Title company wants double fees...

Foreclosures, Short Sales, Tax Foreclosures
1

I closed my first SS and have questions… I got a call from the Romeros that they were behind, i offered a SS, i had them deed the property to my LLC. I than pursued my negotiations with HSBC (the lender). The ARV of the house is 160K. The Romero’s owed 135K. But because it was in such bad shape the BPO came in at 120K (so in essence they were negative 15K). I negotiated HSBC down to 80K. Since my LLC was on title, i had my LLC hire me as the RE agent (i’m licensed) and listed the property AFTER i knew i had a deal with HSBC. An agent calls me 4 days later and said she had a qualified buyer, we wrote it up at 117K. Awesome, i thought. $37K of profit! So we closed at a title company. The logic was "i’ll just use the “end-buyers” money to fund the whole thing. Well, we closed and it was beautiful after i paid the selling agent her 3% and all soft costs i netted 29K in the bank…nice. Three days later i get a call from the escrow officer that we had a problem. I was told that this was not going to fly “after” i had my money in my bank account. I was devastated.

Part 2
When i initially purchased (well, my LLC) the property from the Romero’s for 10 bucks. The escrow officer said i was suppose to have closed at a title company and should have legitimally paid for the house (80K)…Hmm, i thought. This doesn’t make any sense. I had to find 80K and I had to find it fast. I found a private investor to lend me the 80K that I initially offered the H/O for the house. Long story short my investor came in and let me borrowed 80K for that day and i paid him 10% ($8000).

Question. Did I really need to close at a title company on my initial closing? (my hunch is Rio Grande Title just wants more fees and have “two” actual closings, rather than just one.

So, in summary, is anyone else having the H/O deed the properties to them? Are you suppose to have the H/O deed their houses to you? If not, how are you suppose to sell the property if you’re not in control of the property? The second questions is, isn’t ok to use an “end-buyers” money to fund the whole deal? I was told i couldn’t do this. Why would it even be illegal? Why shouln’t i be able to buy a house for 10 bucks, have the owners deed the house to me, negotiate a SS, sell it to and end-buyer and use their money to pay the amount shorted??? Do I really need Investor money??? (my hunch is…NO)

2

the title company is trying to get more money out of you. You had the deed from the owner and got the short sale approval from the lien holders - so you’re done…the fact that you flipped it and made money and the title company wants more fees is irrelevant. They have no recourse and are hoping you will give up some cash, you are in the strong position here since you already have the cash! Unless they put a hold on the check, but if it’s cleared their bank already you are set! When title companies screw up they will send letters to you or call, but after the money has been disbursed they are SOL. Of course, I’m not an attorney and have not reviewed your documents, but I would think since you had the deed and had the title company close on your flip, you’re good to go.

Oh and by the way, it’s none of the title company’s business what anyone “should” pay. They are supposed to act as a neutral 3rd party. Tell em to pound sand and take your business elsewhere.

3

Ok great, thanks Jason. That’s what I thought. Now another question is. Am i suppose to have the H/O deed their house to me on SS’s? Does it matter?

4

I agree with Jason… The title company is fishing… Once they issued the title policies on the resell you’re fine… those policies insured chain of title unless fraud was committed. They could threaten to unwind the deal but rarely ever do.

As for getting the deed… some investors do grab it to insure that they will have control of the property, however don’t record it if we are doing a short as the short lender will not like seeing title transferred.

As for using the buyers funds… That is a simple escrow instruction from buyer and their lender… Some lenders don’t like the issue. This is where a box of chocolate go along way.

As for paying 80k or 10 dollars, I assume you took title subject to the existing loan, and then started the short. Therefore you did pay 80k PLUS 10 dollars… Not really an issue for the escrow company…

As the agent, did you counter back to the buyer that the transaction is subject to seller obtaining title? if not you could have been in a little trouble… I always add that statement to the resell contracts and also to the agent remarks of the MLS.

Congrats

Michael