Today I closed what may be one of the craziest and most insane deals I or anyone I know has ever worked on. I've lived in Tampa for 5+ years now, and this deal started over 6 years ago while I was still in NY.
It all started when I was still living on Long Island. At the time I was bartending a few nights a week while working real estate during the day. One night at the bar, the father of an old high school friend came in. We started discussing what I was up to, and he asked if I would be interested in representing him in the purchase of a property in The Hamptons. He told me there was something strange going on with the house, as it had sat empty for many years.
His plan was to fully gut the property to turn it into a summer house for him and his family, with an eye towards possibly selling it for a profit 5 to 10 years down the road. He was willing to write a full price offer right there on the spot, all cash. This sounded great, it would be easy money. So I told him I looked forward to working with him, signed the proper disclosures, and set out to speak with the listing agent.
Upon finally reaching the listing agent, I was informed that the property was in an estate. During the housing market crash, they had attempted to sell the house multiple times and failed. The price was too high, so it sat on the market year after year. Finally in 2015 and 2016 as the market came around, they started to get offers. However, the executor had taken ill and was unable to complete a deal. By the time I reached out, the executor was in a coma. No deal was possible.
I thought about this for a few weeks... I decided that going the extra mile would be necessary but there's got to be a way to get the deal done. I reached back out to the agent and asked if he had contact with any other family members. He told me no, and that the executor had no heirs and he would not be able to get anyone else to step up and represent the property, especially considering the amount owed in liens and mortgage may be more than the sale price on the house. Most estates don't want to bother with a short sale as there is nothing in it for them, and they will just let the bank foreclose.
However, there was a problem in this case. The house basically became stuck in limbo because without a competent executor, the bank can't serve notice to foreclose. They could serve notice via publication, but most of the large loan servicers that handle this kind of transaction don't have the manpower to investigate these things and the houses sit as "zombie homes" for years.
I decided to do my own research and see if there were any other heirs or beneficiaries named. I went down to the Suffolk County surrogates court and requested copies of the will and all estate paperwork for the deceased. I discovered that there was actually a co-executor named years earlier, but she had relinquished her duties to her cousin. It took several months to put all this together, and in this time frame the original listing on the property had expired.
I reached out to the co-executor who had relinquished her duties. She took my phone call and I told her I had a buyer ready with an all cash offer based on the most recent listing price. She informed me that her cousin (the executor who had previously been in a coma) had miraculously woken up. She gave me his number and I called him. I spoke to him, let him know I had a buyer, and we agreed to terms on the phone. However, he had another cousin who he said was a Realtor who he was giving the listing to, so he suggested I call her and work out the deal with her.
Now I was getting somewhere, I was about 6 months into the deal at this point, and I spoke with the new family Realtor. We came to an agreement on terms, and a signed deal sheet went out. All parties had signed, the next step was the long form contract. At about this point I was getting set to move to Florida. On the day I left NY and began my drive down south, I called the other agent on the phone. She informed me of some bad news. The executor had died two days prior and the deal was now dead. Furthermore, it seemed that no one in the family was willing to pick up the mantle of executor and help get the deal done. Once again we were dead in the water.
After speaking with my buyer, we decided we were undeterred. There were 5 other beneficiaries listed in the will, all of whom could step up and serve as executor. Furthermore, we could petition the court to assign a random executor if necessary to help close out the estate. I reached out to the other beneficiaries and found a cousin who was willing to do the job. I set her up with an attorney who was willing to take on the estate and hold off on billing until close. This was early 2017 at this point.
It took nearly 3 years of petitioning the court to get the new executor appointed. You read that correctly, 3 years. Not only did we need to get the new executor approved, but we needed a court order approving the sale of the home. While we were working on this process with the courts, I was concurrently working with the lender to get a short sale approved.
While waiting for the courts to approve the sale, we also finally got access to the interior of the house. We brought a locksmith and an inspector out to the property to open it up. At first glance the house looked to be in about the condition we expected: Needed an new roof including sheathing and insulation, needed new windows, full electrical rewire, new above ground plumbing, replace floors, new kitchen, new siding, etc.
But what we couldn’t see from the outside, and became very apparent once we were inside the home, was that there were foundation issues. A decade of neglect had left water runoff seeping into the soil very close to the foundation and longitudinal cracks were present throughout the basement walls. The bottom plate had also separate from the foundation in two corners of the house.
Realistically from an investment standpoint, this house was a tear down. However, my buyer at the time did not mind spending the money to fix the house up, because he could afford to hold on to it for a number of years to recoup his investment. The house would be used by family during that run.
The paperwork was almost finally through the courts in 2020 when suddenly Covid broke out. The courts shut down for months, and we were stuck waiting even longer. When finally the sale was approved, we resumed the short sale process, only to discover the loan servicer had changed. This meant we needed to start all over again.
