What really happened and lessons learned

There are many articles online discouraging property owners from selling their house/land without a real estate agent. We have been involved in multiple real estate transactions as buyers and sellers in the past and we decided to give "FSBO" a shot. We had two rural properties to sell - one went great and the other was a nightmare. We worked with a great attorney who was instrumental in getting the nightmare sale through. He has not seen a closing this messed up in his 30+ years in his practice - especially the utter incompetence on the closing company's and lender's side and the many lies told by those parties. I am sharing this story as it might help others avoid some of the issues we dealt with. I am not sharing this to deter anyone from selling without a real estate agent. I would do it all over again. However, I will say that if you decide to go the FSBO route, be prepared to be involved and put time into the process. 

Now here is what really happened after we thought we were almost done - i.e. we received and accepted an offer .... 

We listed our house for sale in May and received an offer in late August.

The buyer asked that we pay their closing costs. We did not think that was an unusual request but in our negotiations we asked for a higher price and agreed to pay up to 3% of the purchase price. After the 3% we still would get more than our bottom line so we were okay with that. Especially since there was not real estate agent involved and we were not paying any commission. This really should have been a red flag that this is a weak buyer with no funds towards closing costs and we should have said no. Although they told us they were pre-approved for a VA mortgage and provided us with a bank name, loan officer’s name and his contact information.

Once we agreed on a price, we asked the buyers to sign a purchase agreement and bring their earnest money deposit. The buyers appeared shocked that we asked for a deposit. They informed us that they could not come up with the deposit (customary in our area is $500 which is already minimal in my opinion) until two weeks later. Clearly this was a red flag. We told them we would not enter into any contract unless it was accompanied with a deposit. At this point, we went back to showing the house and figured that was the end of it. However, the buyers showed up 2 weeks later with a deposit in cash.

We signed a basic agreement outlining the conditions of our transaction. We made an appointment with our attorney to prepare a “real” contract which we signed a few days later. At that time we handed him the cash deposit to put his trust account (both the buyers and us were present).

Lesson learned: Never, ever accept a cash deposit (even though it takes the worry about a bounced check out of the way and your attorney says cash is OK). This came back to haunt us later. We should have gotten a check.

Per our attorney’s advice, we set the closing date to 7 weeks from the “official” contract as he said that VA loans can take a while to close. A few days later we received a copy of the preapproval letter from the buyers and filed it with our attorney. It took longer to get the letter than we would have liked but the loan officer they worked with initially quit and a new one was not assigned to them until a couple of days later. So there was a little bit of delay due to personnel changes completely out of the buyers’ control.

Now we were off to happy land for a while, enjoying the fact that we have a contract on the house.

After some time the buyers called me asking how they could find insurance. I made several calls to different insurers in the area and made a list of those who indicated that they insured mobile homes. The buyers informed me that they picked one of these insurers and submitted the quote to the lender. I confirmed with the lender that the insurance policy submitted was acceptable to them.

At this point I was thinking that these buyers could really use a buyer’s agent to assist them with things like this (we have offered to pay buyer’s agent’s commission but our buyers did not use one). However, I only spent a couple of days shopping around for insurance and I had the time. So no big deal. Back to happy land …

About 4 weeks into the process, I started worrying that we have not heard from the VA appraiser yet. I have read horror stories about VA appraisals taking forever. I contacted the buyers who told me that the appraisal was ordered right after we signed the contract. The buyers told me that the lender told them we should be getting a call from the appraiser on specific dates. I changed my plans to ensure I did not leave the house on those dates so I would not miss this call. This went on for about two weeks and I was getting tired of being stuck in the house waiting by the phone. Later the buyers also told me that the appraiser came over but no one was home to let him in – this was not true, I was there. About 6 weeks into the process the buyers told me that the delay was on the lender’s side. Supposedly the lender was trying to find a way for the bank to pay for the appraisal (instead of them) but 6 weeks into the 7-week contract determined that the buyers would have to pay it. The buyers supposedly sent the payment that day. At this time I started speaking directly with the lender at least once a day. I was informed that yes, the appraisal was ordered just then (when the buyers paid for it). Considering what I know now about the buyers, my guess is that they did not have the money to pay for the appraisal before then. And, obviously, I was concerned about the ever changing story about the appraisal.

