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Sometimes closing on a deal is not so straightforward. Michael shares a nightmare closing scenario and we discuss how to mitigate struggles like these to stay on schedule, saving time and money.

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Transcript

 

Emil:

Everyone, welcome back for another weekend wisdom edition of the remote real estate investor. My name is Emil Shour. And today I've got with me,

 

Tom:

Tom Schneider,

 

Michael:

and Michael Albaum.

 

Emil:

And we're going to be talking about what happens when your closing goes sideways. So Michael recently had a refi on a triplex he owns and had some some challenges arise. And we're gonna just put them in the hot seat, learn what happened and learn how he deals with it. So you guys can get some tips and takeaways in case this ever happens to you down the road. So let's hop into this one.

 

Alright, Michael said, set the stage for us. What what happened on this refi on your triplex.

 

Michael:

All right. Step back in time with me to December of 2020. So that's what I started this whole process. And my wife actually found this awesome lender out in the Midwest, they could land on this property that I owned inside of an LLC. And I was like, great, this is awesome. So we got the ball rolling. He got a couple different quotes. For me. He was a mortgage broker. That's what he did he so he wasn't the lender specifically. So he found a lender that was going to work. We said, Great, we got the ball rolling, we got the application process started.

 

And then they said, Oh, you're doing some rehab work. So they went out for the appraisal, that's when they learned learned, quote, unquote, about the rehab work. And I was like, I told you about the rehab work. And they said, Oh, well, we can't we have to go back and do another appraisal once the work is done. So keep us posted. I'm like, oh my god. So that slowed things down to start, then we were supposed to close. And they said, Oh, you filled out some paperwork wrong. Yeah.

 

Tom:

Did you get charged for like a chip chart trip charge for the appraisal? appraisal.

 

Michael:

So I got a second charge for the appraisal, which they didn't tell me about until the closing statement showed it. It was only a couple 100 bucks. But I was I was still a bit frustrated, because they didn't like tell me that. And I should have assumed like, of course somebody has to travel to go do these things. But also at the same time, it seems a bit frustrating that they said oh, here's the price for the appraisal when they quoted it to me. And then the final amount being taken out at the closing is different, because they charged more for the appraisal example back second time, which they should have done because they knew about the construction. So that was a bit frustrating.

 

Tom:

Was the construction like really significant.

 

Michael:

It was a total remodel of a unit of the biggest unit in the in the triplex so fairly.

 

Tom:

King unit.

 

Michael:

Yeah. Yeah. So yeah. So then they tell me Oh, by the way, I know we're pretty close to closing, but you filled out some paperwork wrong. So on my statement of information to the Secretary of State of California, I put that the LLC was member managed. But when I initially filed and made the LLC, I put that it was manager managed. So those two documents didn't align. So they said, Oh, you got it, you got to change this. And I was like, all right. We should we're done about this earlier, but whatever. So I did that and filed an amendment with the Secretary of State, it really wasn't a big deal, like 25 bucks to do to do it all online. Good to go. Great.

 

So now fast forward, the closing has already been delayed. They finally got through the re inspection of the property, as well. And they say, oh, by the way, this same issue happened in Alaska, where the property is, is physically. So you need to update that as well with the the secretary of state or change the operating agreement. I was like, why didn't you bring this up when you were scanning the documents that you had for California a month ago? Like a So anyway, to file an amendment, the Secretary of State of Alaska was much more difficult. It wasn't able to be that online. It was a whole process. And then I didn't get verification that it was accepted and approved. Until 18 business days later, was there a timeframe?

 

So I said I can't wait 18 more days to close this thing. What options do we have? And they said, Oh, we can close load in your personal name. So I say Great, let's do that. And they said, Okay, well, now because it's gonna be a person's name, you have to click claim it out of your LLC and into your personal name. I was like, You got to be kidding me. So I quick claiming that out of the LLC into my personal name. And they said, Okay, yeah, now we're clear to close. So they reached out to the title company, and the title company was unresponsive. So then I reached out to the title company, the title, the closer I reached out to their manager, and everybody was giving me the runaround. Oh, we need more documents from the lender, and the lender saying, Oh, we need we gave everything to title. It's in title’s hands. So days and days, days, this Thursday went on for like a week of trying to coordinate this thing with the title company.

