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What do you tell a another agent’s buyer when they call you crying

Today I got a call from a lady who was crying uncontrollably. So much so that I was having a hard time understanding her. But, when I finally got her to calm down enough that I could understand her, she wanted to know what she could do. She had gone with another agent, despite reading my posts and now had a 24 hour notice on her door.

I didn't want to get too involved for legal reasons, but I did give her the number of two good real estate attorneys here locally. The problem was she bought a home on owner financing and choice to do so without the use of and escrow account or any memorandums on the title, and now she was given a 24 hour notice by the mortgage company who just foreclosed on the house, and she didn't know it.

What had happened is she bought this home on a contract and the contract was never recorded. Then she didn't put any of the down payment in escrow or use an escrow company to pay her payments. (I use an escrow company to make sure the payments are distributed to the original mortgage and taxes prior to the seller getting the funds).

She had paid $20,000 down and been paying for 8 months and now was going to be out on the street and no home or money to show for it. You see, the owner after two months, I'm guessing got in to financial trouble and decided to take her payments and put them on their home and skip a payment or two on her property and then get caught up in a couple months, but the catch up never happened.

So, if you are in the market for a lease option or a home with owner financing, I suggest you seek legal advice and work with an agent that specializes in creative financing or you could be in the same situation as this lady. I felt sorry for her. I am hoping she has some legal recourse against the seller, but getting blood from a turnip isn't going to be easy.

Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739

Posted by Todd Clark (Broker) (503)524-9494 (Beaverton, Oregon Real Estate Expert) on 09/28/2008 06:02 PM

Comments (113)

Owner Financing in the Mortgage / Finance Channel

crying, foreclosure, lease option, owner financing, escrow accounts, tigard oregon real estate, beaverton oregon real estate, legal

Originally posted at: Living Beaverton - Your guide to everything Beaverton: What do you tell a another agent’s buyer when they call you crying

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113 Comments on What do you tell a another agent’s buyer when they call you crying

SEP

2008

Wow, this is certainly a scary story! Sad that she didn't have any one representing her and looking out for her best interests.

Todd - great advice for possible lease to own buyers - I think we are going to have more situations like this as this type of financing catches on throught the country to avoid the customary mortgage mess. Finding a good real estate attorney inconjunction with a knowledgable Relator like you Todd is good advice.

Wow that is horrible. You need a good real estate attorney for this one. I really hope it works out for her.

Ouch. Thats is tough. I bet there are some more people that will find theirself in that situation soon.

This is going to be so much more common practice as small investors who own multiple houses sold on lease with buy options use the payments coming in for personal use and not to pay the appropriate property. People need to make escrow based payments that reach the lender on their lease house and not the investors pocket.

Wow thats scary - things don't happen the same way here.....we don't have 'escrow' but everything has to go through a notary/lawyer - I can't imagine a scenerio like what this woman is going through!

Oh boy that just plain stinks! I hope she follows through on your advice to seek legal counsel.

How about......"grow a pair?" OK I shall now go back and read the post :)

Great Post! I have never done a lease option and will never do one. Just too much hassle and liability for ALL Parties!

That is so sad to hear. It makes you wonder why she chose to go that route if she had $20k to put down. Her credit must have been really bad if she couldn't get traditional financing... shame on the owner! This is one of the stories I always "scare" people with when they mention owner financing. It's not a good idea!

Ouch! I am working on 2 owner financing situations right now. That is scary.

OK..I'm back. Holy crap!!! This is really bad. This poor lady needs to call an attorney asap. I fear we will be hearing more and more of these stories Todd. Desperate people do really stupid things.

Wow! It's amazing the things people will pull these days. That's why its important to make sure you hire a reputable agent and one that is willing to share their references with you.

Todd

My heart really gos out to that woman; what lengths people will go to to hurt others. I only wish you could help her.

Sincerely

Tom Braatz

Todd - This is a very unfortunate situation and your referral to an attorney is the only thing you could do. What kind of real estate agent represented her in this transaction?

