Does Your Title Company Have Your Back?Posted on September 2, 2014 by
All Investors and Realtors need to know the guidelines of their Title Company’s requirements for buying and flipping short sales. Each Title Company may have one or two underwriters which tell them how to conduct their business. I am a firm believer in having all my i’s dotted and my t’s crossed with full disclosure. Whenever I want to use the end buyer’s money to fund the first transaction “A to B” closing, I have already sent all my forms to the Title Company to send to their underwriter to review. This way, I will not have any problems when it is time to close. Some Title Companies will require additional documentation and others approve my forms and are ready to close, saving you points and interest on hard money.
Recently though, I had a short sale closing set on Friday with a Foreclosure Auction set on the following Tuesday, leaving 3 days after the closing to get them the money (which must be certified funds), and have them stop the Foreclosure Auction Sale. Obviously, when purchasing short sales, we don’t want to procrastinate it to the last minute due to the new guidelines with the Florida statutes about the timeline for postponing Foreclosure Auctions. These guidelines of making sure that the Plaintiff’s Counsel and/or the Defendant’s counsel has filed a Motion to Cancel Sale at least 10 to 15 days prior to the actual auction make it difficult to get Fannie Mae and Freddie Mac to act due to the fact they follow that guideline. Meaning, if you have passed the window of the 10-15 days and it’s down to only 8 days before the sale date, they will say you missed it and it’s too late to request postponement. However, there are times when “stuff” happens and you close within that 10-15 day timeline, not giving the Plaintiff’s Counsel enough time to get a Motion to Cancel heard before the original Judge. Our court system has turned into a mill! Even if both parties agree, Plaintiff and Defendant, they are having a hearing before the original Judge. When I worked for attorneys, all you had to do was prepare a Stipulation and Order of Postponement and/or Cancellation, both parties would have agreed and the Judge would sign it without a hearing. I believe the Plaintiff’s attorney just likes to charge the bank more money for representation and this would be too easy for all parties. The Foreclosure Auction could be held on line or before a different Judge that does not know the Seller’s situation, nor do they care. Many times, if the Sellers wait to file their Motion to Cancel in Pro Per (acting as their own counsel), the Foreclosure Auction Judge will deny it versus the Judge who has heard their case all along.
Back to my story … I called the owner of the Title Company to make sure that there would be no problem with closing so close to the Foreclosure Auction sale and he said “no problem” but we need to make sure that the Foreclosure Auction was cancelled and that it was pulled from the foreclosure sale list. Since the Seller had an attorney, I already had him working on the cancellation of the sale. The money was wired to the Title Company for the closing on Friday and then at 2:00 p.m. the owner of the title company called me and said that his underwriter didn’t want it to allow it to close unless we already had the sale date cancelled. The catch 22 was that the Plaintiff’s counsel was not going to cancel the sale unless they received their money. I was furious because the rules had changed and I wasn’t informed. The first mortgage was receiving a full payoff and the 2nd and the 3rd were short sales. I told him if he sent my money back to me now, I may not have time to get the wire, get a certified check and get it to the Plaintiff’s counsel in Ft. Lauderdale by Monday morning so that they would file a Motion to Cancel the Sale. We argued a bit and then we came to an arrangement, he would send the money to the first mortgage company on Friday and then on Tuesday we would close and payoff the 2nd and 3rd mortgage company. I wasn’t happy with this idea however, I had approval letters from the 2nd and the 3rd which he recommended I ask for more time so as long as it closed on Tuesday, I was happy.
1. What I was afraid of: When the first mortgage company received a full payoff, then the 2nd mortgage company, who agreed to $1,000 and was owed $30,000, would move into 1st position.
2. If the second mortgage company realizes that they are now in 1st position, then the entire amount of the debt would have to be paid off.
3. I didn’t like that the rules changed, as I could have sent the money myself to the 1st since it was a full payoff, 2nd and 3rd then closed with him on Tuesday showing that all parties had been paid and all he had to do was finish the closing documents. NOTE: Many people couldn’t do this, but I have the experience and knowledge and I was planning on doing this if any problems arose.
Friday, I contacted the second mortgage company and asked to extend the closing date to the end of the month. Instead, they sent me a revised approval letter with an INCREASE in the payoff from $1,000 to $1,700. What?! As I argued back and forth with the negotiator showing him I already had a letter that said $1,000, he finally produced the final approval letter for $1,000 and this time, removing the 60 day deed restriction on the property and accepting the $1,000 as full settlement versus just a release which would have allowed them to go after my seller. Boy was I excited!!! I not only got the $1,000, removal of the deed restriction but also a full settlement. As a negotiator, I believe that everyone can get a full settlement on these liens, you just have to keep asking “how” it can be a full settlement and if you are flipping it and the negotiator says it will take another $1,000, I would recommend that you pay it and make up the difference on another deal. You should always worry about your Sellers and remember, their referrals and testimonials will keep you in business forever!
Everyone believes that the Plaintiff’s Attorney representing the Banks are actually aware of when there is a Foreclosure Auction Sale and when they are paid off and then they will dismiss the case. That is wrong and that is the farthest thing from the truth!! Whenever I am negotiating with the Banks, they don’t even know if there is a foreclosure sale so it’s always important that we check the docket by going to www.flclerks.com, click on the correct County and then look in the Civil records so that you can view the docket and track the case. We have to always send the negotiator a copy of the docket showing the sale date to get them working on a postponement 30 days in advance because it takes them that long. If you don’t start 30 days in advance, then they will not postpone the hearing unless a Seller files a Motion to Cancel the Sale and/or the bank receives a total payoff. Even then, you need to make sure that the case is dismissed.
The moral of this story is to know if something changes with the underwriter that your Title Company uses. You cannot assume they will tell you every time underwriting guidelines change, as they most likely will not. You need to constantly be asking questions and double checking while you are structuring your deals to be sure your Title Company can close them. In addition, have a 2nd Title Company to fall back on. I work with a couple of Title Companies and I am glad I do because of the above reasons. I recommend that you too talk to 2-3 Title Companies and find out who their underwriters are and will they allow you to conduct business the way you want to, as I teach you to fully disclose your intention to the Bank that you are planning on flipping the property.
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