The new servicer (SLS) was nearly impossible to work with compared to the original servicer. It took almost 6 months to get me verified as a qualified representative on the account to file the short sale paperwork. When everything was finally processed and the short sale approved, we learned that SLS was taking part in what was (at that time) a pilot program with Auction.com.
On previous short sales I had worked on, once a contract price was reached, the bank would file for a Broker Price Opinion of Value. If the BPO was at or below the contract price, generally the short sale would be approved, and the buyer would get the house. If the BPO price comes in OVER the contract price, the lender sends a counter offer to the buyer at the BPO price. If the buyer accepts, the deal goes through at a higher price.
SLS’s new program instead takes this Broker Price Opinion, and then requires a public auction to take place on Auction.com. The BPO price becomes the minimum bid. (We did petition SLS and Freddie Mac to try to let the deal go through with the existing buyer, considering the extenuating circumstances and the fact that they had been in contract for over 4 years at this point, however we were denied.)
Now my original buyer who did all the legwork with me to make this deal happen would have to compete with the general public for the house. Even the executor, who stood to make more money off the public auction, wanted the deal to simply go through with the original buyer and be done with it. However we were left with no choice.
In October of 2021, the first public auction was held. The BPO price had come in at $285,000. My buyer was willing to pay up to $300,000 for the house. To my shock, bidding went through the roof on this property. The winning bid was $405,000 to a different buyer.
Contracts went out and were signed within a few days, however I noticed something strange was going on with the transaction. The real estate agent named as representing the buyer never responded to attempts to notify her. The only person we heard from was another representative on the deal, who may or may not have been one of the buyers (details were a little murky).
For months they delayed closing. First, they switched the deal from a cash sale to a hard money loan. I protested but was overruled by the lender and Auction.com. Then they insisted on using their own title agency. When we pushed them for a preliminary HUD they sent over the HUD for the wrong address. As time went on, the buyers claimed they were having lender issues. Then they claimed to have spent $20,000 on plans to build a new home on the site and were serious about closing. They even sent me the plans, which at first glance looked legitimate.
The auction had ended in October, they should have been closed by mid November the latest. By Christmas the deal still hadn’t closed. They kept delaying and by February of 2022 I started getting suspicious. I did some research on these buyers and discovered the individual who had contacted me on their behalf was actually facing a civil suit in Federal Court for Fraud and Racketeering in the manipulation of online auctions.
Apparently he has been using straw buyers to drive prices up on online auctions to eliminate real buyers. Then his straw buyer will fail to close. His straw buyers usually take the top spots on the auction. Once the buyer fails to close, the auction house (in the case of the lawsuit, Hubzu) starts going down the list of other bidders. His straw bidders all bow out. Then he uses an inside contact at the auction company to say “I have a buyer who will close” and he closes these deals at a much lower price than where the auction ended.
Additional background research on this individual revealed he was involved in a rent to own scam in Detroit that received media attention, although I don’t believe he ever faced charges since he simply owned the properties used in the scam.
I reported this activity to Auction.com, and the deal was immediately scrapped.
You would think after all this, that the loan servicer might FINALLY approve my original buyer at a reasonable price for this property? You would be wrong.
Instead, they made us start the ENTIRE short sale process all over again. It took another 4 months to finally get the short sale and auction approved. Finally in June of 2022 we held a second auction.
This time, the bidding went crazy high again. The property was won by a bidder at $415,000. Of course after everything that had gone on, I was extremely cautious in this transaction. I spoke to the agent for the winning bidder and essentially grilled him. I let him know that we were weary of the online auction process and any failure to perform on behalf of his buyer would be met by a swift termination of the contract.
Luckily, the buyer this time was real. We still had a few things to clear up with some old liens, but finally on 9/20/22 we actually closed. I had been working on this house since June of 2016. I had gone from representing a potential buyer to becoming the listing agent for the estate. I had made trips to courthouse to track down potential beneficiaries, discovered structural issues in the house, written hardship letters for the estate, and even outed fraudsters attempting to rip off the auction process.
It has been a wild ride. Although the ending for my original buyer wasn’t as happy, I am glad that the estate was able to realize some proceeds from the sale. This includes a local church that was a named beneficiary in the will of the original owner, as well as some of the surviving family members. I think the neighbors who have had to live next to this dilapidated property for over a decade will be glad too to see a brand new home going up in its place.
I’ve closed hundreds of deals in the 7 years I’ve been in real estate. I honestly didn’t make much money off of this one, but it may be the one that I’m most proud of. I stuck this through where many agents before had failed and got a result. It was frustrating, stressful, and not something any agent wants to go through. However, I did learn a bit during this process and am truly pleased that this one got over the line.