Evening, Todd, Certainly a sad story but I wonder why this buyer has so little understanding of the process. She is a classic case of why some buyers need an agent more than others.

The situation of a lease purchase is becoming more common in my market. It's the first time in years it's even been considered. I've done two this year and I was the listing agent on one of them. We had them put $40k down(non-refundable) + lease payments. We'll see when it goes to close next summer. The other one - done deal. Just had to be creative and give the buyer some options to get them to bite.

Unfortunately, I am not surprised that this has happened. I would be concerned if I were a renter and the landlord doing the same thing. With such a high volume of forclosures, you have no way of knowing who is solvent and who isn't.

There isn't much this lady will be able to do, all the current owner will have to do and will most likely do will be to file for bankruptcy.

Sean Allen

Many owners are trying to lease properties because they are having money problems, or trying lease to own. There is a danger to tenants when the mortgage isn't paid.

I've heard of this in other states, but in Georgia now you CAN NOT close without an attorney. I suppose you could close with an attorney and no title search, but don't think it would happen. There are no ESCROW companies in Georgia. This is an awful thing to happen to anyone. I feel bad for the lady, but there is really nothing you can do at this point.

Too many scammers out there taking peoples money and ruining their lives

Excellent post. I am getting so many buyer calls lately looking for lease options. I tell them to be very careful right now with the current market situation. They are better off buying and if there is no way they can qualify for regular financing then my advice is usually to rent for a while. Here the foreclosures are so numerous that it is a risky idea.

Although with the tightening of financing I'm sure we'll be seeing more of this to come.

Tragic! It's also important to make sure the the responsible party is also paying the taxes.

I feel for her but it is hard to believe that no notices were put on her door unless the foreclosure was started and almost over before he sold it to her, that way all the notices would have already been served and the owner would have commited fraud in that case. There is a way she could recoup her $20,000 but she would need an attorney. Here in Florida even after foreclosure you can attach a lein if was in foreclosure but I will end there because it was be giving legal advise and I would want no one to think I was trying to do that.

Todd .. I feel for you on this one ... ouch ... pippa

Todd, it sounds like it was already in foreclosure when she bought it or else she should have been receiving notices on her door. Here they start 6 months to a year befaor actually foreclosing. She needs to see a lawyer about a possible lien for the $20,000 or get a judgement against the seller and attach it to his home.

That is horrible! I just finished a lease purchase this weekend and the earnest money (for the purchase) was held in the Broker's escrow account. If the home was foreclosed, my potential buyer would be protected. I'm sure that every state is different, but it is so important to explain the pros and cons of a lease purchase to your clients.

I can't imagine this happening to me. It's sad but you a good person because you referred her to two lawyers. I hope this turns out well for her.

Stacey~

Todd, Geez! What an awful story! I hope she'll be able to pull this back together somehow. Like maybe she could work it out with the seller's lender?

Todd: In most states (I don't know specifically about Oregon) being in physical possession of the property is about the same as having a recorded contract. It serves notice to the world that you have an interest in the property. The mortgage company would be bound to determine her potential rights and join her as a defendant in the foreclosure. This would at least give her a day in court. She needs to see an attorney ASAP. If she wasn't named a defendant in the action, there might be an opportunity to at least delay the proceedings.

However, if as Mr. Stallions suggests, the foreclosure was already pending when she purchased and took possession of the property, then her interest could be wiped out without her being a defendant. In that situation, the burden is on her to intervene in the existing foreclosure since the proceedings are a matter of public record.

Its a tough situation. I hope it turns out for the best.

That would be a real estate nightmare. It is sad she is in this situation, but you gave her the best advice you could under the circumstances; the names of two good Real Estate Attorneys.

WOW what a night mare. How unfortunate for her. I sure hope this can be figured out for her somehow.

Poor girl! I hope this story has a happy ending.

I had two different people who were are being represented by other agents call me last week. You have to be very careful when that happens.

Can't be too careful these days. Although, when you think about it, there is so much information on the web, in the newspapers, that you would think people would be smarter than they are. Trying to save a little money maybe. I am sorry for her.