 

The person who the lender had on my case on my file was on the East Coast, but the title company was on the west coast. So there was several hour time difference. I mean, it was just like, the amount of people that got added to the emails each day grew exponentially. And I think Like the final set of emails, there were 12 people CCD on this, like it was a joke. Like they just couldn't get it. Right. So the loan finally funded this Monday, this past Monday, yesterday. And on Thursday, I think I got an email saying, Oh, we hope that this is from title, we hope that the lender wires over the money by Monday. And I wrote back and I was like you hope in a nicer house like you hope I was like, stop hoping and get this done? Who need to take responsibility for this? The lender has told me they've already sent you the money, where is it? When or when should I be expecting it? Please do not respond with you hope. I would like a plan of action going forward and someone to take responsibility, and I was nicer about it. But that was the gist of it. And that was the inner dialogue I was having in my in my head.

 

So somebody wrote back to me, they said, We're so sorry for this confusion. It will be in your account Monday morning. And I say, Great. Thank you for the confirmation. I look forward to seeing my account Monday morning. So Monday morning rolls around, the lender emails me and says, Hey, confirm with us when you receive the funds. I said, Great. No problem. We'll do 10 o'clock rolls around no funds. 12 o'clock rolls around no funds, but as they're…

 

Emil:

Keep hitting refresh.

 

MIchael:

Yeah, refresh. I was like, Hey, you told me is gonna be my account. Monday morning. I know, we're in the same time zone. There's nothing here and there's nothing pending What's going on? And they said, Oh, it should be there. And I said, well, it's not. So there's a lot of money out in cyberspace that you need to figure out where it is, and tell me when I should be expecting it. And they said, Oh, we are our servers have been slow. You know, I did it personally, it should be there.

 

So then finally, about two o'clock, it shows up. And I say Great. Thanks, everybody. This was ridiculous. So that was a really long winded way of basically going through what was a nightmare close, and a lot of takeaways that I had from this and other closings that have gone semi sideways, as well as that you really have to be your own advocate so much of the time, just because the lender says they're working on it doesn't necessarily mean that they are or just because the title company says they're working on this. I mean, they necessarily are. And so don't assume I feel silly saying this, but like, Don't assume that people are going to do the things they say they do. You really have to follow up with them and really be the driver, and also making sure that everybody's communicating. At no point should I have had to step in to email, both the title company and the lender on an email together and say, hey, why aren't you communicating better? Why am I the intermediary for my own loan? This is ridiculous.

 

Tom:

Michael, not a not a big hope guy just doesn't really believe in hope, it's just kidding. I'm just kidding. That's pretty funny. I hope it funds. Okay. So yeah. Yeah, question for you here. So did you select the title company, or did the lender select the title company? You obviously selected the lender?

 

Michael:

Here's the here's the funny part. So I wanted to use Spruce Title, who we use a lot of Roofstock. And I have a personal relationship with we had them on the podcast. They helped me do some things in Southern California to do a quitclaim deed, which was awesome. And so I said, Hey, Spruce, can you do this? And they said, you know, we really don't do a lot of business in Alaska, we would prefer to have your lender, your lenders title company, do it whoever they use, but when in a pinch, let us know we can we can try to be of some assistance. So I thought that we were lined up. I thought we were using spruce. It wasn't until push came to shove at the end of this when they told me Oh, we're using this other our title company that we use a lot. And now I'm sitting here scratching my head, looking at hindsight, being like, Are you freaking kidding me? This is the company that you chose over mine, are you insane, so it was just really frustrating. It was really frustrating.

