If are just going this series, following what happened to one of my Buyers when he entered into a Contract with an Undisclosed Short Sale Flip, here are the links to the previous posts to get you up to speed.
This post shows where it all came to a very heated point.
THE SETTLEMENT TABLE
The morning of Good Friday, all parties were waiting for word on whether Lorraine had finally gotten her Short Sale Approval Letter, which she was calling her Payoff Letter. Settlement had been scheduled with WSCE for 11am as it was a holiday and they would be closing at 2pm. As luck would have it, all parties were told to be at Settlement at 2pm by Jane, the Listing Agent. Lorraie would have her Approval Letter by then, have conducted her purchase (with her own funds) and would consent to showing us the Approval Letter.
Vince's attorney, Greg, had been on call for this event. With the two hour notice given, he called WSCE and asked that they email the papers Vince would be asked to sign, and the title work. Greg waited and waited for that paperwork, dealying his departure and making him fifteen minutes late. Meanwhile, Vince and I arrived to WSCE to meet, not Jane the Listing Agent, but Jane's co-worker and fellow agent, Missy. Missy was very kind, assured us that Lorraine's deal had closed and she was upstairs in an office, but would join us for Settlement. So since Greg was running behind and we were early, Vince and I headed out for a quick fast food lunch.
It was at lunch that I told Vince that Greg and I had talked earlier that day and that Greg had a suspiscion things were not going to be favorable to Vince purchasing the home. Vince had spoken with Greg and gotten the same feeling. So with that in mind, we went back to WSCE and arrived to find Greg already in a room with Missy and the Settlement Agent Felipe. As we took our places, it was apparent that Felipe was flustered by Greg's thoroughness.
Greg explained that his first issue was that the title work went back sixty years, but did not include the most recent history as of six weeks. (Our side of the transaction did know that the Substitute Trustee's Deed was still lingering out there, and that the property was in foreclosure, but WSCE had conveniently left that out...as a result, leaving it out of what was submitted to title insurance underwriting.) When explaining all of this to Felipe, Greg was straightforward and calm But the more Felipe fought back about that being "it" for title work, Greg outed Felipe as hiding something. Felipe didn't like that and so things got heated.
Greg then asked to see proof of the prior transaction having been funded by Lorraine's own money. What Felipe produced, seemingly at gunpoint, was wires totalling $180,000, $60,000 shy of Lorraine's purchase price. When Greg insisted the funds were short, Felipe produced a letter from Big Money Investments stating the following:
Big Money Investments, fronting the money for the purchase of 123 Main Street, only allows these funds to be released AFTER the successful Settlement of Lorraine to Vince.
It was truly sad to see Missy and Felipe on their heals defending that this was not a Wet Settlement Act violation, despite the missing $60,000. Greg literally had to speak to them in Dick and Jane terms to have them comprehend the illegality of the transaction. When they contended it was "all perfectly legal" (their favorite mantra) Greg turned to them and asked, "Were one of you an attorney licensed in the Commonwealth of Virginia that could actually speak to the legality or illegality of what is happening here. I was under the impression I was only licensed attorney in the room." That shut them up on the legality. Though it was at this point that Felipe, completely aggravated that he'd been held 90 minutes past closing time on a religious holiday and exposed as a liar, turned to Vince and shoved the settlement papers toward him. Felipe with his back now to Greg said, "Vince, if you want to buy this house you'll need to sign these papers now. Do you want to buy the house?"
I thought Greg was going to grab Felipe by the throat. However, Greg managed to keep his follwoing command in civil tones. "Felipe. Look at me. Vince is my client. If you have something to say to Vince, you say it to me and I'll communicate it with my client. Is that clear?"
Next up was the request to see the Short Sale Approval Letter from the prior transaction where Lorraine had purchased the Property. Lorraine was still nowhere to be seen, but apparently in the building. Felipe refused to show the letter. This dance went on and on, our side insisting that Lorraine had no problem with showing us the letter and that Vince would not sign unless title work was fixed and the letter was shown. So as title work was being fixed, Missy left the room to confer with Lorraine. Meanwhile, Felipe informed Vince he could not settle this transaction as Vince's funds hadn't arrived. (You'd think he'd check that before shoving the settlement paperwork toward him to sign thirty minutes ago.) A quick phone call and five minutes later, Felipe indeed confirmed that Vince's funds were there.
Missy came back with a denial from Lorraine on showing us the Short Sale Approval Letter. I think Missy was back and forth three times all told, with no luck of convincing Lorraine to provide the letter, when Greg requested time alone with Vince and I. Greg told Vince that the transaction was a huge risk and that if there was ever a title claim, Vince would likely be unable to collect. He also had serious doubts as to the fact that Lorraine indeed had a Short Sale Approval Letter at all, thus not having the authority to resale the property anyway. Either that, or there was likely a cloud to be placed on the title to prevent immediate resale. Whatever was happening, Lorraine was hiding something.
When Missy and Felipe came back into the room, Vince said, "At the advice of my attorney, Lorraine has ten minutes to show me the Short Sale Approval Letter or I'm walking out of here and our deal will be dead."
Missy left. After fifteen minutes had passed with no word, Vince signed a contract release and we sent Felipe (who had swung to favor our side of the transaction) up to Lorraine with that piece of paper.
As a side note, the earnest money deposit had been returned to Vince two weeks ealier when he first contacted Greg. Greg had prepared an addendum returning the deposit to Vince knowing that if the FBI acted quickly that Vince's deposit would be frozen during investigation.
Felipe returned with the release signed by Lorraine and we were on our way out the door at 5pm. It was the most entertaining three hours I had ever spent as a Realtor®. As I drove home I got an angry call from Missy who was baffled as to why we'd left. She also offered to get Lorraine to sign the release and was even more baffled when I told her that Felipe got her signature on the release for us before we left. (Missy's approach to this Short Sale Approval Letter was like a car dealership where the salesman has to "go talk with his manager" before he can let you know if your offer on the car will be accepted.)
Jane, the Listing Agent, called me the next day and apologized for the confusion over the letter. She said, as if there was nothing at all wrong with it, "Lorraine couldn't give you the letter because she didn't have it yet." So yes, Lorraine was attempting to sell a property she didn't even own. Apparently Greg learned this when Felipe ran out to have a word with him after we left on Friday. Felipe's words exactly were, "It's a good thing you advised your client the way you did. Lorraine didn't have Short Sale Approval."
Of course, it didn't end there, but the last bit well be short. You can read the aftermath in Short Sale Flip Volume 6: Post-Mortum.