Unbelievable (sort of OT)

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Submitted by urbanrealtor on October 27, 2011 - 8:52pm

This is sort of a Rant and Rave topic.
I am basically posting here to rant about real estate professionals that just offend me with their conduct.
But feel free to go off about whatever.
Just as long as its not like "I hate republicans because they are facists" (you know who you are Brian).
I prefer complaints that are specific in their focus.
I am starting this because I have recently witnessed some truly impressive ethical fails.

Submitted by urbanrealtor on October 27, 2011 - 9:17pm.

So here is a big one.

I was listing a condo for a short sale.
It was a nice townhouse with 3br/3ba and a 2-car garage and an atrium.
Nice place.

Unfortunately, the bank (BofA--originally CWide) sold the note during the most recent round of profit panics. They sold it for half of face value.
So:
Loan: 370k
List price: 250k (which is low but I needed offers fast to avoid the repo)
Market value: Probably 275k-325k
Contract price: 250k (buyer knows it probably will get bumped up by the bank)
sale price of the (non-performing)note when purchased by BNY-Mellon (which sounds like "boney melon"): $180k

So midway through the short, the BNY-M cancels the short and just puts it up for auction.

That is actually not my complaint.
Its frustrating but shit, life goes on.

Investors buy it for $212k on the courthouse steps.
I am impressed at their determination and acumen in accomplishing this.

Then, the problem.

They first ask me if I have any buyers for the property.
They are Realtors and trying to get money out of it asap any way they can.
The previous buyers are not interested.

And here is where it gets fucked up.

The new owners show up at the property pounding on the door.
They demand rent or keys.

Thats illegal.
On a personal note it really pisses me off when Realtors act like thugs and try to deprive people of their rights.

So here we are now:
I have actually paid for an attorney for these tenants.
The landlords have shown up multiple times with notices or new rental agreements they want the tenants to sign.

They have threatened to evict them if they do not sign and pay.

This is despite the 2009 federal tenant protection law.

Fucking unbelievable.

Submitted by equalizer on October 27, 2011 - 9:58pm.

urbanrealtor wrote:
So here is a big one.

I was listing a condo for a short sale.
It was a nice townhouse with 3br/3ba and a 2-car garage and an atrium.
Nice place.

Unfortunately, the bank (BofA--originally CWide) sold the note during the most recent round of profit panics. They sold it for half of face value.
So:
Loan: 370k
List price: 250k (which is low but I needed offers fast to avoid the repo)
Market value: Probably 275k-325k
Contract price: 250k (buyer knows it probably will get bumped up by the bank)
sale price of the (non-performing)note when purchased by BNY-Mellon (which sounds like "boney melon"): $180k

So midway through the short, the BNY-M cancels the short and just puts it up for auction.

That is actually not my complaint.
Its frustrating but shit, life goes on.

Investors buy it for $212k on the courthouse steps.
I am impressed at their determination and acumen in accomplishing this.

Then, the problem.

They first ask me if I have any buyers for the property.
They are Realtors and trying to get money out of it asap any way they can.
The previous buyers are not interested.

And here is where it gets fucked up.

The new owners show up at the property pounding on the door.
They demand rent or keys.

Thats illegal.
On a personal note it really pisses me off when Realtors act like thugs and try to deprive people of their rights.

So here we are now:
I have actually paid for an attorney for these tenants.
The landlords have shown up multiple times with notices or new rental agreements they want the tenants to sign.

They have threatened to evict them if they do not sign and pay.

This is despite the 2009 federal tenant protection law.

Fucking unbelievable.


For those who are not familiar with rental laws, Do they have a rental agreement from the bank? If not, then don't they have to leave? What does 2009 law state? Thx

Submitted by urbanrealtor on October 28, 2011 - 7:26am.

Yeah sorry.

