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One of the Craziest, Weirdest Wholesale Deals Ever

This is a wild story, even for seasoned real estate investors. It’s a bit long, so you might want to get comfortable, grab a cup of coffee or a beer (depending on the time of day). Read it and weep. And then cheer at the end.

One of the biggest challenges in the business of real estate investing is finding title companies and escrow officers that understand our business. I just finished working one of the craziest wholesale transactions of my career, and the difference between the level of service offered by the big brand name title company and a small investor friendly title company was astonishing.

The name of the famous title company shall remain under blogging disguise from Google search and alert bots, and named in pictures only (worth a thousand words, what good return on investment!). But I will gladly name the unprecedented service offered by Fernon Meeks of Axis Title and Escrow in Denver for saving the deal and making some amazing moves. She is an investor herself, who decided to get into the title business. Her motto, by the way, is “We Stay Open so You Can Close.” I can vouch for that. (You rock, Fernon).

Real Estate with Lots of Hair

Now, I will admit that this deal had a lot of hair on it.  So I did cut some slack to folks.  Here are a few of the crazy circumstances:

• The property was foreclosed by the lender at the Denver Public Trustee and then listed as REO;
• It had numerous encumbrances wiped at foreclosure, but a federal criminal restitution lien (wow) remained attached to the property, with twelve month redemption rights. (hmm, this 10 foot pole is kind of heavy!)
• The property had been placed under contract 3 or 4 times already and fallen out due to title issues (big surprise) and also unsuccessful wholesalers who could not find a buyer etc. It got a lot of attention because it is in the hot Highlands / Jefferson Park neighborhood of Denver.
• The REO listing agent was in the process of being fired because so many contracts had been placed on the property that did not close.
• It was being “flipped” using transactional funding (flash cash) to an end buyer. Thanks to Short Funding for killer service too.

Is that enough craziness for a title examiner and escrow agent yet? Here’s more:

• The bank REO asset manager / listing agent had actually double contracted the property! Once to our company and again to the wholesaler who ended up having the only contract that would close (because if the contract fell, the bank was jerking the listing agreement). We had been in back-up position twice and legal stuff was flying everywhere.
• The wholesaler who had it under contract, and then re-contracted to us, had borrowed the earnest money from someone who sounded like a crazy mafia Italian guy (who called me checking up on the deal!).
• At this point all earnest money was hard (non-refundable to all parties). So if anything went wrong all the parties were like dominoes falling down, and would be pretty upset.
• Oh, one last thing. The wholesaler had “misread” one of the Amend-Extend agreements from the Bank REO and thought he had a discount that was invalid. So, his specific performance contract to me was for MORE than he was buying it for.  Bad Dog.

What Else Could Go Wrong?

Like I said, lots of hair. But here’s the real kicker, and where the title company tale starts. After all the crazy lien stuff was negotiated and resolved, and we figured out a way to resolve the double contract and back-to-back closing, it was discovered that the legal description of the property was incorrect. What else could possibly go wrong?

Next was the blame game for who screwed up the legal description. The listing agent blames the title company. The title company blames the public trustee. I’m sure the public trustee would have blamed the previous owner, but alas, he was in prison for mortgage fraud! How in the world do we get this deal closed?

This is point when the title processor decided to stop returning phone calls and emails and the deal went into limbo. Behind the scenes, and in preparation for closing the Side B to C transaction, Fernon at Axis was researching the problem with the legal description. She told me later that it had been incorrect for more than 10 years and at least one sale transfer.

So, we needed a survey, fast! The big title company ordered it and received a corrected legal description. Yeah!  BUT, now the title examiner was complaining that his commitment did not match the new (correct) legal description. Dumb investor to smart title company lady:   “That should be an easy problem to solve, Miss. Just change the title commitment to match the survey, right?”

To my absolute disbelief, the big famous title company was not willing to do this (I still don’t understand why). Instead, they called the surveyor and asked him to “correct his survey to match the title commitment!” Excuse me? You’re planning to use the WRONG legal description on my deed and your company will be “insuring over” the defect? Wow.

Thankfully, small customer service driven title company closer was privy to all this and was in the background preparing a title policy that included the service of filing the “accurate” survey at the County. This procedure would finally have the property and the legal description match, and insurable title from Side B closing forward and forever more. So my initial policy from the big bad title company was moot.

The Closing Finish Line!  After all was said and done:

• The wholesaler got back his borrowed earnest money back, and paid back the mafia guy.
• Wholesaler’s buyer agent reduced her commission (bless her) to account for mystery discount to get deal closed.
• Transactional funding company covers the short-term loan to wholesaler for Side A of the transaction
• I receive deed and title commitment insuring over improper legal, but re-insure with a new title company that makes everything legitimate and insured.
• I sell the property to the final end user, who was extremely patient throughout the entire process, and he now owns a great rental property.
• I take the rest of the week off, (we concluded at 4:30 p.m. on Friday).
• I send Fernon at Axis Title Company a really big thank you card and a bottle of wine.

End of crazy title company tale:  Small, investor friendly title company 1, big famous title company, zero.

Did I mention I love this business?