A week later (the day before our contract was expiring), the appraiser contacted me and set up an appointment to do the appraisal the next day. Hooray! We knew there was going to be one repair (should there be a VA or FHA loan) we had to make but we did not want to invest money into it until we had to. The house has a French door that had no deck or steps outside. The appraiser told us we could purchase pre-fabricated stairs and install them in front of the door as long as the top had a minimum of 3x3 ft platform. This instruction is important – he told me this and also he told my husband separately from me. My husband asked if we could purchase one from Clayton Homes (they have a sales place nearby) and the appraiser said we could. However, he said not to spend any time or money on it until he reports back to the bank regarding the value of the house. He said it usually took him 5 business days to report back to the bank.

We also had to sign a contract extension. The bank said they can close by end of the month (2 more weeks) but asked that we extend by 3 weeks to be safe. Our attorney extended it by 4 weeks so we would not have to pay him again for another extension.

The appraisal came back fine value-wise – 8 weeks in, it’s Wednesday before Thanksgiving. Happy times again. We were most concerned about the house appraising as I have read that VA appraisers are usually lower than those for conventional loans. The appraiser also did not request any other changes except for the stairs. We went to Clayton Mobile Homes and purchased stairs that had 3x3 platform. We leveled the ground, installed the stairs and seeded the disturbed area with new grass seed. We called the appraiser to let him know we were ready for re-inspection on Friday after Thanksgiving. He came over on Monday after Thanksgiving and by the end of day the bank informed us that all was good and ready to go on that front. I know now that we should have requested a copy of the appraiser’s re-inspection report but the lender was happy, so I was happy (big mistake). The lender told us they were trying to close on November 30^th – i.e. in 2 days. Hooray!

The next day, Tuesday 11/29, we could not get hold of the buyers. I called the lender to see if he heard from them as the night before we had that bad storm that blew the Gatlingburg fire out of control and the buyers lived in that general area. I was concerned about their well-being. The winds were very scary at our place too. We finally heard from them. The wife was admitted to the hospital with pneumonia that morning and the husband was home without phone or power due to downed trees. We had to wait for her to get well and come home from the hospital.

On Friday, 12/2, the buyer told us that the wife was having heart trouble and would have a heart cath on Saturday. She was released from the hospital on Sunday and let us know that she had a heart attack. But she was feeling better and wanted to move as soon as possible.

Now we come to the last week before the closing … I was speaking with the lender several times a day as has he was ironing out last minute things before closing. It became very clear that the bank was nowhere near closing by the 30^th as they lead us believe.

The first issue that came up out of underwriting was that the $500 earnest money deposit was made in cash. The bank said there was no proof that money actually came from the buyers. If there was a check, it would show it drawn on their bank account. They said it was a common fraud for sellers or realtors to pay the earnest money deposit (why in the world - as a seller - would I pay an earnest money deposit to get into a contract with someone I don’t know is beyond me, but apparently it happens). And now that deposit could not be used by the buyers as their “cash to close”. Somehow they got this figured out over a few days and underwriting approved the transaction.

Then there was the issue of the VA escape clause. Apparently this was supposed to be signed at contract time. The escape clause states that if the property does not appraise, the buyer is not obligated to buy it. We have that exact same contingency in the contract but it had to be on the form the VA makes. We did not mind signing it but at some point I had to pack up my printer – so by the time the bank sent us the form, I had to ask neighbors to print & scan it for us.

Another last minute issue that was rearing its ugly head was an affidavit of affixation. We have filed this about a year before. Affixation (sometimes it is referred to as “retiring the mobile home to the property”) is done in two steps in Tennessee. First you send the original title of the home along with a request to detitle it to the state (Department of Revenue, vehicle services). Then you take their approval and record the Affidavit with the Register of Deeds in your county. The lender kept telling me we had to do it again and that they could not find, etc. I provided the title company with book and page number from the register of deeds. If I can find it, they should be able to as well. I also have no way of re-doing it (as the lender requested at some point) as we no longer have the title – it was surrendered to the state. I believe that they resolved this by having the buyers sign a new affidavit of affixation as part of their paperwork.

On Tuesday, the buyers rented a huge U-haul truck and found someone to help them load it. They live about 2 hours away. The lender told them that they needed to wait until the closing is scheduled to do this but they said they had to do it because that is the day they had help. The lender tells me he made it very clear to them that they should not move just yet.