Lease option and owner finance deals should NEVER be done without an attorney

That is terrible. That person will get their's someday but this poor woman now has to hire an attorney and fight it. What a shame!

Great post, I would love more information about this. Thanks for the post.

Todd,what a mess. This makes me shiver. With all the desperate people out there, I would imagine that this will be the next thing we hear about on the news. Now, the lady can spend even more money fighting this in court. WOW!

What a powerful lesson she learned...I wonder how many times she has said that she wishes she had listened to you!

Oh my gosh! What a terrible and sad story and a truely tough lesson learned.

My heart aches for this woman. Thank you for sharing this story, so that we can share it with everyone we know.

That sucks. I guess it would be time to play "My lawyer is meaner than your lawyer. I would also file some fraud charges to make sure that you get their attention... Of course, that won't fix the base problem.

Wow - what an awful situation! I am going to use this example - thanks for sharing

Both sides need to be very careful with this type of arrangement. This type of market brings so many schemes to the surface. Caution is always advised.

OUCH! My office generally requires that a third party account is set up to pay the mortgage with the offset going to the seller after the obligation on the mortgage is satisfied. A heck of a lot of peace of mind for a relatively low fee!

Did I read the title correctly? Another agent's buyer? An agent represented this lady in the transaction? I'd hate to be that agent or their broker right about now.

This is not good at all... Actually a very real but scary situation

Todd, this is exactly why it's illegal to do a wrap mortgage in Texas...big no, no. Especially not handling this with a lawyer in the first place.

I'm so sorry for her. She should sue the other parties involved.

Later in the rain~Deb

SEP

2008

Looks like the lawyers are the only ones who will win on this one.

Todd,

What a horrible situation for this poor woman to find herself in. Hopefully the attorneys will find some way to assist her.

Wow - I leave for the day and look what happens...Thank you everyone!

Colleen - I'm guessing it was an agent that saw a paycheck coming their way and had never done a transaction involving owner financing and instead of asking or admitting they didn't know how to do it, they just took a shot and look what ended up happening to this poor lady.

Judy - I get anyone and everyone in contact with a good real estate attorney so they can read over the contracts with them and then get them in contact with an escrow company that takes care of the payments for everyone so nothing like this happens to the buyer.

Carol - I hope it does also, I'm guessing I will never find out the end result. But, I do hope she calls me when it is done and thanks me for the number to the attorney. (FINGERS CROSSED)

Chuck - I've talked about it before and I know it will happen again! I wrote about how this could happen and warned people against it, yet people want to save that $10 per month.

Todd - This is tragic. I hope she is able to win some measure of recourse against the seller. To answer the question posed in your title, I am going to direct them to you from now on. :)

how messed up

What a sad mess! I would not want to be the other agent!

I sometimes complain about all the lawyers involved in transactions up here in NY but at least the buyer has an additional layer of protection. This is horrible. I hope she can get something for it. It sounds like it is criminal to me.

Hi Todd-

What a story. Most stories like this I hear are buyers who work with FSBOs. It just takes a few of the stories to motivate buyers and sellers to hire professionals. Can you imagine attempting to do your own brain surgery or trying to cut your own hair? FEAR is a great motivator so sharing the story is the first step. The second would be to illustrate the advantages of using a professional (not just someone who has a license). Thanks for sharing and greetings from Paradise.

What a horrible mess. I would like to hear what happens, if possible.

omg...that is a horrible thing. i wonder how this will turn out for her. this economy is tough as it is and everyone is already on eggshells without things like this happening..

Hey, Todd. I've seen this happen in my own neighborhood. It's a heartbreaking thing to watch.

Now, I have to ask you, where did you get the previous or next post blog button? Those are cool!

I would also have her contact the manager for the agent who made the mess...Yicks !

We are getting lots of calls these days from buyers who want to lease/purchase. It's indeed complicated and should be saved for agents who know what they're doing. And always counsel the buyer (and seller) to have legal representation! If they choose not to, that's their choice. But always offer it.