The 2009 law said that someone who gets the property on the courthouse steps (the bank, an investor, FannieMae) has specific requirements in how they treat the tenant.
They are required to either respect the existing lease (by creating an identical lease with their name) or to give a 90 days notice to vacate to the tenant.
There is no provision to charge those tenants rent during the 90 days (its not quite that simple but that's what it boils down to).

That is why every bank pays giant scary law firms (like Wolfram & Hart or Pite Duncan or Morrison Forrester) to offer a contract to decide if the tenant wants 90 days or $5000 to move out in a few weeks.

This law does not extend to former owners, but usually a bank does not care that much who is occupying and will treat any occupant as a bona fide tenant.

The Realtor-Investor-Landlord-Douchbags obviously have not researched this at all and are trying to intimidate the tenants.

And yes, I know that Wolfram and Hart is not real.

Submitted by all on October 28, 2011 - 8:53am.

Isn't there a non-profit that is supposed to assist the tenants?

But don't the tenants have to pay the rent, since the new owner has to honor the current lease until it expires (or 90 days)? My impression was that in reality banks don't collect rent because they do not want to be landlords, not because the law forces them to forfeit.

Submitted by urbanrealtor on October 28, 2011 - 9:58am.

captcha wrote:
Isn't there a non-profit that is supposed to assist the tenants?

But don't the tenants have to pay the rent, since the new owner has to honor the current lease until it expires (or 90 days)? My impression was that in reality banks don't collect rent because they do not want to be landlords, not because the law forces them to forfeit.

I actually went over this with a couple of different attorneys.

At a literal level, the tenants are not excused from rent.
However, collecting rent requires the voluntary adoption of a new rental agreement.
There is no requirement for the tenants to adopt such an agreement.
If they choose not to, then they can be served with a notice to quit.
A 90-day notice.
If the tenant pays rent, then they can be credited for rent they have paid.
In this case, they had paid rent on the 15th (their normal day) and the property was foreclosed on the 17th.
Further, if the landlord asserts that the tenants are bound by the old lease, then he is also bound to it.
That is a dumb idea because it can mean that the landlord owes them the deposit based on the terms of that lease.
Accepting rent creates this relationship.

So, again, there is no real way for the landlord to have it both ways.
Either they are landlords with tenants or they are successors in interest with holdover occupants.

And yes there are non-profits that help with this.
But I wanted them to have the benefit of a legal bulldog.

Submitted by recordsclerk on October 28, 2011 - 10:53am.

In your scenario I think you should ask the original owner to return said deposit and refund 28-29 days worth of prepaid rent. There is nothing wrong with collecting rent while not paying mortgage, but collecting rents beyond your ownership and not refunding deposit is crap. I still don't see your point that the new owners are bad people because they want rent from tenants that live in their property. They should credit them this month’s rent, but starting next month rent should be paid. If the home would have been sold through the short sale process, would this not be the same outcome for the tenants. Why is this scenario any different? If the new owners want the tenants to leave quick, the tenants should be paid a fair amount (cash for keys) to leave quick.

Submitted by urbanrealtor on October 28, 2011 - 3:12pm.

recordsclerk wrote:
In your scenario I think you should ask the original owner to return said deposit and refund 28-29 days worth of prepaid rent. There is nothing wrong with collecting rent while not paying mortgage, but collecting rents beyond your ownership and not refunding deposit is crap. I still don't see your point that the new owners are bad people because they want rent from tenants that live in their property. They should credit them this month’s rent, but starting next month rent should be paid. If the home would have been sold through the short sale process, would this not be the same outcome for the tenants. Why is this scenario any different? If the new owners want the tenants to leave quick, the tenants should be paid a fair amount (cash for keys) to leave quick.

The scenario is different because the law is dramatically different and the type of sale is dramatically different.
In a normal sale or in a short sale, there is a process by which the tenant's deposit is transferred to the custody of the new owner as is the already-paid rent.
That usually is not a separate check or anything.
Its usually just an additional line item on a closing statement or just a contract addendum stating that "x-dollars are credited to tenant's ledger for deposit and y-dollars are credited to cover rent through (random date)".

