November 19th, 2009
Jumping Through Hoops
My bunny goes to school. Rosie Rabbit is enrolled in her 3rd term of Rabbit
Agility class. Having successfully tested out of the first two levels, she
is now a "Green Belt Agility Bunny". While the "Hoppy Hour" is playtime,
Agility Class is hard work. "Rosie right. Rosie left. Rosie Hop. Stop. JUMP".
I feel like I'm living in a Dr. Seuss book, but Rosie really gets into it.
I figured if my little bunny can learn how to jump through hoops on command,
I could figure out how to buy a house in foreclosure.
My client John called me in May to see a house that was listed in Grey Cloud
Island Township in Washington County. Grey Cloud is a place that time
forgot, yet its only 15 minutes from Minneapolis/St Paul Airport, where John
works. The house was bank owned. The listing agent didn't return calls and,
when I finally reached his assistant, she lied when telling me there were no
other offers. All the time and effort to put the offer together was for
naught, and it took weeks to be told another other had been accepted.
Not wanting to go through that nightmare again, I looked on Washington
County's website and found a little cottage on Grey Cloud Island that was
still in the redemption period with the mortgage amount only $75,000. So I
did some detective work and found the attorney for Ricky's estate, the fee
owner of the house. The attorney was thrilled to hear from me. Ricky's
hunting buddy had a pending purchase agreement but couldn't get financing.
Banks are reluctant to lend money on houses that don't have electricity,
flushing toilets and front steps. I called my banker at Private Bank and he
wouldn't touch the deal either. But he suggested I just use my credit line
and I buy it then finance it for John.
I submitted an offer for the property believing the seller would land up
with about $5,000. And didn't hear back. When I finally reached the attorney
he told me the $75,000 mortgage was just the start. There was a 2nd
mortgage, fees, penalties, judgments. So my best alternative was to buy it
directly from the bank when it came out of redemption on August 26th.
John renews his apartment lease through the end of August.
Well-its a Minnesota property owned by a Minnesota Bank, U.S. Bank. How hard
could this be? So I called my US Bank banker and he provided me with the 800
number for foreclosures-which are handled in Kentucky! Surprisingly quick I
reached someone who looked up the property and said "its not ours, we're
just service the loan -you need to talk to Freddie Mac." So I told Freddie
Mac I want to submit an offer contingent upon the expiration of the
redemption period. And they said "No"-all properties must be listed on the
MLS for at least 48 hours before any offers are accepted.
John renews his apartment lease through the end of September.
Everyday we check the web for the listing of the little cottage in Grey
Cloud Island Township.
October 2nd, 6 weeks after the redemption period expires, the property is
listed. We go visit again. The old propane furnace was stolen, along with
what was left of the electrical box after Ricky messed with it, and even the
metal gate to the property entrance was gone!
I submit an offer that day with a closing date of October 16th.
Brian the Broker tells me a neighbor also submitted an offer and gave me the
chance to submit "My best offer". I upped the price $2,000. He said the
house was mine.
October 9th, a week after I submitted my offer, I get Freddie Mac's
addendum. The terms were totally to their side, such as if I close late I
pay a $50 a day penalty. They pay none. They changed my October 16th closing
date to "on or before November 6th." They return the sign documents on
We're starting to get concerned about the approaching winter, as the house
has no electricity or heat and the septic may need attention prior to the
ground freezing. Freddie Mac is in Austin, Texas-they don't get the winter
thing. Plus, this was before the Tax Credit was extended and we were up
against the November 30th date for that.
John extends his apartment lease one more month.
On November 6th, our scheduled day of closing, US Bank, who told me "they
don't own the property", sends the deed to their closer. My closer at Old
Republic is given figures on Monday, November 9th and told if she can get
the closing statement done THAT DAY we can close on Friday, the 13th.
Freddie Mac requires 72 hours to review the HUD and Veterans Day was
Wednesday. So Old Republic came through for me. I wasn't notified until1:00
on Thursday the 12th that Friday the 13th was our lucky day--a month after
the closing date on the original purchase agreement.
You would think these banks would be anxious to unload these troubled
assets. And somewhat sensitive to a vacant home in winter.
After going through all of this craziness to buy one little house, its
actually easier and quicker to teach Rosie Rabbit how to jump through hoops!