People who read my blog are typically looking to purchase a home in Key
West. They usually find my blog by searching an address after viewing a
property on Zillow, Realtor.com, or even the real Key West mls website.
These new prospects often read additional blogs I have written to get a
sense of who I am as a person and the services I may be able to provide
to them.
Many readers think that they can get a deal by buying a bank owned home
because they think they'll get it at a bargain price. During the past
couple of years some bank owned properties have been offered for sale
via several online auction websites. I have helped several buyers
purchase homes through these sites. One particular online auction turned
into a real estate horror story.
I registered the buyer and myself as his agent so that I could be a
part of the process and earn a commission if the buyer
was the successful bidder. I read the TERMS before signing up. I warned
my buyer up front that the standard Florida Purchase and Sale Contract
would not be used but that the contract written by the online auction
company would be used instead. That contract was totally written to
benefit the bank as seller. I used to be a lawyer. The law describes
this type of contract as a contract of adhesion. The thing is if a buyer
wants something so badly, he'll probably sign anything just for the
chance to get a good deal.
My buyer was the successful bidder in a particular online auction.
Thus began the saga that became a minor real estate horror story. After
my buyer's bid was accepted, the buyer was required to sign the bank
prepared purchase contract - the contract of adhesion I mentioned above.
I did my part by providing all the documentation to the bank asset
manager who is located in a faraway town.
My buyer was
paying cash so there was no third party mortgage involved. The house
itself was a total mess. My buyer did not do an inspection as the buyer
planned to do a major renovation.
Within the first week
or so we received a preliminary title report which showed that the law
firm that foreclosed the mortgage omitted a necessary party to the
foreclosure' This required the attorney to do a new foreclosure the
omitted party. This set back the closing date by several months. Just
about the same time my buyer became aware that someone had complained to
City of Key West Code Enforcement about yard debris and trash in the
front and back yards on the house upon which my buyer had a contract.
The City of Key West Special Master imposed a daily fine of $250 on the
property until such time as the mess was cleaned up and the fine paid. I
got a copy of the FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER and
emailed a copy to the listing agent, asset manager, and closing agent
all located at the same address in the faraway Florida city. All of the asset management people and title people had Muslim last names except for the real estate agent. I checked with the Florida Real Estate Commission - he is a real person who lives in Florida.
When neither the listing real estate agent nor the asset manager
responded to me, I called both. I left a voice message for the real
estate agent. The agent never returned that call nor did he ever
respond to any email I sent to him. When I called the asset management
company I asked to speak to M**** Mohamed, the asset manager. The first
person I spoke with sounded far away, much farther away than the address
in Florida where the asset management company's office was located. It
was as if I was talking to someone on the other side of the world or
that I was speaking on a tin can phone or both. I was asked to call back
at a later time. I did and that is when I spoke to Mohamed. I knew then
what I suspected earlier that I was talking to someone in India or
Pakistan and not in Florida.
I told Mohamed about the
code violation and ongoing fine. He asked me to send him a copy of the
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER which I had previously sent to him.
I did. Then we began a series of email correspondence about the
ever-growing fine. A few weeks into the process Mohamed assured me the
problem had been resolved. He said he initiated a process to hire a
vendor to clean up the yard. During the meantime my buyers left town
for a previously planned vacation. I drove by the house to see if the
place had been cleaned up. The front yard looked okay but I could see
trash in the side yards. I went to the backyard where fallen palm fronts
and other debris littered the yard. I took photos. Then I went to City
Hall to speak to someone about the property. I was informed that the
city would hold my buyer responsible if the bank owner did not clean up
the mess and pay the fine by the time we closed.
About
five months had passed since the new foreclosure was started. The title
agent emailed me a notice the bank was ready to close. I sent emails to
Mohamed and others at the asset management company stating that the
code violation constituted a title defect and that the buyer required
the bank to pay the fine and get the code violation cleared. Mohamed and
the title agent sent a series of written in English but which either
intentionally or accidentally never stated that the bank clear the code
violation and pay the fine before closing.
I re-read
the bank purchase contract (the contract of adhesion). The contract
specifically excluded the bank as being responsible for any code
violations. I then engaged a local law firm to write a letter to the
bank asset manager and title company reaffirming the buyer's position
that the code violation constituted a title defect. Mohamed and the
title agent became more responsive to the lawyer who communicated in a
non-threatening manner but simply required the bank to clear the title
defect before closing. I went to city hall and got a form by which the
bank could seek to mitigate (reduce) the amount of the fine which by
then had risen to over $20,000. Remember the fine was $250 per day.
I
sent the mitigation form to Mohamed who said the contractor he hired to clean up
the yard had done so. I told him that whoever he hired picked up trash
in the front yard but not the side yards or back yard. I told him
emphatically not to mess the government. He finally got the message. The
bank extended the closing a few extra weeks so that it could appear
before the Special Magistrate to mitigate the fine. The yard was cleaned
and the fine was reduced to only $15,000. The bank paid the fine at
closing.
But that's not the end of the story. The TERMS
disclosed at the online auction site were less than forthright in
disclosing all the fees that the buyer would be required to pay. The
biggest and most offensive non-disclosure appeared when we received the
preliminary settlement sheet. The buyer was required to pay the Seller's
State of Florida Documentary Stamp Tax which is calculated at 70 cents
per one hundred dollars of sales price. This is always a seller cost,
but under the bank's contract shifted this expense to the buyer. While
the bank paid the title policy, all of the other title closing costs
were likewise shifted to the buyer. The buyer's sole remedy upon
learning all the associated fees would be to walk away from the
contract, lose his deposit, and not get the property. Buyers do what
buyers do: they suck it up and pay the fees.
My buyer
closed on the property and got a really good price on what will end up
being a very nice home once the renovations are completed. It could have ended differently, however, had I not kept pressing the bank to clear the code violation and pay the fine. I can't help
but wonder if anyone at the real bank with all the Billions of Dollars
in assets has any knowledge that the bank asset management company in
Pakistan or where it is that Mohamed lives cost the bank $15,000.
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Saturday, October 3, 2015
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The information on this site is for discussion purposes only. Under no circumstances does this information constitute a recommendation to buy or sell securities, assets, real estate, or otherwise. Information has not been verified, is not guaranteed, and is subject to change.