That's fine.

However, in a foreclosure, the lease/rental agreement is wiped out.
It ceases to exist as does the mechanism tying the payment to the detainment of the property.
So the money spent no longer actually pertains to any use of the property.
It just becomes money owed by the (former) landlord to the tenant.
The tenant's only recourse to recover this is to ask or to pursue collection activities (like a lawsuit).
Suing a person who just lost a house in foreclosure is not a very fruitful endeavor.
Ask any HOA president (I am one).
What was happening for a few years was that the deadbeat homeowner would rent out a home and include the maximum legal deposit (3x rent in CA).
Then they would get foreclosed upon with a debt owing to the tenant of 3-4 months worth of cash (deposit + rent already paid).
This was usually followed by bankruptcy.
The end result was very often a tenant who was now totally broke and homeless with their only solution to be a petition to the bk trustee.
I had one client who had this happen 3 times as a tenant (which was why she was buying).
As a way to avoid more bankruptcies by tenants (which were surging) and lawsuits that followed, the federal government created the 90 day rule.
The notice to quit (called the notice to vacate or the eviction notice) had to be 90 days and any new rental agreement had to be voluntary.

Cash for keys refers to the new landlord (bank or investor) basically bribing the tenant to move early.

And I don't think there is anything wrong with that.

In fact the landlords that were the subject of this rant just offered a hefty sum to make this problem go away.

My only issue here was the violation of the 90-day rule and the standards of practice.

Submitted by SD Realtor on October 28, 2011 - 3:32pm.

When we were doing our flips the most dicey thing was dealing with tenants who occupied properties that we purchased at auction. The laws that protect the tenants are pretty straightforward and are exactly as you stated.

You can correct me if I am wrong, but if I recall correctly, if the tenants have a copy of the previous lease, the new owners are indeed bound by that lease assuming it is a bona fide lease. There are several caviots defining that, primarly when the lease was generated in relation to the notice of trustee sale, as well as if the rent is market rate.

As you said, the general way to go about an eviction, (and if the lease is bona fide, and the tenants pay you the new landlord then you cannot evict until the lease term is up) is to go about it through the formal process as you explained above... Many newbee types in the flip game don't understand the rules and try to bully tenants when in reality the tenants have alot of power if they know how to use it and can get a nice payout if they are positioned well by a pre-existing lease.

***********

I do have a great ethical story for you as well but it was not my transaction. Knew of a guy in a short sale. He had crappy representation. There were two loans... the second wanted 2500 from the buyer PRIOR to sending formal acceptance. Realtor didn't know better and allowed him to do it however they waited until the last minute, sent the money in and the home went to foreclosure... that is not even the bad part...

The listing agent was using a third party short sale processor who worked for a broker. Another agent for THAT broker ended up buying the home at trustee sale. The original buyer who lost the 2500 ended up buying the home from the realtor who bought it at trustee sale for a little more then what they had it for during the short sale.

Unreal man...

Submitted by urbanrealtor on October 28, 2011 - 4:18pm.

The issue with a bona fide lease is whether it was created before the "notice of foreclosure".
That term is kind of confusing for CA.
Some banks define that as the date of the NOD, some as the date of the NOT, some as the date on the original note (not kidding).
HUD finally weighed in and clarified that the "notice of foreclosure" occurs when there is a clear winner of a trustee auction.

In other words, the repo date.

You can't create a bona fide lease after the house is no longer the ex-landlords.

Submitted by zk on October 29, 2011 - 6:53am.

urbanrealtor wrote:

And yes, I know that Wolfram and Hart is not real.

But the law firm you really have to fear is Dewey, Cheatham, and Howe.

Submitted by CDMA ENG on October 29, 2011 - 9:23am.

Quality post guys...