Oh my, this is very very scary. I don't know what you would tell her. Thanks for the good reminder.

Very good post dealing with the intricacies of lease-purchase. The problem is that in many cases folks are so eager to get into a home that they will sign anything and the worst part is that some agents are only looking out for themselves and it is a toxic situation. I feel like you did the best you could but the others need to accept responsibility for their actions...

I learned a lot just from reading this post. Thans for sharing. I think she still might have recourse with an attorney in the formal of personal judgment against the original lienholder.

This is an awful situation, which could have been avoided if the buyer had used an attorney. She is going to need one now. She purchased a home in good faith, with seller financing. The seller took her money and didn't pay his/her mortgagor. This is fraud. I hope she can collect something from the seller, but it looks like she may be out both financially and literally.

I know many real estate agents "hate" to get attorneys involved -- and I have lost prospects when I tell them there are occasions I will recommend they get legal advice. I think we need to be more aware of when attorneys need to get involved. With possible foreclosure, short sales and leasing to own -- the consumers should seek legal advice.

Ouch, thats terrible. Poor woman

James - I'm guessing that is what happened here as well. I'm guessing he had multi properties and someone moved out of one and he could never catch up.

Liz - Well this didn't have to either, but I personally find an escrow company to handle the funds every month. Just to make sure everything get paid as it is supposed to, a lawyer or notary wouldn't have changed that here.

Steve - I am hoping as more and more people look at lease options and owner financing as an option to purchase a home that when they go to hire an agent they hire someone who has the experience to do it or I'm afraid we are going to hear a lot more stories like this one.

Larry - I certainly don't tell people not to do them, if done right, they can be a great avenue for people to get in to a first home or maybe even an investment property with little to no money down.

She should be crying, that is a sad story. She needs an attorney and fast as it is no longer a real estate problem, it is a legal problem. Sadly I would bet it's not going to all work out too well, unless the past seller is solvent.

Monika - I hope so also, she shouldn't lose the home because of some _________.

Bryant - OMG, I think I just spit orange juice out my nose, that was too funny Bryant, wasn't ready for that.

Good Post, Todd.

I learned a good deal from it. It's unfortunate, though, that I had to learn from this poor soul's tremendous misfortune. I expect she feels the same -- in spades. Best wishes --

June - Don't say that yet, with all the mess going on in the financial world, lease options and owner financing maybe the only way to get a house sold. Remember the #1 agent in Las Vegas during the 1990s was someone who did nothing but owner financing.

Donna - You never know, sometimes I have homes that are being offered on owner financing that the interest rate is better than what she could get with the banks. I'm guessing this was only about 5-10% down and if it was a good interest rate, why not go for it! I have one home listed right now that with $5,000 down, you can get 7.99% interest and no closing costs or PMI, try to get that with a bank right now.

Don't these kind of phone calls break your heart! We need to have consequences for professionals that do not do their Job correctly. Poor lady!

I hope for her realtor's sake that she/he did not talk her out of using escrow. But since the contract never got recorded, could it be that she didn't actually use another real estate agent? Hopefully, she gave the other party a Form 1098 for mortgage interest paid, and if the other party didn't report the income, she can get some form of satisfaction by reporting them as tax cheats to the IRS.

WOW! This is just another reason why using an attorney, putting all that money in escrow, paying out all liens & deeds through escrow and recording the document is SO important in these transactions.

I hope she will see justice also, but I doubt it.

Yep, that is exactly what we warn people about but they think they can wing it. People need to learn the value of a Realtor again. The media has devalued us for so long that the public is now vunerable to dumb mistakes.

Sara - Make sure you have protection in place for everyone or you could be in the same boat as this agent if the lawyers get their way.

Bryant - The sad part is a lot of these people aren't even desperate, they just want a better deal and don't want to deal with the banks.

Winter - I'm guessing this other agent had references, but they had just never done an owner financing transaction.

