House #37: Even More WTF

September 1, 2012 · 13 comments

The WTF House just got WTF-ier…

If you’re not familiar with the back-story, read this first

Yesterday (Friday) was closing day. The bank had made it clear that if we didn’t close by yesterday, the deal was off and the sale was no longer approved. And if the deal fell through, the sellers would lose their $20,000, likely get foreclosed on, likely owe the bank money for the foreclosure and then get their credit destroyed. Basically, all they had to do to get their $20,000 and avoid all that bad stuff was to be out of the house by yesterday afternoon and then show up to sign the closing documents. They couldn’t do either.

Closing was scheduled for noon. My wife showed up at the house at 11:00am to verify that the sellers had moved out –- they hadn’t moved a thing. When my wife asked why not, they said, “Oh, we’ll be out by later tonight.” My wife explained that they needed to be out before the closing, which was just an hour away. (For reference, we weren’t going to give them extra time, as they clearly didn’t want to move and if we let them stay for a few extra hours, we risked having them squat in the house for much longer and having to jump through hoops to evict them).

After many discussions between my wife, the seller’s agent and the sellers, it became clear that the sellers didn’t quite comprehend that they’d lose everything if we didn’t get this closed by the end of the day, and that we weren’t going to close if they weren’t out of the house. Finally, by noon yesterday, the sellers seemed to get the message and agreed to move by 4pm, at which time every one would convene at the seller’s house and we’d close there.

Of course, 4pm comes around, and the house is still 80% full of stuff. The sellers aren’t even around when my wife, the closing attorney and the seller’s agent shows up to sign the docs. My wife then had to listen to the sellers tell her how unreasonable WE were being by forcing them out of the house on such short notice (they knew literally a month ago that we needed to close by yesterday, they just chose to ignore the information). My wife offered one final concession -– she said that we would sign an agreement that said we’d close immediately, the sellers $20,000 moving bonus would go into escrow, and we’d give the sellers 24 more hours to get their stuff out of the house; if they didn’t have their stuff out within 24 hours, we were entitled to $2500 from escrow to cover the cost of having their stuff hauled away and disposed of.

Finally, at 4:45pm, 15 minutes before the deadline (the closing attorney would have to wire the funds to the lender by 5:00pm), the sellers agreed to the deal. The closing attorney rushed to the bank to get the funds wired, but the husband – who needed to sign the docs – still hadn’t shown up to sign. The attorney called the husband to tell him to come directly to the bank in hopes they could get everything done in the final 5 minutes before the bank closed.

And…of course…the husband didn’t make it in time. He showed up at 5:00pm and signed the docs, but by the time they were done, the bank was closed, and the funds couldn’t be wired to the lender. This creates a very interesting situation — while all the closing docs are signed and we’ve transferred cash to the closing attorney to pay for the house, technically the house isn’t sold unless the lender agrees. And the lender had made it clear that if they didn’t get their money by yesterday, the short sale approval was no longer good.

I guess this means we wait until Tuesday to see if the bank accepts the payoff — if they do, we own the house…if they don’t, either the sale will fall through or we’ll have to start the short sale process over. The funniest part about the whole thing is that the sellers and the seller’s agent believe the house is 100% closed — they couldn’t grasp the concept that the approval expired, so now the bank may turn down the sale and refuse to pay the sellers their $20,000 (and refuse to pay the agent her commission)…

I’m very curious to see what happens. More on Tuesday!

13 responses to “House #37: Even More WTF”

  1. Jarred S. says:

    Subscribed! This really is a WTF. I can’t imagine how frustrating that scenario would be. I would hate to see these people lose such a great second chance, although it sounds to me like they are doomed either way. Sometimes people don’t understand how to not screw up, and that is unfortunate. Hopefully this works out for everyone.

  2. T says:

    Unbelievable! Can’t wait to see how this ends up…

  3. Ivan Jouikov says:

    This one’s on you. Should’ve been following up/checking up on them moving out more often and way in advance.

    A story full of intrigue; can’t hear the conclusion!

  4. J Scott says:

    Hey Ivan,

    What would you have done to ensure they were out?

    Personally, I couldn’t think of anything other than what we did — we told their agent they weren’t moving (we talked to her every day last week and she just kept saying, “Oh, they’ll be out.” Ethically, and even legally, we’re not allowed to contact the sellers directly (they are represented by another agent). So, other than talking to their agent every day and telling her what was happening, I’m not sure what else we could have done. I don’t own the house, and I can’t force them to move any faster than they want to move (or even force them to move at all).

    In anticipation of them not being ready, we tried scheduling the closing for earlier in the week — they pushed it to the end of the week. So, we tried scheduling the closing to earlier in the day — they pushed it to the end of the day. So, walked into the closing with an amendment that would allow them an extra 24 hours to move, as we suspected they needed it. They signed the amendment, but then didn’t show up on time to the bank to get everything signed and wired.

