Securement company rekeys property in error

I negotiated a short sale and closing for my Seller that went off without a hitch.  We successfully closed the file back in August and the Buyers were given keys at the closing table.  With that being said, we were pretty surprised last week when we received an urgent email and call from the Buyers’ agent stating that the Buyers had returned home from their honeymoon to find their property had been rekeyed.

My first thought was:  What went wrong??  Did the Title Company not wire payoff funds?  We immediately checked the wire confirmation and the mortgage company confirmed they received the proceeds and closed the file.

Our second call was to the securement company and we were told that their company is so overloaded with rekey assignments that they received the order to rekey the property from the bank before they received notice we closed our transaction.  We were told that the securement company did not follow procedure.  The securement company is supposed to check with the mortgage company prior to rekeying a house to confirm if the order is still valid.

The Buyers called the police but decided not to file a report.  The Buyers’ agent demanded an apology from the securement company but to this day has not received one.  They did send a check to the new homeowners for $300.00 and also reinstalled the homeowners’ locks that had been removed.  The Buyers were happy with the end results, mostly relieved that they truly owned the house they bought.

Homeowner Behind on Mortgage and Near Foreclosure

Homeowner behind on mortgage and near foreclosure seeks help from a company that promises relief.

We received a call this week from a potential client that was referred by a local realtor to handle a short sale on her property.

The referral began because the homeowner received a visit to her property from a securement company stating that they were checking if the property was occupied or vacant. This obviously concerned her, which resulted in her call to us.

After speaking with her, she informed us she was served with a notice of foreclosure some time ago. She went on with stating that she hired a company to help her stop the foreclosure and help her obtain a loan modification and paid them about $4,000.00!! The company was helpful at first but then began to not return her calls.

The homeowner gave us the name of the foreclosure attorney and we decided to call them to find out the status of the foreclosure. After speaking to them, we come to find out that the order approving the sale was confirmed by the judge in the beginning of April of this year and that the judicial deed was issued and in the process of being recorded!

We called the homeowner to inform her of what we found out which, unfortunately, was bad news for her… she had lost her property to foreclosure and most likely eviction proceedings will begin.

Homeowners BEWARE of companies promising you foreclosure/mortgage relief for a fee!

Agents soliciting attorneys on short sales

I met with a real estate agent who wanted to refer me short sales.  He said he had an in-house negotiation team and would like to hire me for only the closing portion of the transaction.  I explained my concerns which namely are protecting the Seller from future liability with their existing lender and how I would have to review and except the short sale payoff prior to closing.  I would be putting my client in jeopardy if he did not negotiate the payoff properly because I would refuse to complete the closing.  I would want the short payoff to list that later the lender would not pursue any sort of deficiency judgment (see previous blogs).  The real estate agent did not seem to understand this point but agreed that he always obtained this language.  Personally, I was suspect.

He emails with his next idea – he is going to have his bankruptcy attorney (who sends him deals apparently) send me his short sale clients.  My part of the bargain is to pay this attorney a referral fee of $400-500….in fact this is how it came over….”I usually set up a referral through the real estate attorney – he usually gets $400-500 via the closing attorney after the sale”….he goes on to say that he will always guarantee I’ll get $750.00 in attorney fees + title.

Many points could be discussed regarding the above solicitation…but the point here is that attorneys are governed by ethical rules enforced by the ARDC.  In most cases, attorneys are not allowed to split fees with other attorneys (certainly not paying a bankruptcy attorney fees for sending a closing).

Rules 1.5(e) permits fee splitting between lawyers, not members of the same firm, where the primary service performed by one lawyer is the referral of the client to another lawyer, if certain requirements are met. A referral agreement is valid only if it meets all of the following requirements:

(1) the client is advised in writing by that the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial responsibility for the representation (i.e., the referring lawyer agrees to be financially responsible for the performance of services to the client);

(2) the client is advised in writing the share each lawyer will receive;

(3) client consents in writing after receipt of the written disclosure; and

(4) the total fee is reasonable. 

The above solicitation does not fit the parameters of the ARDC rule.  The agent took this news in stride and it seemed he just did not understand the rules and was apologetic about asking me to commit a violation. 

Next, he sends over a contract and it states that our office is just supposed to do the closing.  There is a third-party company negotiating the short sale.  If the short sale is approved – there will be a $3000.00 attorney fee paid and of that $3000.00 the third-party company would get $2000.00 ( I could not make this stuff up!)  Further, if the attorney fees are approved at $1000.00 then the company would get half the attorney fee.  I’ll start by saying I will have no part of this deal (again refer to above rule amongst other reasons)….  

