9/16/2008
Well, I'm back from Illinois.
The wedding was a blast, and it was great to see old friends and family, but, after 5 days of rain and gray skies (and people asking me why I'm not married yet, and not believing me when I tell them I'm incredibly happy being single), I was delighted to be back in sunny Tampa.
One of the deals I have been working on (I will refer to it as "The Deal from Hell" from now on), has continued on it's downward spiral. I had a bad feeling about this deal from the beginning, and it has turned out much worse than I had anticipated. ..
Let's see.....It all started out when I agreed to take a post-dated check from a stranger for a deposit. This was just plain stupid on my part, and I deserved to have the check bounce.......And bounce it did... So, once I found out the check was not good, I called the buyer and told them they needed to get me the deposit in cash by 10 am the next day or I was cancelling the contract. I met them in the parking lot of their bank the next morning, and, after waiting for an hour or so (It was Friday, so there were at least seven thousand people there cashing checks and doing whatever it is that people do at banks on Fridays), I finally got the cash.
Once I got the deposit- we brought the contract to the hard money lender who is supposed to fund this deal. The lady who was working our file decided to quit (or get fired- we're not sure), the next day, and then the file basically got lost for a few days, until it finally resurfaced, and then the guy who does the inspections/appraisals for this lender, had a family emergency (his Dad died), so, once again, the file just sat there for a few more days......
This brings us up to yesterday, when my buyer finally got fed up with this hard money lender, and decided to look for a new one. I was still in Illinois at the time, and got a call from my buyer telling me they found another lender, but they would only lend part of the purchase price, and they still needed to find 26k from somewhere. At this point, I had pretty much written this whole deal off, and figured that this was going to be my first REO that I was going to have to back out of. It was supposed to close today, and I had no way of lining up financing to buy it myself in that short of time period, and I knew my buyer couldn't either. I still hadn't heard from the bank's title company, though, so I figured there might be a chance that they couldn't close today (this title company sucks ass and never gets deals done on time), and we could buy ourselves some more time.
So, first thing this morning, I get a call from the new lender that my buyer had found while I was gone. Boy oh boy did this guy catch me off guard.... He basically told me, in no uncertain terms, that he was turning me in to the Florida State Attorney's office because I was committing fraud by trying to sell a property that I didn't own, and also because I have been doing simultaneous closings, which, he says, are illegal. Like I said- he totally caught me off guard, and I ended up hanging up on him after he told me that my attorney was also going to jail for doing simultaneous closings. He ended up calling me back a few hours later and letting me know that I should be expecting a call from the FL State Attorney in the next day or so, and that he had told him all about my "fraudulent activity".
GOOD TIMES.
On a lighter note- the bank's title company can't close this deal until Monday at the earliest, and the original hard money lender for this deal is most likely going to do the loan for my buyer (we'll find out tomorrow), so this nightmare just might work out. I am not holding my breath, though...
P.S.
My attorney told me I have nothing to worry about, but I am still worried.
P.P.S.
I am giving myself a raise.
Tuesday, September 16, 2008
The Deal From The Fiery Pits Of Hell
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17 comments:
Hi Steph,
It is illegal to use the funds from your buyer on the back side to fund the deal on the front side because essentially you are selling something that you have no rights to. Proving that is a different story. Was the hard money lender local?
Well, my attorney is telling me otherwise.
If it is illegal, can you point me to the legislation that says so? I'm not being a smart ass here- I'd really like to see it with my own eyes. I asked the guy who is turning me in the same thing yesterday, and he just ignored me.
Yes, the lender is a local guy, and has a very bad reputation.
Sounds like the lawyer is just swinging his...ahem..."ego" around. Just get your lawyer's assurances in writing...
A major flaw in the concurrent closing strategy is that it is illegal to sell any property to which you do not own the title. In legal circles, this is commonly referred to as grand theft. For example, in 2002, the Florida Bar Association disciplined an attorney (Florida Supreme Court Case No. SC01-2321) for acting as legal counsel and the closing agent in a real estate transaction involving selling property the attorney's client did not legally own.