CE

Submitted by urbanrealtor on October 29, 2011 - 11:42am.

SD Realtor wrote:

I do have a great ethical story for you as well but it was not my transaction. Knew of a guy in a short sale. He had crappy representation. There were two loans... the second wanted 2500 from the buyer PRIOR to sending formal acceptance. Realtor didn't know better and allowed him to do it however they waited until the last minute, sent the money in and the home went to foreclosure... that is not even the bad part...

The listing agent was using a third party short sale processor who worked for a broker. Another agent for THAT broker ended up buying the home at trustee sale. The original buyer who lost the 2500 ended up buying the home from the realtor who bought it at trustee sale for a little more then what they had it for during the short sale.

Unreal man...

That is very fucked up.

On the bright side, the original buyer got the property they wanted....Eventually.

Submitted by SD Realtor on October 29, 2011 - 2:18pm.

Yes the buyer did get the home which was good. On the flip side the broker for the short sale negotiator was a slimeball.

Submitted by briansd1 on October 29, 2011 - 7:56pm.

urbanrealtor wrote:

Just as long as its not like "I hate republicans because they are facists" (you know who you are Brian).

I never said such thing, ever, so please don't put words in my mouth. BTW, I have pretty thick skin and I'm not offended by your comment.

I think that my comments are generally pretty fair and balanced.

Did you not notice that, since I started responding tit-for-tat, the rants from the other side have stopped.

Rahm Emanuel is my hero. I believe in having a conscience and certain degree of moral high-ground, but I also believe in getting tough when needed, and having some fun at it.

You can't neutralize Fox News with just PBS and Paul Krugman, you need some Jon Stewart, Bill Maher, and some much heavier guns, I'm afraid.

urbanrealtor wrote:
I am basically posting here to rant about real estate professionals that just offend me with their conduct.

About Realtors, there are good and bad ones.

It's about the incentives.

I beleive that in any profession that is commission based, or where compensation is based on short term events, then you will have ethical lapses. That's just part of the game.

Submitted by Rich Toscano on October 30, 2011 - 8:30am.

briansd1 wrote:
Did you not notice that, since I started responding tit-for-tat, the rants from the other side have stopped.

No... they "stopped" because I just delete them now when I see them. As I recall it, your "tit for tat" responses only fueled the flame(war)s and made the problem worse. (That said, I do appreciate that you've stopped instigating things yourself).

Submitted by Rich Toscano on October 30, 2011 - 8:32am.

PS to Dan... I lol'd at Wolfram and Hart. Nice callback.

Submitted by urbanrealtor on October 30, 2011 - 1:20pm.

New one:
I have a couple trying to buy in Del Cerro.
They have looked at a lot of stuff and made a few (but only a few) offers.
Only one was accepted and seemed like it would work.
The seller accepted our offer and we opened escrow.
Our offer specified 17 days for investigation contingencies and the entire escrow for lending contingencies.
That means you have 17 calendar days after acceptance to investigate, inspect, and review disclosures.
If a new disclosure is made, then there is a minimum 5 day contingency period after that disclosure.
Also, the contingency removal is active.
That means that the buyer has to sign a piece of paper saying "I remove contingencies" before his deposit is in jeopardy.

So here is what happened:
On day 9 of escrow, the buyer was at a party with a friend who works at SD USD's administration office.
This friend commented that he should not be moving to that location because it is across the street from a school scheduled to be closed.
The buyer did some research and confirmed with the district that the school was under consideration for closure.
He advised me of this on day 11 and canceled escrow.
I submitted the cancellation notice to the listing agent on day 12.
The listing agent (who is very well-known up there) called me and stated that this school was not on the list to be closed and that he had confirmed same.
Thats not the problem.
That would have actually been really good (had it been definitive and confirmable).
However, he then went on to say that since he had information contradicting our reason for cancellation, therefore the cancellation in bad faith and the deposit was forfeit.
I tried to research this issue directly with the district and was advised that they could not confirm that this school would close but that many schools in the area would be closing and they would have to wait and see.
The buyer was unimpressed (as I would be) with this maybe-we're-going-to-close-the-school thing and declined to rescind his cancellation.

