Editor’s note: One of the most amazing things about the real estate business is that no two transactions ever go sour exactly the same way. The difference between closing the transaction and having it “DFT” (deal fell through) is directly correlated to the agent’s problem-solving skills and how well the agent’s represent their client’s interests. Inman News would like you to share your personal “Transaction from Hell” that you successfully closed by going over and beyond the call of duty. Be sure to provide the “gory details” and what you did to close the transaction. We will publish the best of these in future columns. Our first installment comes from Inman News columnist, Bernice Ross. Send your own horror deals to hell@inman.com.
In October 1993, a good friend of mine listed his house in the Big Rock subdivision of Malibu, Calif. This area has a history of severe slides. In fact, it is so unstable the water lines are above ground. Prices are about 50 percent of other comparable homes in the area.
The tenant living in the property had not paid rent for nine months. Making matters worse, the property was worth less than the existing liens so even if we were to sell the property, we would have to negotiate a short sale with Citibank (i.e. persuade the lender to take less than their liens).
The buyer, whose job was managing a billion-dollar loan portfolio, initially contacted another agent to write an offer on the property, but became so irritated with the other agent’s incompetence, she refused to work with anyone except me. I worked out a 33 percent referral fee for the other agent.
The seller began eviction proceedings against the tenant. The tenant agreed to move out. On moving day, Citibank turned down the short payoff as the Malibu fire swept through Malibu. I sat with my seller on the phone for two hours watching the fire coverage. The reports said every house on the seller’s street was on fire. We watched the beautiful coral tree in his backyard burn. We were both convinced the property had “gone up in smoke.”
Three days later I went with the seller to view the damage. Every house on Big Rock Canyon had burned to the ground. The embers were still smoldering. When we turned onto my client’s little cul-de-sac street, five houses were totally untouched by the flames. Miraculously, his was one of them. But when we arrived at the property, we discovered the tenant had ransacked the house because he believed it was going to burn to the ground.
The buyer still wanted to purchase the property, but Citibank refused to accept the short sale. I demanded to speak to a supervisor. The comparable sales Citibank used had all burned down. I sent them the pictures to illustrate my point. Citibank still wanted to proceed with foreclosure rather than approve the short sale. When the second trust deed holder declared bankruptcy on Nov. 1, which stayed Citibank’s foreclosure, the lender decide to accept the short sale offer.
The buyer had sold her house continent upon closing the Malibu property. The seller had a state tax lien of $20,000, plus a judgment from another lender. In the meantime, the City of Los Angeles began a judicial foreclosure for non-payment of property taxes. The bankruptcy didn’t stay the city’s foreclosure.
The physical inspection revealed a crack across the entire slab. The preliminary title report also revealed a $48,000 special assessment that no one knew about. There was more movement in the area which would require another special assessment in the near future. The buyer refused to pay the special assessment, which meant Citibank would have to pay it to clear the property.
The seller became bankrupt. I explained the situation to the other lender, the state tax board and the second trust deed holder. We negotiated a reduction of what each was willing to accept in order to receive something from closing the sale.
The city set the foreclosure date of March 1, 1994. On Jan. 17, 1994, Los Angeles was rocked by the 6.7 magnitude Northridge Earthquake. There was a new crack in the house’s foundation. The earthquake was followed by torrential rains and the city said there would be another $10,000 special assessment to repair the problem.
Citibank agreed to the short sale, provided we reduce our commission by $9,600. This money would be used partially to pay some of the other lien holders and to pay the special assessment.
In the meantime, interest rates increased a full point. The buyer was traveling, so we FedEx’d the loan documents to her to lock in the interest rate. The hotel refused the FedEx package and sent it back to the lender. We sent a second set of docs to the buyer and FedEx lost the package. In the meantime, the purchaser’s of the buyer’s property was facing 10 conditions for loan approval. The buyer finally lost it and threatened to sue everyone if the transaction didn’t close. The buyer’s lender decided to fund the loan off a fax copy of the docs. I assisted the agent representing the purchasers for my buyer’s house in resolving the conditions for the loan approval.
We finally worked out all the details and were ready to close. At 6:00 PM the night before closing, the title company “dated down” the file and discoverd $3,600 in “escaped taxes.” The title company, its attorney and our attorney had never heard of this term. Since our company had three sides on this transaction, my manager and I decided to chip in the money to avoid going to court. We finally closed.
What kept the transaction together? When the second trust deed holder and the other agent who initially represented the buyer in the transaction wanted more money, I told them there was no more money and if they persisted, they would get zero. With each person or company, I used facts, pictures and other supporting documentation to support what I was saying in the negotiations. Every time another disaster hit, I told the buyer: “Here is the problem, and here are the options for coping with it. It’s your choice about canceling the transaction or continuing.” After the closing, the buyer told me the one thing that kept her in this horrible mess was that I provided options, but never tried to force her to stay in the transaction.
Seven years later, the buyer sold the property and made a cool 100 percent in appreciation.
Do you have a “transaction from hell?” If so, we want to hear from you! Send it to Hell@inman.com.
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