Tom - I'm hoping this isn't what they were planning and it was more of just a snowball effect, but if they didn't mean it, I think this person should be in jail!

Great Post! We just discussed this in our last meeting. We have been seeing an increase in lease options, also

Petra - I don't know and I didn't want to dig for more information that she was sharing as I didn't want to get involved for legal reasons.

Bill - Owner Financing really is less than 1% of all transactions and considering most don't know anything about a regular transaction, I suspect they know even less about owner financing and all the complications that can come from such a transaction.

Tracy - Most of the time both owner financing and lease options done with the proper motives can be a great thing for both buyer and seller.

Sean - That really is sad that people can get out of a crime (IMHO) by just filing for bankruptcy.

Richard - There certainly is, but if you put some of the safeguards that are available, it can certainly take a lot of the risk out of the situation.

Tammy - Even a lawyer probably wouldn't have been able to help this lady unless they knew of such a service that would accept the payments on behalf of the seller and that 3^rd party paid the mortgage and the taxes prior to paying any money to the seller.

Todd- These are the stories of our forefathers before we had all the rules and people in place to help people like this lady. Unfortunetly someone missed the boat in telling her. Another part of our job is to let clients know that that dollar they save today could cost them 10 tomorrow :(

Russ - I think we should have these people in jail, we have someone here that just got away with stealing millions on a plea bargain and it is just wrong.

Susan - We are lucky here that lease options or owner financing can still be a great deal for a buyer with less than perfect credit or just a situation where they can't own right now.

Donna - That is what I have the 3^rd party do, mortgage and taxes get paid first then the seller.

Charles - All the notices were going to the owner of record which showed him as the owner and all mail was going somewhere else and not to the property from what I understand. She had no notice until she was told she had to vacate the property.

SEP

2008

Pippa - Don't feel for me, feel for this poor lady who has lost thousands and now her home.

Kerry - I even have the payments go through escrow to make sure they go to the lender first then the seller.

OCT

2008

Stacey - I really hope it turns out well for her also, but I'm guessing this home will be in someone else's name before the suit can even be filed in court.

Patricia - I hope she can also, but I'm guessing she used all her money for the down payment to get the home in the first place.

John - I wish I knew the particulars of the situation, but I certainly know that they didn't use a title company or and escrow company, because most of this could have been avoided with those simple precautions.

Sheila - I'm sure hoping one if not both can get her the advice she needs to keep the home. It has been a week now and I haven't heard a thing from her.

Nelya - I really hope so also!

Katie - I am really tempted to call the lawyers I referred her to, but I'm guessing they couldn't tell me anything without her permission.

Randy - What don't they hire the right agent the first time, dang it!

Sarah or John - I'm guessing with the market as it is that this agent just convinced her that they were an owner financing specialist and had never actually done one before.

Tom - I agree!

Tammy - I'm hoping they are losing their primary residence as well, because if they get to keep their home while she is put out on the street, that would make this story even worse.

Great Story Todd... thanks for sharing this horror story with us, Even though I'm NOT AN ATTORNEY it is good to know what to watch out for in an owner financing deal. I've never had a deal like this, but have been involved with one lease option deal (which was prepared by an attorney and recorded but no escrow agent was used). You learn something new every day!!

OCT

2008

Jeff - So would I, so far haven't heard anything back from the person or the lawyers.

Gena - I certainly wish she had gone with me, but I would really like to know what that other agents said to her, that made her go with them instead of me. It isn't often I lose a buyer or a seller after they have talked to me about owner financing or lease options.

OCT

2008

Cristal - I am hoping that it just takes time and she is made whole again, but I'm guessing that will not be the case.

Sharon - I think more people who are interested in doing owner financing or lease options need to know they need to hire someone who has done them before and make sure the contracts are gone over with a fine tooth comb by a good real estate attorney.

Lane - I'm guessing the agent if something is filed against them will just get a slap on the wrist and E/O insurance will cover some if not all of the lose. I can't see where they broke any laws or ethics besides maybe doing a transaction that they didn't know how to do.