On Wednesday at 2 PM, the buyers showed up at our house with the Uhaul and their boat demanding to move in. SERIOUSLY???? At this time the bank was still working on the issue with the $500 cash deposit so we were not certain if the deal would close or not. We allowed them to park the truck and boat on the property but would not let them unload anything. They went into town to get something to eat and came back later that evening.

At 6:30 PM that same day (Wednesday, December 7), I got a call from the bank that they noticed that the VA appraiser did not approve of the stairs. The report stated that the pre-fab stairs were personal property and could not be used. The bank knew this on November 28! (I know that because eventually on December 8^th they forwarded me a copy of the appraiser’s report per my request.) Clearly someone missed it. We called the appraiser and he informed us that the deck/stairs must be site built (quite a different instruction than before). He refused to give us any information how he expected it attached to the property (whether it must be attached to the house or the ground, etc.). The VA instructions just say there must be a 3x3 deck.

It was at this time that I lost it – I literally wanted to just walk away from the deal saying we won’t do it. My husband pushed for us to go get the materials from Lowe’s that night. His mind was little fresher as he got a mental break from this mess at work (not that work was not stressful or irritating but at least he has not been dealing with this ALL day long). Of course, we have already moved all of our tools, etc. We had to drive to our storage 45 minutes away to bring saws and other tools to build a deck. The buyer (the husband) said he would come help build it. Sure, we were not going to turn down help.

The buyers decided to stay in a hotel in town rather than drive 2 hours back home.

Thankfully, Thursday brought us some dry (albeit below freezing weather). It would have been truly miserable to have to build the deck in rain. The buyers showed up to supposedly help but he declared that it was too cold for him after about 10 minutes and they spent the day sitting in our recliners in the house. He again offered help later during the day but quit after 10 minutes because it was still too cold. We finished at 3 PM and called the appraiser. He said he would come by the next morning.

The buyers still wanted to move stuff in the house. We told them that until the bank gets a report from the appraiser that the deck is approved, they cannot unload anything. If that report comes in, they were welcome to unload into the garage (their concern was the cost of keeping the moving truck). But we were not going to allow them put stuff in the house until closing. They were not happy.

On Friday, 12/9, the appraiser came out at 10 AM and promised to send the report back to the bank by end of the day (which he did).  Once the appraiser said it was okay (verbally, before he sent the report to the bank), we told the buyers that they could use the garage. Their loan officer told me that they could not move their stuff into the garage because it would not fit (the garage is 27 x 24 ft – it will fit the contents of a Uhaul truck) and because it was not empty. At that point, I just started laughing because otherwise I would have to cry. First of all, it’s still my house and until the closing it does not have to be empty. Second, it was empty until we had to bring back tools and materials to build a deck. Of course, they gave us a different story – they did not want to have to move into the garage, they wanted to move to the house. So they decided to make arrangements to keep the truck through the weekend.

Around noon, the buyers showed up and told me that they were going to get something out of the truck. But instead of getting something out of the truck, they parked next to the truck and sat there for the rest of the day watching me and the kids. It was extremely uncomfortable and normally I would call the cops to make them leave. But I did not want to make them mad and lose the deal after all this work and so close to closing. I mean, who in the world acts like that? This was bordering on stalking.

At 5 PM on Friday, the lender told us they were still working on trying to get it done. At 6:30 PM we were informed that the closing was a go and that a notary closing agent would meet us at 7:30 PM or so (depending on how quickly he got the papers, printed them out and driving time). They wanted to close at the house but there was no table and chairs and they wanted us to be able to sit down at a table. We decided to close at a nearby pizza place.

I asked if we can see the closing statement before the closing and was told it was not available. Under any other circumstances, we would have waited until Monday so things would not be rushed but … 1) our attorney has been going back and forth with the title company all week in regards to settlement charges – we felt fairly certain they got it all hammered out and 2) our buyer just had a heart attack the week before and we did not want to take any chances regarding their health. And aside from that, I could not handle another 2 days of stalking.

The closing agent arrived at 9 PM and by 10 PM all papers were signed.