 

And then I also asked him, I was like, both the lender and the title company. So you're really going to charge me full price, you're really going to give me all these fees, and everybody keeps giving me the runaround Oh, well, it's the other company that's causing the delays. So you know, our fees are set. I said, Man, this is just unbelievable. So I don't think I'm done fighting that battle yet. More so over principle than anything else. I mean, the fees were not exorbitant. I think they were, you know, reasonable for what I got. But still to make me have to jump through all these hoops at the 11th hour to make me have to do all the communication and I'm like, Am I doing your job for you at the end of the day? Come on. This is This is ridiculous.

 

So and then not the lack of response, I think is what really gets my go. It really grinds my gears. When people are asking for things that need to happen in a timely manner and just lack of response and I get people are busy, but some acknowledgement of Hey, we're working on it. I mean, Emil, you and I talked about this all the time you sent me an email, it's crickets. If you can't get to it, just acknowledge that hey, won't get to it'll tomorrow. Or hey, we'll get back to you in a day, whatever. Something to let me know that someone on the other end has put eyes on this or is as has a pulse at least.

 

Tom:

Are there other little tricks you do within your emails when you're responding to them like Hey, are you the right person to contact for this like Basically like having them, like accept ownership of whatever that like specifically. I mean, that's that's brutal Michael, that you had to kind of jump in and quarterback, you know, between these these two companies, but I love it. Do you have any kind of pro tips like on writing these types of emails? I mean, one of them, I would just chime in with, you know, be direct, but don't be a jerk. But is there any other kind of like thoughts you have in being proactive with email, which I think is like the right thing to do? And you can see that it's like, getting a little bit off kilter?

 

Michael:

I think that's a really great tip that you offered almost in your question of Hey, asking, Are you the right person?

 

Tom:

Thanks Michael.

 

Michael:

Yeah, absolutely.

 

Tom:

So I threw it off the backboard and just dunked it.

 

Michael:

We read it the Roofstock Academy book club, a book by Chris Voss called never split the difference. And he talks about if you're not getting responses to emails, a way that you can write in the email is, have you given up trying to assist me in resolving this problem, or something to that effect? It's like, a little harsh, but

 

Tom:

That sounds a little harsh. I like it. I like it.

 

Michael:

It is it is a little bit harsh, but also how many times you're going to bang your head against the wall with somebody who's not responding to your emails, or phone calls, or any kind of other communication? That's kind of the the question that needs to be answered. Hey, are you are you done talking to me? Are we just giving up here? And so I've only done it a couple of times, and it tends to work pretty well. I've been cc on an email where that was sent. And I was like, hey, that seems pretty harsh. Not sure that was appropriate. So I would definitely make sure it's a last ditch effort. And, you know, there are ways to word that in a more light hearted manner. But I think absolutely, oftentimes, it is justified. I didn't come to that at this. But I think that that's a really great tip of Hey, asking, Are you the right person for me to be talking to, and then also see seeing anybody and everybody that can help?

 

So managers, managers, managers, because so often, if the chain isn't consistent, things get lost in the email thread. And so adding people and subtracting people mid thread is difficult. So I'd say just make sure everybody is on on the train and communication with one another from the start. And that's helpful.

 

Tom:

Yeah, I'd say one thing too, when you're adding, you know, more and more people on email, I think sometimes people could see a lot of people in email and like, think like, Oh, this isn't necessarily me. So like, within the body of the email, you know, if there is a lot of people on it, I’ll do an  @ Michael album, like or @ whoever you're talking to, just because sometimes if you you're looking at an email, and there's a dozen people on you'd be like, oh, somebody else is gonna pick this up totally. So you know, use that kind of wider spray, but then use the little, you know, direct shot within the within the body of the email.

 

Michael:

Such a great point, such a great point.

 

Emil:

So to summarize, the big takeaway, I think, here is that the buck stops with you, you kind of have to, like you have to quarterback the whole thing, right? Is that the big takeaway, that you should own the process? As much as you can?

