Wednesday, November 17, 2010


Dealing with CitiMortgage

On Monday, November 8th, I submitted a full price offer for a townhome owned by CitiMortgage. On Wednesday, November 10th, Citibank accepted my price and closing date, yet completely ignored the standard MN Realtors Purchase agreement I submitted. They sent me their counter offer to substitute for my offer. Except their counter offer ignores Minnesota Law.

These are some of the provisions in their UNSIGNED counter offer I objected to in writing with my counter to their counter:

a) I must complete any inspections in five days – without any assurance they would turn the natural gas and water back on so I know if I'll have heat and water pressure. The practice of winterizing homes makes it difficult to evaluate them.

b) Use their title company, who is not named in the contract. CitiMortgage will only provide a Limited or Special Warranty Deed, which means they are only responsible for title issues that occur while they own the property. Given they acquired it from a deadbeat investor who walked away from dozens of mortgages, after collecting the rents and stealing the appliances, title insurance is a very big concern. Who knows whatever title issues may creep up? This makes my choice of title insurance provider even more critical.

I also requested they replace their lengthy title language with the title language that is in the standard Minnesota Purchase Agreement.

c) This is a big one. Seller won't pay any prorated property taxes or assessments. I discovered the unpaid taxes, with penalty, are $2,231. I imagine the $1,740 HOA dues for 2010 are not paid either, but haven't seen that information because CitiMortgage refused to provide it. They are asking me to eat nearly $4,000 with a full price offer.

The listing agent tells me Minnesota State Law requires seller to pay taxes at closing so the language doesn't matter. WRONG, as verified by the Realtor's Legal Hotline. MN law requires taxes be must paid up to date to deed property, it does not specify WHO pays them.

d) Omits Minnesota Statutory Language for Seller to provide updated Homeowners Association documents and for buyer to have 10 days to examine them.

e) “Buyer acknowledges receipt and review of the “Home buyer’s Guide to Common Environmental Hazards”. Never got this, though I didn't object. If there were environmental concerns on a 10 year old townhome built on a former farm field in Maple Grove, I believe they would have surfaced by now.

f) I objected to their requirement for Arbitration as the only method to settle any disputes.

The agent tells me CitiMortgage is unlikely to sign my counter, but he submits it anyway.

Today, 12 days after I submitted an offer for closing that is suppose to happen in two weeks, the agent calls me. He said that CitiMortgage will allow me to use my own title company, as long as I pay for it (they pay if I use theirs). The agent tells me that CitiMortgage “can't” change anything else on their contract. “Can't” or “won't”? He assures me that CitiMortgage always pays the property taxes (same guy that told me yesterday MN State Law says they HAVE to pay the taxes), yet they refuse to delete that line from their agreement that says CitiMortgage won't pay the taxes or assessments.

They won't agree in writing to restore the natural gas and water for my inspection, though they agent claims they will do this. They willfully violate Minnesota Law by not providing me the HOA docs and 10 days to review them.

So I walked. And next time before I decide to even look at a bank owned property, I'll first ask if its owned by CitiMortgage.

If you want a copy of the CitiMortgage document I'm happy to send it.

Wednesday, November 10, 2010

Joe Realtor Team

The Joe Realtor Team

Joe Realtor built up a nice business. Now he wants to take it easy. So he recruits young agents and grandmas to be on his team. Joe Realtor's name is the listing agent on the MLS, signs, ads, brochures. But its the “team members” who are doing all the running around to obtain and sell the listings.

Joe Realtors acts as a supervisor. Then splits the fees with his “team”. The team members have a hard time building their own book of business because every thing stays under the “Joe Realtor” brand. My limited experience is the “team members” are not the cream of the crop agents. If they were, they would be building their own business instead of Joe Realtors.

I looked at a townhome that was a short sale listed by Joe Realtor. It was beautiful. I called Joe Realtor to inquire if the Homeowners Association permitted rentals. I was told it was Suzy's listing and given her cell number. I called Suzy and hear a small child whaling in the background.

“You sound busy”, I told Suzy. “Why don't you call me back later”.

“Its just my grand kid. I can still talk”. Not paying full attention proved to be a pattern for Suzy.

“Does the HOA permit rentals on Unit X?” I asked Suzy.

Suzy assured me they did and I wrote a purchase agreement that was promptly signed by the Seller, contingent on lender approval of the short sale.

I check the MLS and the listing is still shown as active.