Funny thing is that I used to gripe about the “olden days” when you got a cashier’s check at closing, deposit it at the bank and then the bank would put a hold on the funds until the check cleared. I have to say I would have rather walked away with a check than a form that allows me to pick to have a check mailed to me or wire transfer. We chose the wire transfer (for expediency) but it still would not be wired until Tuesday. Closing agent has to over-night the documents back and the title company would wire the funds once they receive it.

So off we went … happy the closing was done, the buyers went to the house, we went to our temporary apartment. Since the closing was not scheduled until late Friday, we did not have a chance to switch the utilities. I told the buyers I would call first thing on Monday morning to disconnect water and power and that they needed to get their utilities set up.

This should be the end of the story … but wait, there is more.

Throughout the process, the buyers asked us to leave things for them. When we originally agreed on the purchase, they asked if we would leave our couch and recliners behind. We agreed as we did not intend to keep them and we would not have the hassle of selling them on craigslist. However, as time went on they asked us to leave items that we either intended to keep or sell (electric chicken coop door opener, chest freezer, the stairs we originally bought from Clayton Homes, etc.). As this became a pattern, we did not agree to leave any of these items. However, we gave them an option to buy them first. Overall, they agreed (verbally) to purchase items for $250. If it was me, I would have been ready with a check for $250 right after we closed (I might not have the cash on me on such a short notice but I would have a check). However, no payment was offered and we just figured we would ask over the weekend. We knew we could not force them to pay, but that was price we were willing to pay for being stupid/naive and making a deal like that.

We had a bunch of errands to run on Saturday and we did not return until Sunday. When we arrived, the first words out of the buyer’s mouth were: “You need to help me move the couches and bed.” Not “Can you help me?” – it was an order. We still had several hours of work ahead of us on the rental property next door and some tractor work we promised our neighbor. We told them we had to get that done first and then we would see. We also asked for the $250. They told us that they could not pay until Wednesday. (We took a check from them anyway and would deposit it on Wednesday.) It was dark by the time we got done with our other projects and my husband helped them move a few items.

They also asked us for their earnest money deposit back (at this time it was still in the attorney’s trust account). We told them it would have been accounted for in the closing (and our closing statement showed that we received our expected proceeds less $500). However, I contacted our attorney and scheduled time to see him on Monday to review the closing statement to confirm that we should keep the $500.

Monday … 3^rd day after closing

I disconnected water and power at our old house and then went to see our attorney. One look at the closing statement had him on the phone with the title company – it was not what he and the title company had worked out. By end of Monday, the title company instructed him to not release the $500 to anyone until they receive the paperwork the next day and tell him who needs to receive it.

On Monday evening, we got an angry phone call from the buyers that they water was cut off … well, duh. The water company office is 15 minutes from the house (I have provided both phone number and address to the buyers at least twice before.)

Tuesday … 4^th day after closing

I got a phone call from the lender who stated that “The title company is rescinding your wire transfer because the buyers did not bring their cash to close.” I just about had a heart attack right there and then. This has to be a nightmare I was going to wake up from, right? Apparently the buyers were supposed to bring about $500 to closing. The lender claims he told them the exact amount and instructed them to bring it to closing. The closing agent never asked them for a payment (I would think this would be a screw up on his side) and they (obviously) did not offer. So now, because they did not pay $500, the title company will not pay us tens of thousands of dollars for the house. I immediately contacted our attorney (although I was only able to leave a message) but he got right on it. Of course, in my mind I am already running through scenarios of how we are going to have to evict them, what damage we might have to repair and put the house back up for sale. This is 4 days after closing!

And since the buyers did not have the $250 they promised to pay us, odds are they don’t have the $500. How in the world do you expect to buy a house with no cash on hand? And I mean, no cash. It is not like they were expected to come up with a 20% down payment.

I asked the lender if I can just go ahead and pay it. He said it was not possible. Our attorney spent the day working on this and by the end of the day he clarified the amount due to us with the title company and that the buyers’ cash to close can be paid from the $500 deposit he is holding, However, he has to get the buyers’ approval to use the money for that purpose.

At the same time, the lender told me at about 3 PM that the buyers have already wired the money and that he is checking to see if it came through. We stopped by to speak with the buyers at 5 PM to confirm the situation and they were just getting ready to go to Walmart to wire the money. I am not sure who lied to me (the lender or whether the buyers lied to the lender that they already wired the money). But our attorney instructed us to go with them and confirm that the payment was made. When we came to Walmart, they told us that they could not do wire transfers (just person-to-person Money Gram transfers). The bank inside Walmart was still open but they would not do a wire for a non-customer. So it is back to the attorney handing the wire transfer which is probably better.