So now the buyer is small-claiming the seller and his agent for the amount of the deposit and then some.

To me this is unbelievable because the whole point of an investigation period is for confirming the property meets your requirements.

Almost any reason (including not liking the neighbors dog) are valid reasons to back out.

I am just astounded (more irritated really than surprised) to see a known agent act in such a way.

Submitted by Coronita on October 30, 2011 - 1:52pm.

urbanrealtor wrote:
New one:
I have a couple trying to buy in Del Cerro.
They have looked at a lot of stuff and made a few (but only a few) offers.
Only one was accepted and seemed like it would work.
The seller accepted our offer and we opened escrow.
Our offer specified 17 days for investigation contingencies and the entire escrow for lending contingencies.
That means you have 17 calendar days after acceptance to investigate, inspect, and review disclosures.
If a new disclosure is made, then there is a minimum 5 day contingency period after that disclosure.
Also, the contingency removal is active.
That means that the buyer has to sign a piece of paper saying "I remove contingencies" before his deposit is in jeopardy.

So here is what happened:
On day 9 of escrow, the buyer was at a party with a friend who works at SD USD's administration office.
This friend commented that he should not be moving to that location because it is across the street from a school scheduled to be closed.
The buyer did some research and confirmed with the district that the school was under consideration for closure.
He advised me of this on day 11 and canceled escrow.
I submitted the cancellation notice to the listing agent on day 12.
The listing agent (who is very well-known up there) called me and stated that this school was not on the list to be closed and that he had confirmed same.
Thats not the problem.
That would have actually been really good (had it been definitive and confirmable).
However, he then went on to say that since he had information contradicting our reason for cancellation, therefore the cancellation in bad faith and the deposit was forfeit.
I tried to research this issue directly with the district and was advised that they could not confirm that this school would close but that many schools in the area would be closing and they would have to wait and see.
The buyer was unimpressed (as I would be) with this maybe-we're-going-to-close-the-school thing and declined to rescind his cancellation.

So now the buyer is small-claiming the seller and his agent for the amount of the deposit and then some.

To me this is unbelievable because the whole point of an investigation period is for confirming the property meets your requirements.

Almost any reason (including not liking the neighbors dog) are valid reasons to back out.

I am just astounded (more irritated really than surprised) to see a known agent act in such a way.

I thought the entire 17 days period was for any reason...

Submitted by urbanrealtor on October 30, 2011 - 2:24pm.

Pretty much anything other than "I just changed my mind".

Submitted by SD Realtor on October 30, 2011 - 8:31pm.

Wow that is a doozy. Even if the school stays open it seems like your client can say he is concerned about the school closing in the future given the current budget issues. Has your broker called the listing broker? Seems like a very frivolous situation.

Submitted by urbanrealtor on October 30, 2011 - 9:09pm.

SD Realtor wrote:
Wow that is a doozy. Even if the school stays open it seems like your client can say he is concerned about the school closing in the future given the current budget issues. Has your broker called the listing broker? Seems like a very frivolous situation.

I am the broker.
So is he.

Submitted by lookingagain on October 30, 2011 - 10:37pm.

I'd like to take this opportunity to vent on one of my latest RE transactions. Last year my wife and I put a offer on a short sale (we ended up buying the place). We put in an offer of 925K for the house and there were three loans on the property, the first with B of A and two others with a second bank. I should have known that there would be problems as the home had fallen out of escrow three times IIRC.