 

Michael:

Yeah, well, I think you should be, you should be ready, willing and able to quarterback the process should you need to, I don't think in 90% of the instances, this doesn't happen. And things go smoothly in the title, company and lender work cohesively together. And you sometimes need to nudge people along and make sure everybody is talking and playing nice, get in the sandbox. But I absolutely do think that if you are going to play in this space, you need to be willing to be able to do this kind of stuff. Because this stuff happens clearly.

 

Emil:

Right? I wonder if this is more of a refi thing, because I had the same thing on my Indy refi, where I had to do a lot of communicating between lender title and even like mobile notary, I had to set it all up and like coordinate with everybody so that docs were getting to the right person at the right time so that I could sign and everything. So I don't know if it's a refi thing, or maybe that's just coincidence that both of us have had this experience with refinances, but yeah, interesting.

 

Michael:

It's so funny, you mentioned that, I mean, I totally forgot that part of the story. So at the end, at the like, the 11th hour, the title company finally gets back to me says, oh, we're gonna schedule a mobile notary. And what's your address? And we're going to hit the mobile notary and they'll come out and do sign docs. I said, great. That's awesome. This is my address. And I was actually out in Colorado at the time. So this was I don't know, like, noon or two.

 

And I was like, it's getting late. So if I need to go to the local notary store, let me know they said it and I will schedule mobile notary so great. This is we'll get back to you when we have something that's perfect. So, five o'clock comes and goes six o'clock comes and go seven o'clock comes and goes, I don't hear anything from anybody. So I called her love to message their offices, of course close as an emails, Hey, didn't hear from you or isn't mobile notary. Nothing happens so I was like great. And in the morning, we were headed out to Utah to the National Park making our way back to California. So I get this call at like seven o'clock. And this guy's like, Hey, I'm Have a mobile notary, are you? Are you still okay to sign? I'm like, No, dude, I'm on my way out of town driving to Utah. Like, no, he's like, I got an email last night. I didn't see it. Can I? Can I be there in 20 minutes? I'm like, Yes, fine, come in 20 minutes. So he signed all the paperwork knocked it out. I was like, Oh my god, everybody's dropping the ball.

 

Emil:

There's a lesson there. And that and this is something I've learned recently, if you're a remote investor, which if you're listening to this show, you most likely are, you're gonna have to deal with mobile notaries all the time, you can't, you can't sign in person typically, right? Because your lenders not local or whatever it is, find a mobile notary near you and add them to your team for anytime you have closing Doc's like, I use the same person now he lives, I think five minutes away from me, I coordinate with him, him and I like know each other now, and it's so much easier to handle that stuff and make sure they're in the loop when you know the person and you use them over and over again. So that's something I recently started doing.

 

Michael:

I was in Tahoe, Nevada, on vacation, and I had to sign something and they're like, oh, it has to be a California notary. I was like, Oh my god, are you serious? So I had to drive across the state border and then look up like a mobile notary and find them and they were like you coming to me I just broke my back like, Oh my god, what is going on?

 

So I think there's other takeaways just be flexible, be versatile, you know, be willing to flex a little bit because not everything is going to be the same as it was in prior closings. And especially with the remote aspect, things just are different. So be aware of that and be willing to Yeah, to just be flexible.

 

Emil:

And things don't go smoothly. We try to hammer that point home right? You got to you got to be ready and accepting of the unexpected because that's kind of just real estate and especially with just lenders and closing and docs and all this stuff. It never goes according to plan smoothly, at least from my experience.

 

Tom:

Be comfortable being uncomfortable.

 

Michael:

Yeah, that's it.

 

Emil:

Alright guys, any any final words before we wrap this one up?

 

Michael:

Just be in constant communication with everybody who's involved?

 

Emil:

Yep. Alright everybody. Thanks for joining us on this weekend wisdom. We will catch you all soon. Happy investing,

 

Tom:

Happy investing.

 

Michael:

Happy investing.