In a previous blog I mentioned the process for a double close. In my last blog I wouldn't share this secret as I wanted more people to read more of my blogs. Well, this time I will give a brief explanation as it is important for the experience I will share for this installment.
Process: We get a property under contract and open escrow. If the seller is a bank we generally have to use their preferred title company. We deposit earnest money. We market the property for sale. We find a buyer. Our buyer opens escrow with our favorite title agency, Security Title, and they deposit their earnest money. Let's say we have a purchase contract of $50,000 with the bank (seller). And, we have a sales contract with our buyer for $55,000. On closing day the buyer deposits the $55,000 with Security Title. Security Title then wires the $50,000 to the bank's title company. Once the closing with the bank's title company is complete we close our sale with our buyer with our title company. The $5,000 difference is our profit. This is typically the most creative double escrow we do.
I hope this helps. If not, don't worry about it. The story will make less sense, but I only have so much time and patience to explain these things.
The above example is how a smooth transaction should go. I am sure by this time the readers are sensing there is more to the story. You are correct in your assumption. I am sensing you are all of above-average intelligence. And, my measure of above-average is anyone smarter than me, which is nearly everyone. I know, this is not supported mathematically. Did you know “mathematics” is the study of math? Clever. But, this is a real estate blog. Know what? There is not a fancy word for the “Study of Real Estate”. How unfortunate.
Ok, back to the experience. We bought a property from a bank. Well, by “bought” I mean we had it under contract. We marketed it and found a buyer. Let's call him “Jumpy”. Jumpy was what is called a “rehabber”, or a fix-and-sell buyer. In other words, Jumpy would buy the property, fix it up and then resell it retail to a homeowner.
Friday afternoon there was a hiccup with the title process and we didn't close. So, the closing would be postponed to the next week. This was no big deal. As much as we wanted to close we understood they couldn't close until the issues were cleared up and we could get clean title that we could pass on to our buyer, Jumpy.
Mid-day Monday we hadn't closed. The seller's agent happened to drive by the property. Actually, he didn't drive by. He slammed on his brakes and came to a screeching halt. There was a construction crew working madly on the house. He was shocked! The windows were being replaced and the inside had been torn apart. They were putting in a new front door as he was sitting in his car with his mouth agape. He immediately called our agent to find out what was going on. Our agent called us and asked what was going on. We called Jumpy and asked him what was going on. He said, “Well we closed on Friday. So, on Friday afternoon we started to work on the project and have been at it all weekend!” He was pretty happy with his incredible efficiency. Well, happiness turned to panic. We had NOT closed on Friday. Now he was nervous, really nervous. He said he had already sunk $20k into the project (likely an exaggeration, but there was no doubt he had spent money).
We called our agent and told him the crew thought we had closed. The best thing to do was just close and all would be fine. He called the seller's agent and relayed the information to him. The seller's agent was not happy and suggested lawsuits, fights, legal battles and more. Our agent informed him if he went that route the selling agent would ultimately lose the listing and get nothing. He told him to just close and all would be fine.
Well, Monday turned to Tuesday and Jumpy was getting jumpy. He hadn't slept well. He begged us to make it happen. We told him we were working on it and to just relax. Jumpy was jumpy and not going to relax. Plus, he hadn't slept. Tuesday turned to Wednesday. Anxiety was rampant. Wednesday turned to Thursday. Our agent was in communication with the title company and the seller's agent. The seller's agent was getting super angry. Our agent told him to relax. But, the selling agent wasn't listening.
Well, on Thursday while the agents were arguing about who was responsible for what and which side of the lawsuits each would be on, we closed. There was a collective sigh of relief. Well, with all except the selling agent. He wanted blood. The commission check must have changed his mind. We never heard from him again.
And that is real estate in my corner of the globe.
Bruce B Wuollet
Learn more at www.thebakersonfund.com