Wednesday … 5^th day after closing

Our attorney got in touch with the sellers in the morning and they gave him permission to wire the funds. He was getting ready to wire the money when the lender stopped him. The loan officer said that the wire must come from the buyer’s bank account.

Unfortunately, the buyer’s bank is 120 miles away. The buyers tried to figure out if they can initiate the wire without driving to the bank but were told they must do it in person. That is a long drive for anyone, let alone for someone who just had a heart attack. We did a little searching and found a closer branch in neighboring state – still at minimum 1 hour drive but at least closer. We called to make sure they can initiate the wire there and not at the branch where they opened their account. The buyers set out to drive to the bank.

Thankfully, the escrow officer at the title company had some sense about her. After speaking with the buyers she became concerned because they sounded elderly and that it was nuts to ask them to drive that far – especially since the attorney has their money and could do it for them. She also said that if the lender messed up initially and did not verify their bank statement for the source of the deposit when they made it, what did it matter now? Apparently she pulled enough muscle with the lender that the lender’s company president approved for our attorney to wire the money. She caught the buyers about 25 minutes into their drive (and a block from the attorney’s office). They stopped to see him and at 2 PM he wired the money.

At 6 PM we got a confirmation from the title company that they received it and initiated our payment. It should be in account later that evening or on Thursday morning (depending on our bank).

And I am going to say this again: Never, ever accept earnest money deposit in cash.

This should be the end of the story … but no, there is still more …

Thursday … 6^th day after closing

I looked at our account in the morning and the funds were not there yet. I waited until about 10 AM and then called our credit union. They asked if we got the wire instructions from them (which I did not know to do, the title company just requested a copy of a cancelled check). They explained to me that they use a 3^rd party company for wires and gave me the instructions. I contacted the title company and they already re-sent the funds that morning. The payment was returned to them and they called our bank and got the right instructions.

I waited another 3 hours and then checked with our bank. They told me they just returned the money to the title company 30 minutes ago. They said that the wire came in but there was no account number. The names listed as recipients were the buyers! Thankfully, our credit union does not have any customers with those names. I contacted the title company again and asked them to email me when the wire is sent. And eventually they did but our bank actually called me before the title company to let me know that the wire was correctly credited to our account.

I guess third time was the charm. Did I mention I miss those days when you simply got a check at closing?

While this should have been the end of this, we had a second property to sell that was tied to this sale by a shared driveway. The buyer of our adjacent property is using a local bank and is getting a commercial loan (rental property) with a substantial down payment. This process was going smoothly. We got the offer, signed the contract, allowed the appraiser and the termite inspector in and sat back and relaxed. But since the VA required a “Shared Driveway Agreement” for the sale of the first house, things got complicated. The buyer of the second property was quite easy to work with and agreeable to signing the shared driveway agreement. However, there were two things that needed to happen prior to that closing and we had to postpone the closing by 2 weeks:

The buyers of our house (the ones with the VA loan) had to sign a second agreement with the buyer of the rental house. They said they would sign it but then they kept pushing it back with “we’ll do that tomorrow”. I understand that we had no way to make them sign this additional document (they already agreed to its contents and it was included in their deed - so they were already bound by it per their lender and VA requirement) but there was not much we could do but beg them to come sign this for the second sale. We finally got them to sign the paper 12 days after their closing.

The deed from the first sale had to be recorded with the Register of Deeds. This was out of our control. It was up to the title company to mail it in. When I asked them when it was sent out for recording, they told me it was done 7 days after the closing. We have been checking with the courthouse and it has not been received. Eventually our attorney called the title company and they told him a different story. They said they were still waiting for paperwork from the lender (this was 12 days after the closing!!! and after they disbursed the funds to us). However, at his urging they sent the deed out and it got recorded the following day.

The buyer of the second house already had a renter scheduled to move in a day after the original closing date. We entered into an “early occupancy agreement” with them so that their renter could still move in. The closing happened as rescheduled, we received the funds within 3 hours of closing (fully credited to our account) and to my knowledge, the deed was recorded the same day as well.