said I was done talking with him and hung up.

Within minutes, I got a call from Dorothy. She was very polite and asked me what I was seeking thru mediation. I grinned and said, “I want the cost of the title policy to come out of the $6,000 I am paying for the buyers and I want the added fee’s Land America is charging to be credited back to me. I don’t have the HUD-1 in front of me right now so why don’t I just make it simple and tell you that I want a total of $4,000 credited back to me.” Dorothy was quiet for a few seconds and sounded like she was crying as she said, “This is just horrible. All I wanted was for to have a nice Christmas in their new house!”
I was quick to fire back at her and said, “I sure would hate to be in your shoes when you have to go to the buyers and tell them they can’t move into their new house because you screwed up and copped an attitude.” She quietly cried into the phone and said she would call me back.

At 5:00 pm that same day, Dorothy called back again and said she had a proposal for me. She said, “Jim, this can’t go to mediation. That would ruin everyone’s Christmas.”

She went on to tell me that the buyers’ lender had agreed to waive $750 they were charging for an origination fee. The title company had removed over $600 from the HUD-1 and credited the $600 to me. She had given up $750 from her commission (it had been over $7,000 before that) and Keller-Williams had agreed to credit me additional money from their profits as well.

The Shake-Down Worked!

I told her I would be there in 20 minutes to sign and I headed over to Land America.

It should have only taken a few minutes for me to sign and be done but I was greeted by Donald, the arrogant broker. He asked if I was okay with the offer and I told him I was but, I had one request. Since the sale had been in constant question from the start, I had not found another place until the day before and I would need until the next morning to have all of my things out of the house. Actually, the house was empty but I had moved all of my remaining things into the garage. He got pretty annoyed when I told him that and he said we won’t be able to close as long as I have any belongings at the property.

I remember shaking my head (as I lost my temper and any respect I may have had for him) and said to him, “You are just determined to foul this deal up any way you possibly can, aren’t you? SO! MY advice to YOU, is to lose that ego of yours and give me a simple Residential Lease-Back for one day and I will be out in the morning. This way the buyers can get start moving tonight.” In other words, the deal still closes but the buyers actually give me a one-day lease to allow me to finish moving.

Donald seemed a bit surprised at the aggression I displayed and said he would go talk with the buyers. Only now he didn’t see a problem with the one-day lease. He walked out of the room and into the room right next to the one I was in. I was surprised that I could hear everything he was saying to the buyers. He actually went on babbling to the buyers for 4-minutes about how serious the liability could be for them if they allowed the extra day. Pretty much what he was doing was trying to look smart by convincing them that allowing the lease-back could be a huge liability and they should seriously take that into consideration.

My jaw was nearly on the floor in disbelief as the Escrow Agent walked in with the updated Hud-1. I stood up and said to her as I walked towards the door, “When Mr. Trump decides to stop pounding his own chest and comes back in here, tell him I went home.” She didn’t say a word but her body language suggested she was stunned.

30 minutes later, Dorothy called me and was frantic and asked why I left. So, here I was, finally at the end of a 6-month project I had taken on (oddly enough, it was my ego that got me into it after those two students made their smart ass comment) and the past 5 weeks had been so trying with all the attention and added stress I had to deal with that, well…. I was just tired and really didn’t care what Dorothy had to say. I was mentally exhausted.

I let out a sigh and said these exact words using a very calm and quiet voice….

“Dorothy… Shut up.” She didn’t make a sound. I continued by saying, “You have made my life hell the past 5 weeks because you were unwilling to take responsibility for mistakes you made and your half-assed attempt to cover them up has made you a laughingstock. The sad part is, you are being paid a lot of money for being an idiot. I hope will be happy in their new house. I am sure they haven’t enjoyed the grief you have put them through. So please, just shut up! I will be there in the morning to sign and I hope I never have to deal with you again. Have a good night, Dorothy.” I hung up.
The following morning I signed and it closed.

Was the Gamble Worth It?

Was it really worth it for me to go to the extreme of requesting mediation on closing day?

Well in the end, after it was all said and done… Keller-Williams, the Realtor, Land America and the buyers’ lender, managed to give me just under $4,000 that otherwise would have gone to all of them.

I remember feeling as though a massive weight had been taken off of me. I smirked as I walked to the car and thought to myself, “Maybe Dorothy isn’t an idiot at all.”

I laughed as I asked myself, “Who would buy a house, rehab it themselves, move into it, subject themselves to some of the most critical people in the business, only to face 5 weeks of hell while trying to get it sold?” I shook my head as I got in my car and I said out loud… “Only an Idiot!”

Ahh… Real Estate! You gotta love it!

 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.