Emily - Please feel free to use it, I think Owner Financing is a great way to buy a home, but you have to have protections in place for all parties involved.

Fred - I'm guessing you are coming across a lot more clients that have down payments, but not good enough credit scores to buy with a traditional loan right now. This is a great opportunity for them and if you help them get the home now and keep in contact with them, I know who they will use to refinance.

Cat - $10 a month and I also require it, that is the one step I'm guessing this agent missed. Actually, I'm sure there were more, but that was the big one!

Damon - I certainly wouldn't want to be that agent or broker right now either, but it isn't something that is required, but it sure should be in this type of transaction. But, if they made the mistake of not pulling a prelim, then I would say they are dead!

Roland - This is part of the reason Texas doesn't allow owner financing, even though they over killed it. All they had to do is require a outside escrow account to be set up, instead they over reacted and made it against the law.

Deb - This is the reason that Texas outlawed it, but I think they over reacted to a very good program for buyers and sellers. They just didn't understand it and as most government laws, they used a sledge hammer to smash a fly.

Susan - You are probably right on that!

Christine - I'm guessing in some way they will be able to, but how much is it going to cost her in money and time to get there.

Jason - I tried to send one your way the other day, but you don't live near that little town that no one has ever heard of. (LOL)

Eunice - I wouldn't want to be them either, because even if they don't get in to trouble, I would have a real hard time sleeping at night that because of a mistake I made, I basically made someone homeless.

Paddy - Oh, it is criminal on the seller's part, there is no doubt in my mind about that, but convicting them I think is going to be the hard part.

Greg - You are so right about usually hearing these stories when it is a For Sale by owner, the sad part is these two paid a great big commission to be in this mess.

Diane - Do would I!

Dee - This poor lady even if she gets another place to live quickly won't be able to buy a home for months or maybe even years depending on her credit situation as now she doesn't have a down payment.

Natalie - It really is sad and very very heartbreaking to watch. As for the buttons, here is a link to the blog I wrote about how to get those. http://activerain.com/blogsview/329786/Todd-what-nice-buttons

Sally or David - I'm not sure they could do anything besides maybe protect the next person, but if the principle broker doesn't know what the agent did wrong, then I doubt it will help the next person either.

Erica - I was one of only about 5 agents that I knew of that did lease options 4 years ago and now everyone and their brother is trying it with I'm guessing in about a year or two really really bad consequences.

Cathleen - I'm just glad she isn't my client, I think I would have her living with me until it was resolved.

Russell - This was owner financing, but lease options do have their own problems including problems like this.

Rebecca - I'm not sure, if nothing was recorded, which I'm still convinced there was nothing recorded, that lien holder didn't have a reason to advise her of the situation.

Millie - Actually even if she had used a lawyer this still could have happened, but would have been less likely as something would have been recorded with the court house showing she had a interest in the property.

Joan - I have never had a problem getting an attorney involved as it protects me just as much as it does the client most of the time.

Jessica - I agree, thanks to this very bad person, she is a poor woman now!

Mary - I'm guessing the home has already been sold, but even if she gets in there, I wonder if title insurance would protect anyone who bought it at the courtroom steps, if they should have to give it back to her.

Dave - I think of her every night hoping that she is doing alright. I can't imagine her having to live with friends or family because of someone basically trying to steal from her.

Jean - I am guessing they will have the E/O insurance cover it, but I'm not sure there is a law for what they forgot.

Weichert Realtors - Oh, I hope she calls me back, because this is a GREAT idea!

Renee - I am thinking she won't see justice either, but hopefully others will learn from he bad experience.

Ross - The worst part about this is she used a Realtor and this is only going to further the medias hate for us.

Becky - You will continue to see more and more of this and the banks are willing to look at them because they don't want the house back and they know if they accept it, they have a much better chance of getting paid.

Kathy - To bad that 10 was actually $20,000 + in this situation.

Cheryl - You might want to have the person check with the mortgage company to make sure the payments are being paid or they could be in the same situation as this lady was in less than 3 months if they haven't been paid.

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