The attorney and his client were arrested and charged with grand theft, organized fraud, and obtaining a mortgage or promissory note by false representation. The attorney had participated in a so-called double closing, which he later claimed he did not know was illegal, during which his client closed on a contract to sell a property prior to closing on the contract to purchase the same property.
Actually, when doing a simultaneous close, I AM on title briefly. There are two closings- one between me and the bank, and then one between me and my buyer.
My contract with my buyer states that the sale is contingent upon me purchasing the property from the bank.
Are you an attorney?
Hey Steph,
If you are closing with the bank with your own funds first, you have nothing to worry about. But if you are using your buyers funds to close with the bank then there may be a problem. I have heard a lot of different views on it though. Even attorneys will conflict on their views. I guess if this jerk turns you in, it will be up to the court to decide!
Mike
Hi Mike,
I have heard a lot of different "opinions" about this as well.
I am trusting that my attorney (who also owns a title company) knows what he is talking about, and I guess I will just have to wait and see what happens.
Steph,
Opinions are like.........er, Elbows, yeah, that's it, elbows.
EVERYONE has them, and they are ALL different.
Frankly, the person advising you below that a simul close is ILLEGAL, has not proven their OPINION at all.
The case they are referring to, was nothing like your system at all.
Bottom line, until someone shows me that you cannot sell your EQUITABLE INTEREST, and quotes specific law, then they are just another ELBOW.
Don't worry, been at this quite a bit of time myself, had more than my fair share of run-ins with those who just don't know anything different from what they do.
Trust me, at the moment, the Florida Attorney Generals office has plenty of other things to do, and will most likely laugh this lender off the phone.
By the way, why not post up WHO this lender is, so we can avoid them.
Who wants to do business with someone who does not know what they don't know?
Welcome back to Florida............good thing the weather here rocks!
Jim FL
Hey Steph...
Just run by this guys office after you close...Smile...And wave that big ole check in his face...lol
Ed (Upstate NY)
Hi Jim,
I'll email you a link to his website.
I've spoken to several people today about this guy, and it seems that he might have a touch of The Crazy. I learned the hard way not to mess with nut-jobs, so I'm going to just avoid him like the plague from this point forward.
Also, one of the readers of this blog volunteered to fly down here and break his knee caps for me, so I'm considering that option as well... hehehe.
whoa, Whoa, WHOA!!!
Single? Steph, you're married to a world champion tennis player!!
(drawing a blank on "court" puns, sorry. My jokes usually end after 10pm)
The only thing I've ever heard being illegal is using FHA funds on a double close, they want to consider it fraud. Or you just get a written agreement from the lender that it is okay to use their funds to close both sides. As long as both sides know what's going on, it's hard to defraud someone.
Hi Tim- we aren't married....just dating. :)
Anonymous- that is what my attorney has been telling me- as long as there is full disclosure of what's going on (which, there is) then there is no problem. I am always up front with my buyers about me buying from the bank and then re-selling to them, and my title company also has them sign a disclosure saying that they are aware that the property is being flipped. Most of the buyers I sell to are using cash, so there is no lender involved to defraud, anyway.
Hi Steph,
We both know the title company you use is awesome and they know what they are doing. They do all of our closings, which are pretty much all simultaneous, and never one problem. I would love to know who the lender was. Are they here? Hope everything is going well. You have nothing to worry about! Also, great blog.
Pete
Hi Pete!
Didn't know you were reading..
I'll text you the info on this lender. I had never heard of him up until now.
Eric told me to run away from this guy as fast as I can, so I'm going to heed his advice.
Hope you are doing well.
Steph
I have to admit I have wondered from day one about the legality of what you do. I would read that you were "marketing" other people's property and correct me if I'm wrong, you don't have any R.E. license. I'm pretty sure that is not allowed in Florida.
As for simultaneous closing, if I were you I'd seek a second legal opinion from an expert in real estate, toute de suite. You may have to pay a few hundred for a consultation, or it might be free.
If your atty has steered you wrong, you would have to sue him for malpractice, but it probably wouldn't let you off the hook.
Linda,
There is nothing wrong or illegal with marketing a property that you have an equitable interest in, and you do not have to have a license to do so.
Steph
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