After three months, the sellers realtor gets back to us and says that B of A is countering at 934K for the home. When we sit down to go over the transaction, I notice that B of A is getting 898K there is 27K going to the bank holding the second and third and 9K as a "refund to the seller". When I ask what this refund was, she said not to worry about it and it was always in the contracts. I said no it is not, to which she replied that she is the agent and knows better than I what is in real estate contracts. She goes on to "explain" that since this is not the official accounting (what ever that form is called) they just lump all the expected costs into one line item and that these costs are going to be paid by B of A.

(all this time our agent is doing everything she can to control her anger)

Knowing that something was amiss, I asked to see all the correspondence between her and the banks. At first she said that it was impossible because all the electronic communication (e-mail and the banks short sale system) is deleted as soon it is closed after she reads it. I tell her BS, and the next day I get a whole bunch of electronic communications between her and the banks. It took me about 15 minutes to find out that at the time she submitted our offer to B of A, she told the holder of the other two notes that they will get 36K (the amount they settled for in the last attempt but still about 6% of what they are owed). When B of A finally got back to her, they had accepted our offer and were going to pay the other bank 27K.

AFTER hearing from B of A (based on the e-mail time stamps) she sent an e-mail to the other bank with "Great news", B of A as agreed to give them the 36K for the loans, knowing full well this was not true. Her plan was to try to hide the extra 9K as some sort of fees or something that we would have to pay for.

We called her on this, and said that she has lied to us, our realtor and the banks involved with this transaction. She got very indignant and stated that she has never done anything unethical in her life, and that we were not smart enough to understand how real estate transactions work. She went on and on about how complicated these things are and how you can't just "add up the numbers" in the transactions so we had just better do what she says since she knows best.

Well, we wanted the house and our agent suggested that we just split the 9K three ways. So that is what we did and I just kept quiet as possible for the rest of the transaction.

The Worst part is that she now lives three houses away from us!

I know that there are good, honest realtors out there (ours has always done a great job for us) but it is incompetent and dishonest prople like this that give the whole profession it's bad reputation.

Thanks for letting me finally vent this.

R

Submitted by SD Realtor on October 31, 2011 - 8:04am.

YR that is sad to see the seller is going to want to go through the court system. That is pretty lame.

R - another good example of an agent behaving badly. Possibly a conversation with the broker of that agent is a good idea so that the agent will stop the bad habits?

Submitted by urbanrealtor on November 1, 2011 - 12:56pm.

la/r:
It was foolish of the agent not to be upfront with everything from the beginning.

Its really impressive how dumb agents can be by being secretive.

If she had just said: "here are the numbers we need to reach to have an acceptable short sale" (which she obviously had in mind), she probably could have foregone all that bullshit.

If you had an objection to a seller kick out, you could have walked away then.

Instead this turned into a dumb game where she shows you the communication logs (which I would not do) and you decide if you can deal with the bullshit.

Not cool.

Submitted by scott-at-alumni on November 3, 2011 - 8:57am.

Hi folks, this is related to the FC stuff that came up above, and I didn't want to start a new thread (since, near as I can tell, all Piggs read all posts anyway).

I left SD a couple years ago, and moved up to the bay area. But still spend time on this site, of course. We rented while deciding if we picked the right area.

Fast forward, our LL lost the house to FC. Happens all the time. Chase owns it. They have spent the last ~60 days "reviewing our lease", which included the Notice to Vacate hiccough (to which we replied appropriately and in a timely manner).

We've been escrowing rent, in a separate account. We'd actually like to _buy_ the place so we can stay in the area, which is a whole separate topic.

My question is this - when they do finally present us with a replacement lease, and tell us where to pay rent, do we have to pay rent in arrears? I'm all prepared for that, and not unwilling to do so, but I'm also grumpy that they have been so lame in offering us a replacement lease that I'd happily keep all that rent money. And penalize them for their inability to process the lease more quickly.

Anyone know how this will all actually unfold and if I'm truly on the hook for the rent in the interim period between old lease and new?

Thanks a ton for any and all insights / experience / knowledge.

Cheers,
Scott

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