Wednesday, July 18, 2012

Why Curmudgeon does not like real estate closings -- Part II -- a case study

We owe you some money, but we don't know how much. Could you tell us, please, and we'll cut you a check?

How would you respond to such a question?

OK, how would you respond to such a question after someone splashed cold water on your face and picked you up off the floor?

Yet this is a question that mortgage holders face every day.

It is a fact that most of the houses that are sold have mortgages on them at the time of sale. The selling homeowners have not owned the house long enough to pay it off or, perhaps, back in the good old days of home equity loans (back in the good old days when homes had equity), they squeezed a few thousands out for a second mortgage. Maybe more than a few.

Now, when these folks go to sell, the new buyer -- and his lender -- need to make certain that, not only does the old owner move out, the old mortgages are released as well.

The existing mortgages have to be paid off.

So something very much like the question at the top of this post is asked. Someone at the bank pushes a couple of buttons on a computer and a number appears. The number is inserted in a form letter with a per diem amount of interest owed for every day until payment is received.

But the sellers' bank at my third closing last Friday did not issue such a letter. The sellers' attorney could not have been more apologetic. He was, in fact, the very picture of frustration, frequently excusing himself from the closing table to try and get an answer from his clients' bank. Apparently, the sellers' bank had only acquired this loan about two weeks before the closing (even after the collapse, mortgages are still being bought and sold with distressing frequency); perhaps they did not yet even know how much they were owed, he suggested... but that struck me as either odd... or insane.

Because of the goofy position taken by his clients' bank, the sellers' lawyer had drawn up a pre-closing occupancy agreement. By its terms, my client would be able to move in that day, rent free, assuming only the risk of loss to the premises upon taking possession. It was a fair agreement, even if it did contain a proviso allowing the sellers their attorneys fees and costs in the (extraordinarily unlikely) event that the sale fell through completely and they had to seek court assistance to evict my client.

My client -- a divorced school teacher, accompanied by her older sister -- had her worldly goods packed in a truck parked nearby. The second closing I'd had that day had been the sale of her house to a nice young couple with a couple of kids. They were moving in right away, of course; she had no place to go back to. And she'd promised the truck back by 6:00am Saturday.

My lady went through tissue after tissue, alternatively weeping and getting angry as I explained to her that the proposal was fine, under the circumstances, but that we could not accept it unless or until her bank approved it. She was eventually reassured by her sister that this was a reasonable proposal.

Now her bank had only just approved her financing -- and by "just approved" I mean sometime that morning. (Apparently closings these days are scheduled on wishes and hopes; no one's really sure the money will be there for the closing until the wire hits the title company.) Anyway, the loan and the rate were locked until August 6 -- meaning my client could have scheduled her closing at any time during that period and been able to count on this money. Supposedly.

Thus one might think that the bank would cheerfully acquiesce in a "dry" closing for a week or two -- or even to August 6 -- because it had committed money for this purpose during that entire interval.

One might think that... if one were rational and knows nothing about how horrible, rotten, and idiotic our too-big-to-fail banks have become. "Oh sure," the lender told our closer, "we can approve a dry closing. Until Monday. After that, we have to pull our package and reconsider."

Monday? It's Friday afternoon! The sellers' lender hasn't been able to produce a payoff letter in a week; what makes anyone think they'll do so now within a single business day?

My client and her sister moved to a different room where she could cry harder.

Here was a nifty variation on the collision between the irresistible force and the immovable object -- the irresistible incompetence of the sellers' lender and the immovable stupidity of the buyers' lender. We asked the closer to talk to the lender again -- perhaps someone could be found on the other end of the telephone with at least the intelligence of an amoeba. It really wouldn't take a brain surgeon to puzzle out what needed to be done. Meanwhile, the sellers' attorney got back on his cell phone.

I sat with the Realtors. They'd begun to sense that they might not get their checks today and were starting to look into their next appointments. They didn't run out immediately -- but it was raining. "I can't in good conscience put my lady into this new place when she might have to be out on Monday," I said to no one in particular. No one argued with me.

No, actually, that's too snippy. The buyers' Realtor had been a teacher before getting into the real estate business; she'd worked with my lady as fellow teachers and they were clearly friendly. She did try, several times, to reach the mortgage broker, hoping that he might have some influence with the lender. She could never get past his voice mail, however.

The closer returned to report another failure. "The lender says approval until Monday or we can reschedule," she said. I'll let you think about that for a minute. Maybe you can see something I missed. What could the bank possibly gain from rescheduling that it didn't already have if it permitted the dry closing to linger for, say, a week. "Do you think it might help if I talked to someone?" I volunteered. I didn't expect much -- but I felt it necessary to at least try. Then I could say, truthfully, that I'd done as much as could possibly be done.

The closer agreed. "I do have another closing scheduled," she said, "so we have to get to a decision on this soon."

I followed her into another room -- another closing room, as near as I could tell, but this one equipped with a computer terminal and telephone so the closer could communicate with persons outside the room. She called the same person who'd shot her down twice and asked if she could speak with a supervisor.

A supervisor was found in due course. The closer went through everything again -- and I have to stress this -- the closer did a thorough job in laying out the facts. The supervisor shot her down again: If the matter doesn't close by Monday, we pull our package and reconsider; otherwise, you can reschedule the closing.

That's when the closer played the lawyer card. "I have the buyer's attorney with me," she said. "He'd like to talk to you, if you're willing."

He was willing.

I went through everything the closer had again. I mentioned the weeping client and the rented truck piled high with all her worldly goods. I resisted the temptation to ask where he lived, so I could send my lady and her truck to his house, to move in with him and his family. I wanted to add that -- but I didn't think it would be helpful. Besides, he was probably in another state.

"OK," said the supervisor, "next Friday. But after that we'd have pull the package and reconsider."

I wasn't on a speakerphone. When I could contain my surprise, I said, "Thank you. Next Friday should do it. Now let me hand the phone back to the closer because she needs to hear that from you directly."

I handed the phone back. She heard. We set up a real escrow closing -- it happens automatically when the last document is received by the title company -- and we went out into the rain.

My lady was still crying, but now she was happy.

But why in heck was any of that necessary?

1 comment:

Empress Bee (of the high sea) said...

i had one (when i bought the condo i'm in now) that had all sorts of arguments and finally after the closing and we had the keys and went to see it the sister and her husband were there (in our parking spot) on vacation. it took 8 hours to get them OUT of our apartment!!!! they were all so nasty and hateful but i got even (you knew i would). i found a box of jewelry and let them know it. they wanted it, no, sorry i bought everything in the apartment. it got so bad i donated the stuff to the goodwill and sent them a copy of my receipt. don't mess with me.

smiles, bee