What is Real Estate

Writen by James Christensen

There was once an investment property that came on the market for sale in my area that I thought would be of interest to one of my buyers. So we immediately wrote an offer on the property, and were then met with some stiff competition from a few other buyers also.

But lo and behold I put on my best real estate agent running shoes, got the listing agent more interested in having my buyer get the deal than the other people, and we soon signed an agreement for the purchase of the property for $650,000.00.

So once we began moving forward with the due diligence on the transaction, my buyer informed me that he was bringing two partners into the deal along with him. One of the partners had never purchased an investment property before. He was very cautious and worried throughout every step of the transaction.

Well after moving through the contingency period and getting the financing, we were all set to close the transaction. But a few days before we were scheduled to close, my buyers announced that they needed one additional week to close the transaction. One of them had a CD maturing that he was going to utilize for his down payment, but he now realized that it wasn't going to mature until one week after our scheduled closing date.

Upon hearing this the seller went ballistic, saying that he had already obligated himself to purchase another property with the money he would be receiving, and that my buyers were endangering his other transaction with their request for a one week extension. However, he soon gave in and granted my buyers the extension.

Let's flash forward now to one week later on the day the transaction was scheduled to record. This transaction was taking place in California, which is an escrow state, and typically in this situation the escrow agent will call the real estate agents informing them when title has successfully changed hands and been recorded in the names of the new buyers.

So at 10:00 a.m. on the morning of the closing, our escrow agent called to inform me that the grant deed had been recorded, and congratulated me on successfully closing the transaction through her. So, needless to say, I put the phone down and began feeling good about closing the deal and the approximately $20,000.00 that was coming my way as a result of it. Then something completely unprecedented and unexpected happened that would never happen again throughout my entire 20-year career as a real estate agent...

The escrow agent called me back again about 20 minutes later, telling me that we now had a problem. I responded with, "The sale of the property has already been recorded. How could we possibly have a problem?"

She then responded with, "The title company just ran another search on the property, and they've picked up a new $300,000.00 trust deed that's just been recorded on it. I'm going to follow-up on what caused this and I'll be getting back to you."

But about 30 minutes later, our escrow agent called me again with a new update...

" Here's what happened. Our messenger was on his way to deliver the seller his check with the proceeds but we got a hold of the messenger in time and stopped him before he reached the seller's office. I just got off the phone with the seller, and when I asked him about this new $300,000.00 trust deed he responded to me with 'What $300,000.00 trust deed are you talking about?' But when I told him he wouldn't be getting any of his proceeds from the sale until this new $300,000.00 trust deed was removed from the title, he quickly responded to me with, 'Oh that $300,000.00 trust deed!'"

So what the seller had successfully done was borrow an additional $300,000.00 from a private party the week before when we were originally scheduled to close the transaction, which was why he was so irate about the one week delay in closing. He was planning on that private party taking several days to record the new trust deed, which is exactly what happened. But in this situation the $300,000.00 trust deed was recorded just as title was being transferred on the property one week after its scheduled closing time.

Any way you look at it the buyers would have been protected by the title insurance policy which didn't list the new $300,000.00 trust deed as an exclusion to their coverage, but still this was an extremely high drama situation to be involved in as an agent. The seller was hoping that the $300,000.00 trust deed would be recorded sometime after the transaction closed, and that no one would be making any title searches on the property for sometime thereafter into the future.

So the seller immediately paid off the trust deed through escrow, his lender signed off on the reconveyance, and everybody was back to where we were supposed to be once again. The moral of this story is …it is never in the bag till the checks clear. Be ready for all possible outcomes, so that you are mentally prepared to act.

Written for http://www.e-realestatelicense.com By James Christensen Real Estate Expert and educator. Our training site http://www.e-realestatelicense.com offers a valuable service to individuals looking to get into the Real Estate industry.