Where did the money actually go?

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Where did the money actually go?

Mary Ann Rocco
Huntington Beach, CA · Member since 2009 · 13 posts · 0 votes

I'm a private buyer in California on a short sale with 2 loans. Owners haven't made payments in about 16 months and left the house about a year ago.

Fake numbers here just to make my point. I took my buyer closing costs out of both sides of the equation to simplify the example.

MY ORIGINAL CONTRACT:
Sale Price: 200,000
Additonal to 2nd: 16,000
2% in Commissions: 4,000
TOTAL: 220,000

AMOUNT GOING IN TO ESCROW:
Bank Loan: 160,000
from Me: 60,000
TOTAL: 220,000

So far so good. I got copies of the short sale letters literally the day I had to close (the SS letters would expire). I wanted to understand where the money was going. The seller costs were not listed in my HUD-1 statement, just my buyer costs showing the 200,000 sale price plus the additonal out of pocket on the 2nd and the various closing costs. No details on how that 200,000 was really broken down and who was really getting what. The escrow co would not tell me when I asked , basically that I wasn't entitled to that info. Here is what I know.

Amount in 1st SS letter: 160,000
Amount in 2nd SS letter: 27,000
Agent Commissions: 12,000
My estimate of seller closing costs: 6,000 (I estimated high)
TOTAL 205,000

So where did the other 15,000 go? Why wouldn't the escrow company give me this information...why won't ANYONE give me this information? Is there some seller cost that I'm missing? Is it possible that the SS letters exclude any back interest owed such that more had to go to those banks? I moved forward and closed escrow today but I can't seem to let this go in my mind. It's driving me crazy...

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Vikram C.
Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
16y

That's strange. You will normally sign a settlement statement which has a section called "Summary of Borrower's Transaction" and another section called "Summary of Seller's Transaction." These are sections J and K in the HUD-1 form. They should give you all the details that you need.

I thought this form would be the same throughout the country and not specific to AZ. Please recheck the document you signed to see if you missed something.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y

    Legally, it all needs to be itemized on the HUD, so just ask the closing attorney for a draft of the HUD and that should answer your questions. If they refuse to give it to you or to explain where the money is going, find another closing attorney, and let them know you're planning to report them to the attorney general, as you're concerned about potentially being the victim of fraud...

    Worst case, you'll find out all the details at closing, at which point they have to give you a copy of the HUD.

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    2Reply
  • Mary Ann Rocco
    OP
    Huntington Beach, CA · Member since 2009 · 13 posts · 0 votes
    16y

    Thanks. In California we use real estate agents not attorneys. I ALREADY closed and have the HUD statement. It only shows my buyer costs as the 200,000 + the 16,000 as shown in the original CONTRACT. The question comes up that I am not being provided the details on how the 200,000 was divided up. I know that the 2 loans are less than 200,000. I've factored in all of the commissions and an estimate of closing but still fall short. I thought someone here could provide insight to me on where that money went.

    0Reply
  • Vikram C.
    Real Estate Investor · Phoenix, AZ · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    That's strange. You will normally sign a settlement statement which has a section called "Summary of Borrower's Transaction" and another section called "Summary of Seller's Transaction." These are sections J and K in the HUD-1 form. They should give you all the details that you need.

    I thought this form would be the same throughout the country and not specific to AZ. Please recheck the document you signed to see if you missed something.

    3Reply
  • Bill Patterson
    Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes
    16y

    Mary Ann,
    It could be negotiators fees that add part of the cost. Back taxes may add up to quite a bit, also.

    At any rate....does it really matter? Did you get the house you wanted at a good price? That is what counts most!
    Bill

    2Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    The HUD-1 is uniform as well as requirements to complete the form. In some areas and depending on the title company closing agent, one form can be completed for the seller and another for the buyer. Unless there are state requirements for disclosure for both sides, only the side applicable to that party needs to be disclosed. Like Bill P. asked, did you get what you wanted at the price you wanted? It's irrelevant how the other side split up proceeds, so long as you only paid wht you were required to pay and you did not incur liabilities on the deal. Sleep well! Bill

    2Reply
  • Mary Ann Rocco
    OP
    Huntington Beach, CA · Member since 2009 · 13 posts · 0 votes
    16y

    You are all SO RIGHT! I wanted this house so bad I stayed in escrow that took exactly 1 year to the day to close. I probably paid about 20-30K more than the house is worth now, but this is the house I will spend the rest of my life in. THANK YOU for the 'gentle' slap therapy to just 'let it go'.

    Mar

    0Reply
  • Richard Warren
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    16y
    Originally posted by Mary Ann Rocco:
    THANK YOU for the 'gentle' slap therapy to just 'let it go'.


