WHAT WILL YOU DO-IF THE CITY IS ABOUT TO KILL YOUR DEAL?

Question

When it comes to making money in real estate, it is never a done deal until your check or wire is in your bank. What would you do if you have been working on a deal for almost a year and on the day of closing, the city lien pops up?

I got such a call from my escrow officer on one of my deals.  everything was set to go, until the buyer's lender refused to fund because escrow cannot provide a pay-off on a lien that popped up at the last minute from the city.

When I got a call from my escrow officer about the lien, I almost hit the roof. I said to my escrow officer, why don't you call the city and get a demand. She responded, Toyin, I already requested and they told me it will take them two weeks. I was livid. Fire was coming out of my ears. I began to imagine the frustration of starting over again if I lose this buyer.  Now I knew why I wanted to hit the roof in the first place. I immediately called the city pay-off department and the conversation went like this with the city clerk.

Me,   "My name is Toyin Dawodu, and I am calling about the property located at.. ... can you please get me a pay-off regarding the abatement lien?

City Clerk- "some one just called a few minutes ago and I told her that we will send the demand in two weeks.

Me, "Maam, you don't understand, if we don't have these pay-off today, the lender will not fund the buyer's loan. If the loan is not funded today, the docs will expire, and I may have to find another buyer and start all over again."

City Clerk- " I don't know what to tell you. "Click"  That was the end of our conversation.

What will you do?

HERE'S WHAT I DID.

As soon as I finished with the city clerk, I began making a series of telephone calls to any and every official in my city hall.

I call the supervising abatement officer, I did not get any traction

I call my city councilman and his assistant said they will look into it.

I called the mayor's office and yelled a lot.

I called the city ombudsman and complained.  everyone I called, I asked them one question?

How can investors help improve your city by fixing dilapidated properties when you stand in their way of making money?

This question confounded them enough for the city attorney to call me back less than two hours after I set the city ablaze with my phone calls.

My first question to the city attorney was, "can you explain to me why it will take your city two weeks to give a demand on an abatement lien for which the grass was cut three months ago?  Then I used the city's slogan of "city of technology" against him. I said "so much for your so called wired city"

After some back and forth negotiation and maneuvering, the city attorney produced a demand that was sufficient enough for my escrow officer to calculate her estimated closing statement.

The lender got the statement in time to fund the loan.  I closed my deal and got my check.

The only person that cared about my check was me. So if I did not know what to do, or I had allowed fear of calling the Mayor or my city officials to stop me, my deal would have been dead.

Fear is the number one reason most investors fail in this business. How would you have handled this last minute deal breaker?

Karen Sanders · Answer

Exactly as you did. If you are faint of heart this is not the industry for you.

Steve Babiak · Answer

I recently was seller at a closing where something similar to the OP's tale occurred. Property was purchased at sheriff sale. Sheriff sale proceeds had a distribution payable to the county Tax Claim Bureau (TCB) for liens owed to the TCB that pre-dated the sheriff sale. The distribution to the TCB was sufficient to pay off all of those old liens. Now, a lien search for tax liens in that county can be looked up in two different systems, and so the payoff should have led to a satisfaction of all TCB  liens in both of those systems - but somehow a single one of the liens was not recorded as satisfied in one of the systems (yet all other TCB liens did get recorded as satisfied in this system). So the buyer's selected title company orders a tax certification (that is paid for by seller) and the tax cert shows that nothing is owed to the TCB - but the title search finds the lien that was missing a satisfaction and so the title company wants me to take care of that lien. I tell them that it had been taken care of from the sheriff sale distribution already (anybody with a clue understands that is how these things work at sheriff sale). Title company is not satisfied with that answer. So I contact the TCB and nobody answers the phone so I leave a voice message and also send an email that received no response. Call the TCB again a day later and somebody does answer, and basically tells me stuff very similar to what I told the title company, tax cert showed nothing owed to TCB and that there was a mistake that the satisfaction was not recorded on that one lien. And proceeds to tell me that it is not a surprise, since some of the TCB functions had been outsourced in the past and that the third party company had to be dismissed because they failed to have satisfactions recorded for numerous liens that had been paid off (this was not the only one). So I asked how soon the satisfaction would be recorded now that it admittedly is supposed to be satisfied; the answer given to me was seven to ten days because it had to first be approved by the TCB's solicitor. I said that was unacceptable since my closing was three days away - they had to be able to do better than that since they were ultimately responsible for this mistake. I was told there can be no guarantee of that happening.  So I then email the title company telling them that the TCB just confirmed what I had already told the title company, and if they did not believe that they could contact the TCB for confirmation. Come settlement, and the title rep did not make any further issue of it; all of a sudden somebody higher up there had concurred with my initial explanation.  Hurray! But buyer was still concerned that a lien appeared and was not getting paid off at settlement, so I tell them the same explanation. And later that same day, I checked the staus of that one lien - the satisfaction was already recorded, so they can get it done when pushed to do so.  Oh, that title company sucked at other stuff too ;)

Tony SanFilippo · Answer

Nice job on getting the deal done.  Congrats

Toyin Dawodu · Answer

The lien was recorded after the first prelim was pulled. The title company usually pull another prelim just before they record.

David Dachtera · Answer

@Toyin Dawodu,

Was the lien recorded AFTER the title company did their final verification before closing?

Not that it matters - wouldn't have changed the outcome, but at least then you would know whose head(s) to be dribbling on the closing table...

James Mc Ree · Answer

You might have a case for a zoning variance.  I am in Pennsylvania, so Texas and local laws will certainly apply over my thoughts.  A variance could allow you to have a smaller lot area, smaller setbacks and road frontage (whatever you need).  You will need to show a hardship and that you didn't create it.  Every municipality has varying degrees of flexibility in how rigid zoning is enforced.

Part of your pitch might go along the lines of 2 house, 2 loans, 2 families living there, etc - but 1 property.  2 Of everything will continue indefinitely (assuming it is legal as is) and all you want to do is clean up the current situation so each family can own their own property.  The municipality might get a tax benefit out of splitting the properties which is a selling point.

You might want to consult a zoning attorney.

Jim.

Derrick W. · Answer

@Greg Smith

It is one address per the tax office and city but has a sub address for the mail man.  I called the sellers bank and there is a blanket loan on 4 different properties. The bank says they can cut the houses apart and give separate titles.

Jay Hinrichs · Answer

squeky wheel..

Greg Smith · Answer

Derrick, if each house has its own title, and separate loans, what is the probelm?  Is the person that you are buying it from have the two properties in the same name?

One way around this situation may be to create a condominium in which each SFR is its own unit and the ownership of the land is in common, but you can still allocate limited use common areas to each unit.

Derrick W. · Answer

Good for you! I'm glad it worked out.  The city just killed my deal at 430 today.  After a week of negotiating on a small sfr the owner and I finally formed a deal. I literally have the Ernest money check in pocket right now.  What killed the deal was the city's minimum square footage for a lot.  The sfr sits on a lot with a larger sfr and the deal was to divide the property and to purchase the smaller house.  Each house has it's own title and seperate loans.  No matter how you divide it the lot falls short of the min. Requirments.  Now here we sit dead in the water after a week of work.

Any advice? I must be very carefull in my approach as I work for the city.

WHAT WILL YOU DO-IF THE CITY IS ABOUT TO KILL YOUR DEAL?

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