Sunday, September 28, 2008

Why it is essential to be represented by professionals in real estate transactions

When thinking about what duties Realtors perform in the sale of a home, many people assume our main job is marketing. And on the buying side, many assume our main duty is to set showing appointments. While marketing and setting up appointments are part of a Realtor’s job, it is hardly the main function or most important.

In my opinion, the most important function of a Realtor is to protect our client’s best interest.

Recently I represented a buyer in the purchase of a home in Bellwood. My client, whom I’ll call Vivian, was a first-time buyer. After showing her a few homes, she fell in love with a home in Bellwood. I then educated her about what similar homes recently sold for in that area and she made an offer. A day later, we received a contract back signed by the owner. Sounds pretty simple huh? Well, the simple truth is without a team of professionals, she would have never closed the deal and gotten the keys to her home.

That’s because of several factors. First, although we had a signed contract, it didn’t mean anything because the seller turned out to be in pre-foreclosure and had to get approval from their lender to sell their home. After explaining that the home was being sold “short,” Vivian wanted to move forward with the purchase. In situations where the home owner owes more than his home is worth, he must get permission from his lender to take a fair market price. In this case, I was told that the lender had approved the asking price and given an estimate of three weeks for approval. Knowing that short-sales typically take two-three months, I prepared Vivian that possibility. In the meantime, I recommended a mortgage broker to her and made sure she had everything lined up and ready to go. I also explained why it is imperative for her to work with a real estate attorney and put her in touch with an excellent attorney whom I work with often.

It took three months for lender approval, which was in line with the original timeframe that I estimated for Vivian. Once we received approval from the lender, we scheduled the closing date! Ironically, even though my client had a mortgage commitment and was ready to go weeks before, the seller’s lender told us that we had to close on the scheduled date or they would foreclose on its seller. I know it doesn’t make sense, but short-sales and the way lenders work is a discussion for another time. Regardless, we had a scheduled closing so the hard part was over….right?

Like many suburbs, the Village of Bellwood requires a city inspection before they will release tax stamps, and without the stamps, a closing cannot be completed. Once the closing was scheduled, I called the village to schedule the inspection but was told that the seller would have to schedule it. After checking with the village every so often, I was told that the seller had it scheduled and it would take place about 10 days before the closing.

Well the closing date arrived and Vivian, her attorney and I arrived on time. After a few minutes we were told that the seller’s attorney was at the Village of Bellwood picking up the tax stamp. [The seller never told us that the stamps were not issued after the village inspection 10 days before.] After another hour of waiting the title company informed both parties that they had to transfer funds within 15 minutes or the closing would not take place! Remembering that the seller’s lender said we had to close on that day or the deal would be off, I got on the phone to the seller's attorney and was told that he had the tax stamps in hand. He then called the title company representative, told her the same thing and we were done ….but not quite!

The title company representative took the seller’s attorney word and transferred the funds. At this point, my client was congratulated and we thought we were just waiting for the seller’s attorney to bring us keys when I received another call! This time, the seller’s attorney informed me that he did not actually have the stamps. He said that he was sure he’d get them and didn’t want to ruin the deal so he had told us a lie! He added that there was a “small problem.” When I asked what it was, he said the village wanted to hold money in escrow to ensure that my client brought the property up to city code. Then he told me how much the village wanted from my client -- $11,000. I knew that my client did not have an extra $11,000 and for a few minutes I thought the deal was dead. I told Vivian the situation and could see the disappointment on her face. In fact, I was surprised that she didn’t cry. I probably would have if I was in her position.

After huddling with my client’s attorney, her position was that the property was closed and that the title company should be on the line for the $11,000. They approved the transfer and now would have to go after the sellers’s attorney for the money! While this sounded good in theory, I knew in reality that the only way my client would get the home would be after a long legal battle. I knew there had to be another way.

Vivian’s attorney and I both made several calls and in the end we got the $11,000 escrow reduced to $160. That’s right --- we got it reduced by $10,840
How’d we do it? I could probably write a book about that, so all I’ll say here is that we were persistent and tenacious and I am very happy to report Vivian closed and moved in!

To me, it scares me that some people would attempt to buy a home without professional representation. I can’t imagine if my client forked over $11,000 for a ridiculous village escrow. Even if she would ultimately get the money back, she would have to make several costly repairs and upgrades that her attorney and I convinced the village were unnecessary. On the flipside, if Vivian didn’t pay the escrow, she would not have been able to close that day and the lender would have foreclosed on the seller. Either scenario would not have been good for Vivian.

I hope this example gives you a little insight into some of the ways Realtors and other professionals help their clients. If have any questions about short sales, foreclosure properties or other real estate issues, contact me anytime! Also, you can see a list of attorneys, mortgage professionals and home inspectors that I recommend by clicking here.

Your friend and Realtor,
Robert Chiarito

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1 comment:

New Jersey Real Estate said...

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