    Ultimately, if a seller doesn’t want to sell their house, I don’t know how to force them to.

    But again, would love to hear how others may have approached it so that next time we could do something different/better…

  5. Jingle says:

    I wouldn’t have closed without them out of the house 100%. Eviction court here is dicey if you happen to get the wrong judge. And the wrong judge will give the stupidest of people way to much time, which means my money. Jingle’s #3 rule of real estate. Never close with anyone occupying a property. I rather scrap a deal than deal with the stupid in eviction court. I’m sometimes amazed at how smart the stupid are when it comes to manipulating the system. JMHO and experience. Good luck.

  6. Jennifer says:

    I recently bought a short sale (to fix up and rent) and had a very similar situation. The sellers insisted on closing the last possible day allowed by the bank, and then did not even begin to move until the last minute. I ended up allowing them to move their stuff into the carport, some of it in the hours after closing. I watched them finish moving and then changed the locks. Because I couldn’t start work right away, I allowed them two weeks to move their stuff out of the carport. At the end of the two weeks, the stuff had migrated to the neighbor’s carport. Two months later, it’s still there. I think if they had abandoned the stuff one of the local auction houses would have taken it off my hands. It sounds like your sellers were even further in denial, though, since mine at least had started to move by closing and did show up to sign the paperwork. It was a hassle, but I got a good deal, enjoyed the renovations, and now have a good tenant in the house.

    By the way, thanks for your blog. I am just getting into real estate investing and really appreciate hearing the experiences of someone who is doing it successfully.

  7. J Scott says:

    Hey Jingle,

    In general, I absolutely 100% agree. There was one extenuating circumstance in this situation that swayed me to give them some extra time — and that was the fact that the $20,000 they were getting from the bank was escrowed (per our last minute agreement), and they couldn’t get it until they moved out. With $20,000 on the line, and the fact that I’d likely get some/all of that $20K if I had to go to court to evict them, they had a strong incentive to get out. And even if they didn’t leave easily, we likely would have been paid handsomely for waiting.

    Still, your rule is one that EVERY real estate investor should follow — very rarely is a deal worth the hassle of trying to get a squatter out of the house.

  8. Kristine-CA says:

    I’ve been following this short sale since you first posted about it on BP. It went pretty much the way it goes when sellers are in denial. Even though this was a short sale, it appears you got a great intro into the crazy world of working directly with sellers. Welcome!

    Where I am, if the escrow is funded and “set up” to record the next day, most sellers, buyers, agents and lenders accept the new closing date with no issue. Most won’t even require a purchase agreement addendum or extension. I have one that was scheduled to close Friday but is now closing Tuesday a.m. because the buyer’s lender wired funds after the last possible recording time (2:00 pm).

    I’ll be curious to see if a funded escrow is enough to satisfy the lender’s deadline on this one. I have a feeling the house is yours. So, since you say they sellers think the deal is done, and it’s Monday p.m…….are they out yet? 🙂

  9. J Scott says:

    Hey Kristine –

    I have a strong feeling there won’t be any issues with the bank…I just don’t like to count the chickens too soon… 🙂

    And yes, happily, the sellers were out of the house by 5pm on Saturday, as agreed. Now that it’s empty, I can honestly say that this is by far one of the grungiest houses I’ve ever seen in my life. It blows my mind that 6 kids were living in these filthy conditions, and actually makes me feel very bad for them. It’s probably better that they’re moving into another clean house, even if only for the short time until they likely destroy it. So sad…

    So, for lots of reasons, the whole crazy world of working directly with sellers is not overly fun for me at this point… 🙁

  10. Kristine-CA says:

    Hey J. After you’ve dealt with hoarder houses or combo hoarder/crack houses (they come in every neighborhood and price point, BTW), AND after you’ve dealt with the people and issues necessary to get those types of properties vacant, you’ll think a vacant filthy SFH was the good old days. I’m going to go ahead and say Congrats/MT on your closing tomorrow!

  11. Chris Calabrese says:

    If this house was a great deal, I would have helped them move. If they hadn’t started 24 hours in advance of closing, there was basically no way they were getting out in time. Rent a Uhaul and hire a couple of laborers and show up and help. Of course, they probably weren’t moving because they had nowhere to go, so you could always rent them a storage unit for a month.

    Hopefully it will work out anyway. Good luck!

  12. Jingle says:

    Dirt, filth, and grunge…..the smell of of money! Glad they are out….

  13. J Scott says:

    Chris –

    I honestly think they weren’t moving because they didn’t want to let go of their house. It was only when they physically saw the person holding their $20K check — and who explained to them that they couldn’t get the $20K check without signing the docs and getting out — did they actually start moving. They also have 6 kids, which I imagine complicates things as well.

    Not making excuses for them, but I think I finally understand their mentality. It’s a shame that the 6 kids will now unfortunately learn all those bad lessons the parents taught them over the past few days/months/years.

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