    I don't know that you should just let it go. By law you are entitled to an accurate accounting. Take the HUD1 to the title company that handled the closing and ask them to explain it to you. You are probably just missing something but that doesn't mean you don't deserve an explanation.

    :cool:

    2Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y
    Originally posted by Richard Warren:
    Originally posted by Mary Ann Rocco:
    THANK YOU for the 'gentle' slap therapy to just 'let it go'.


    I don't know that you should just let it go. By law you are entitled to an accurate accounting. Take the HUD1 to the title company that handled the closing and ask them to explain it to you. You are probably just missing something but that doesn't mean you don't deserve an explanation.

    :cool:


    Richard, it's my understanding that she received the full accounting on her side of the transaction and understands it, RESPA does not require an accounting for both parties be given to both parties, just their side as applicable.
    0Reply
  • Richard Warren
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    16y
    Originally posted by Financexaminer:
    Richard, it's my understanding that she received the full accounting on her side of the transaction and understands it, RESPA does not require an accounting for both parties be given to both parties, just their side as applicable.


    You're right - I missed that.

    :cool:

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y
    Originally posted by Financexaminer:
    Richard, it's my understanding that she received the full accounting on her side of the transaction and understands it, RESPA does not require an accounting for both parties be given to both parties, just their side as applicable.


    This may be the law, but it's a horrible law. How can any party in the transaction verify the veracity of the entire transaction, and more importantly, how can the buyer or seller ensure the the closing company isn't working with one party to defraud another.

    For example, if the appraiser submits an invoice to charge the appraisal on the HUD, and his invoice is for $100 less than what I had expected to pay, how do I know that the extra $100 isn't going into the hands of the closing company or the other party?

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    1Reply
  • Mary Ann Rocco
    OP
    Huntington Beach, CA · Member since 2009 · 13 posts · 0 votes
    16y

    Thanks for validating my concerns. Why not fill out both sides of the HUD-1 form if there is nothing to hide? It burns me that I'm not entitled to know where my money went...oh I forgot I've let it go.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    Did you buy directly from the previous owners? Or was a wholesaler involved? Could this have been a double close, and the HUD-1 you're seeing is only for the second closing (wholesaler to you)? Who's listed as seller on your HUD-1?

    1Reply
  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y
    Originally posted by Mary Ann Rocco:
    The escrow co would not tell me when I asked , basically that I wasn't entitled to that info. Here is what I know.

    Amount in 1st SS letter: 160,000
    Amount in 2nd SS letter: 27,000
    Agent Commissions: 12,000
    My estimate of seller closing costs: 6,000 (I estimated high)
    TOTAL 205,000

    So where did the other 15,000 go? Why wouldn't the escrow company give me this information...why won't ANYONE give me this information? Is there some seller cost that I'm missing? Is it possible that the SS letters exclude any back interest owed such that more had to go to those banks? I moved forward and closed escrow today but I can't seem to let this go in my mind. It's driving me crazy...


    Do you have copies of the SS letter's? If so, were you listed as the buyer on the SS letter? Who is the title company? Is it Old School/Chicago Title?

    Was your purchase agreement (contract) made out to "owner of record", or was their an indivisdual's name? If it is the latter, you can try to search the public record to see if the seller of record was indeed the individual you contracted with.

    1. Perhaps you contracted with the sellers originally, then after the fact, someone stepped in and negotiated the short sale and either perfected title and sold to you or wholesaled to you with a simultaneous close (using your funds). This could be mortgage fraud since your offer ( for a higher amount) was executed prior to a third-party intervening.

    2. Since you had more than 20% down, you probably bought your house from a SS flipper. This is perfectly legitimate, though it should clearly have been disclosed to you prior to closing.

    In my opinion, you should contact your agent or the listing agent to get clarification. If you did not have representation yourself, then this is probably why your in the dark. If you did have representation, then start with your agent. If you receive no cooperation, then contact their designated broker and threaten to file a complaint with the DRE.

    Regardless of the scenario, I believe the transaction was not properly disclosed and may even have been purposely kept from you. Brokers carry errors and omissions insurance that would payout on this tyoe of claim becuase you could prove you paid $15K more than you should have.

    3. More than likely, the $160K and $27K were NOT proceeds to the lender not sales price. The sales price still could have been $200K - $27K (2nd mortgage) - $12K ( Agents) - Closing costs = $160K ish.

    In my opinion, the numbers may not make sense to you because you may not have the entire picture and this transaction was probably legitimate. However, it is worth looking into becuase I still have questions like why did your agent commissions go from 2% to 6% percent? And, why did it take one year? So, I think you certainly did not receive any value for the time you spent waiting for your home at 6.

    Let us know.
    1Reply
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