“Suzy, my purchase agreement agreed to the AS IS terms, but also said the property was to be taken off the market.”

She argued with me. “Look”, I said. “If I'm agreeing to buy this “as is”, I don't want a bunch of strangers walking through and potentially causing damage.”

Suzy consulted with Joe Realtor and marked it pending on the MLS.

It took Suzy 3 weeks to get me a digital copy of the HOA docs, which Susie assured me she had reviewed. Page 1 of the HOA docs:

“Rentals are only permitted after you have lived in the property for at least 12 months”. I told Suzy I needed to cancel the purchase agreement.

“Why did you think I could use this as rental property?”

Suzy tells me “the seller said there were tenants living in the adjacent unit.” That was the extent of her property research as a listing agent for a listing she had had since April.

I'm inconvenienced. But not as much as the poor family who thought they had their home sold. The property is back on the market, WITHOUT noting the rental restriction.

And I've learned another lesson to get the property managers phone number for the HOA right away. And not trust what the agent tells me. Especially if they are on the “Joe Realtor” team.

On a different property, a bank owned listing was on MLS and I set an appointment, checked it out and wrote an offer the same day. When I went to submit the offer the listing agent told me the bank had just canceled her listing so she could not even submit my offer. So far, the listing has not shown up on MLS with another agent.

That same day I wrote 2 others offers. One is a backup to another short sale offer and won't be submitted until the other falls through. The other is for a newer bank owned unit that is in near perfect condition. I'm in a multiple offer situation on that one.

Even if my offer is accepted, the property has been winterized and the water shut off. So my offer is subject to them putting the water back on for inspection. I looked at a newer unit in excellent shape this week that still had the water turned on. And there was no water pressure in the shower. There are too many options out there to mess with a plumbing problem.

In a buyer's market, I never imagined it would be so hard to buy!

Wednesday, November 3, 2010

Bait and Switch

Bait and Switch

A townhome was originally listed for $179,900 in April 2010 as a short sale.
The price was reduced 11 times until August 16th when the list price was
reduced to $121,530.

I looked at the property and it was beautiful and had good vibes. Three
bedrooms, 3 baths, 2 car attached garage, and a fabulous location without a
lot of similar product. There was a pool and tennis courts and the HOA dues
were on the high side. But there was an on-site property manager who I met.
“Did they tell you about the $7,000 pending assessment for the balcony
replacement?” No, they had not disclosed this.

I submitted comparable sales showing the property was worth $117,000 less
the $7,000 for the balcony. The seller signed my purchase agreement at
$110,000. The lender responded in 2 months, which I'm told is quick for a
short sale. They countered at $127,100 PLUS I had to pay for the balcony,
making the ask price $134,100, $12,570 higher than the list price.

When I asked to see the basis for their number the listing agent told me
they wouldn't reveal it. And whatever market data I submitted would be
ignored. When I asked for a written counter offer, the agent said I had to
write the counter offer, they would not.

My research shows me the top rent would be $1,400 a month, my offer of
$110,000 would cash flow with a little cushion for vacancy, etc. Their
counter offer would require $1,600 a month rent.

Of the dozens of townhomes I've looked at, this is the best one. My friend
and fellow investor cautions me to not fall in love with the property. My
meditation teacher reminds us to not become attached to anything. And he
told us this wonderful story this week.

A king and his minister were hunting and the king goofed with his bow and
arrow and cut off the tip of his thumb.

“All is sweet” said the minister. “Everything happens for a reason, but
sometimes the reason is unclear at the time.”

The king became angry. “What do you mean 'all is sweet', I just lost part of
my thumb and I'm in pain. You're fired.”

“All is sweet”, said the minister and he went home and left the king to

The king encounters a tribe who capture him and feed him delicious food. He
realizes they are fattening him up for some sort of human sacrifice. One of
the tribesman comes to inspect the king and sees the missing thumb tip. “We
have to let you go”, says the tribesman. “Our sacrifices must be perfect”.

Relieved, the king goes home and finds the minister. “You were right”, says
the king. “It was because my thumb tip was cut off that my life was saved.
Now I feel bad about firing you.”

“Don't feel bad” says the minister. “If you hadn't fired me I would have
stayed with you. I'm not missing any body parts and I would have been the

So my deal on the beautiful townhome was not meant to be. And I haven't yet
seen what will be even better. Especially with prices dropping daily.

Whatever your feelings are about this week's election results, remember “all
is sweet”.