But let’s talk about what’s wrong with this…   

1. We have the fee splitting – now not only with a non-attorney (which is never allowed) but some third-party company!
2.  Third party companies are going to be negotiating short sales!!!  I guess we know what the next litigation will be about
3. Who’s protecting Sellers???  Do third-party companies care (or even know) about deficiency judgments?
4. Attorneys – don’t get blind sighted by coming to the table at the last minute for a closing only to find a third-party is involved.
5. Real estate agents – Why not just let the attorney negotiate the short sale payoff & protect the debtor making the transaction smooth and shifting the liability to the right place?
6. What is the advantage to third-party negotiating a payoff – you are not saving money…. you are not creating a quicker closing.

 

 

Can I buy a home while negotiating a Short Sale on my current home?

We received an interesting call today from a client who is requesting assistance with her short sale and also trying to purchase a new property with a loan. My initial reaction was – How could she short sale her property with her current mortgage company and expect a lender to lend on the new purchase she is negotiating a contract on?

I wanted her to be aware of every scenario possible; the short sale lender denying the short sale after they review her financial statements; the new lender denying her loan due to her being in a short sale position with her current property.
This client may come to the table on both deals since she has not been delinquent on her current mortgage and plans to continue paying until she closes the sale of her property. I am sending the request on her short sale.

It might work! Either way, we will protect her by making her sale contingent on short sale approval. Her purchase will be contingent on her ability to obtain financing. So, she has nothing to lose for trying.

Homeowners’ Association Threatens Eviction for Non-Paying Homeowner

I received a call from a frantic man stating that he received a notice from his homeowner’s association stating that if he does not come current on his HOA dues including interest, penalties and attorney fees the homeowner’s association will take possession of his unit on May 6, 2011. The gentleman was distraught explaining that he had tried to make payment arrangements with HOA and the HOA would not cooperate.   The man is a construction worker who has been laid off for months and has struggled to make payments on his mortgage as well.   We have been hearing more and more stories regarding condo owners not being aware that if they fall behind on their assessments the condo association can take possession of their unit per The Forcible Entry and Detainer Act.

Illinois is one of the few states where the HOA is granted the power to evict a non paying association member.  The association does this to obtain use of the property, so they can rent it and or collect rents to cure the homeowner’s dues default. The homeowner still owns the property but cannot occupy it until the payments are made up.  They believe the threat of eviction to the homeowner is usually sufficient to motivate them to pay the owed amount.  Many homeowners are so far behind at this point and unaware they can be evicted that they ignore the HOA hoping it will go away without knowing they have other legal remedies.   Do not let this happen to you!!!!!!

For the full copy of the Forcible Entry and Detainer Act, please click on the link at the bottom of our page.

Home buyer tax credit must be paid back

I am amazed at the number of first time buyers who are shocked that they may have to pay the 7500.00 “homebuyer credit” back.
FYI -
The “first-time home buyer credit” is a temporary refundable, repayable tax credit equal to 10% of the purchase price of a home, up to $7,500 for singles and married couples filing jointly. (Singles who buy a house together get only $3,750 each, as do married couples filing their tax returns separately.) [...]

But the way the credit works, it’s actually more like an interest-free loan. Two years after you claim this credit, you have to start paying it back. The payback comes over 15 years in 15 equal installments–meaning you owe an extra $500 on your tax return each year. Sell your house, and you have to pay the rest back that year from your profits. (No profits, no pay back. Also, if you die, your heirs are off the hook.)

The allowed credit starts being reduced once a single has $75,000 of modified adjusted gross income, or once a couple has $150,000 of income. The credit goes away entirely at $95,000 for singles and $170,000 for couples.

The justification behind a $7,500 interest-free loan is that it is supposed to ease the “pain” of having to come up with closing costs and a downpayment.

Some good examples can be found at :

http://activerain.com/blogsview/647879/7500-tax-credit-faq-

Bank Overreaching: Water Shut Off Without Homeowner’s Knowledge!?

I received an interesting call today.  A woman is short selling her $139,000 real estate for $30,000.  She asked how the bank winterized her property without her knowledge.  The water is shut off; locks on the door.  I did inform her that it is possible the bank obtained the power from the adverse possession law which allowed them to shut her out of her property.  It is a safety net for banks foreclosing on debtors who throw up their hands and walk away from their properties – abandoning their properties.  She informed me she had not left!  Thus, she was going to begin to protect herself by putting a notice in the window stating that she was negotiating a short sale with the bank and that she is the owner of the property & take pictures of the notices.  Also, she was giving notice (with a picture) & warning that she was cutting off the lock if they didn’t come and remove it.