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Deja Vu Again Again

10th January 2007

Dave

I received a refund for my 10% deposit from the county clerk within 2 weeks. I fully intended to bid again on the same house when it came back to auction, but in the mean time I kept looking for other “deals.” I found several possibilities, but one looked especially intriguing. The opening bid was set at $0.00. I discovered that the property was being sold “without appraisal.” In many mortgage contracts there is a clause that allows the lien holder to do this in foreclosure. I can’t say why they might invoke this clause but in this case I have some idea. It could be due to the fact that the judgment was well below the appraised value, or that the place had serious structural problems (settling slab foundation), or due to the fact that the house did not sell in the first auction several months earlier. It may have been all of these factors working together.

My initial research determined that the property had an assessed value of $71,000, an appraised value of $60,000 (matching recent comparable sales), and a judgment of $25,000. I also discovered that there was $3,000.00 in current and back taxes. The property went though an auction about 2 months earlier in which the high bid was $40,000.00. The highest bidder and the second highest bidder both back out of the sale (neither placed the 10% deposit.) so it was back again in auction. I expected to bid up to $42,000. Depending on whether the HVAC required updating, I figure materials to renovate the place would be in the 7-12,000 range. This was actually a wild guess because I had no idea of what the interior would look like and a complete miscalculation of the cost to repair the foundation.

To my surprise I was the only person bidding on this property besides the bank. The banks attorney opened at $30,500, I countered with $32,00, and it was over. Here is where the fun begins. I went immediately to the bank for the $3,200 cashiers check and take it back to the Sheriffs office. The deputy looks at the check and tells me it is mode out wrong. It is made out to the Tulsa Count Clerk rather than the Tulsa County Court Clerk. I go back and get a new check. Later that afternoon I call the attorney’s office to see about getting the abstract updated. The assistant congratulates me and tells me that the rest of the process should go smoothly. Now where did I hear that before?

A couple days after the auction I get a call from a gentleman interested in the property. He tells me that he missed the auction and would I be willing to transfer the property to him for a “small” profit. He emphasized the word small. I told him I may be, but until I get the abstract back and title opinion I couldn’t make a decision. I had no intention of letting him have it but I also knew he could be trouble. If he really wanted the property, all he would have to do is contact the owner and agree to settle the default and give him a small fee for letting him do this. The owner would get little or nothing the way the auction went, so even a few hundred dollars may be all it would take to get the owner to agree. Until the final court confirmation the owner had the legal right to cure the default and retain the property. He would have another 3 1/2 weeks to do this.

It took the title search company 10 days to update the abstract. There was a great deal more work on this one than there was on the first one that I sent them. I take a quick glance at the abstract on the way to my attorney’s office. I notice a red page concerning unpaid taxes. Someone had bought a tax certificate on the property for the past 2 years. I comment on this when I hand it over. He tells me he will read it over and have his opinion by the first of the week. The following Monday I get a call and he tells me what he found. Another error in the legal description on one of the papers filed with the court. This error appeared on a single paper but it could potentially void the entire proceedings. He has a call into the bank’s attorney but hasn’t heard back. It would take another few days to determine if I should continue with the purchase. Finally on Thursday, less than 2 weeks from the confirmation hearing, I get a call that new papers had been filed with the court and that the sale could still go through.

It was finally the time for me to draw on my line of credit. I went to the bank and deposited $20,000 from the line of credit to my personal account. Except for the possibility that someone was trying to cure the default and problems with the foreclosure papers still existed, I felt somewhat relieved to get this out of the way. That relief didn’t last too long. The following Monday I checked my account balances online. Only $5,000 of the $20,000 had been credited to my account. I check with the bank and discover that there is a 10 business day hold on large checks. I would have to get documentation from the lending bank that the funds were available and my bank would release the hold. I go home and call the bank, which is in Rhode Island, and ask them to fax a statement on their letterhead to my banks Risk Management office. They inform me that their policy is to not release any personal information and that they cannot send the Fax but if my bank will call them they can confirm the funds are available. I contact my bank and they inform me that their policy is to get written confirmation. I’ll cut it short her and tell you that this went back and forth for 2 days. As ridiculous as the situation seemed to me I was going to have to wait the 10 business days for the funds to clear. It was now Tuesday, Thanksgiving was on Thursday, and the confirmation hearing was set for the following Tuesday. I had to have a cashiers check into the Court Clerks office by Monday at 4:00. I call my dad to see if he could help me out. He checks with his broker and his brokerage firm will loan him the money and will have a check overnighted. He receives the check late on Wednesday but too late to deposit in his bank. The Friday after Thanksgiving he takes it to his bank and guess what. They have the same hold period.
So now I have 3 days to somehow get the funds. But wait there is something else.

Ever since I get the call from the guy wanting to buy the property from me I check the court records each day to see if any new paper are filed. Sure enough at 7:30 Friday Morning, paper are filed that the confirmation hearing is “stricken.” I call the foreclosure attorney to see what this was about and they know nothing about it but will find out and call em back. Later that afternoon they call too let me know that the Judge was out of town and they could not finds out why the hearing had been canceled. The judge’s clerk agreed to place the hearing back on the docket until the judge could be contacted the next Monday. So here I was no funds (or at least no cashier check), not sure if the sale would be confirmed, not sure that the papers have been filed correctly, and still fearing that an outside source was trying to stop the sale. That weekend of waiting was no fun.

In the meantime, dad had contacted a long time friend who is a bank manager in s small time outside of Tulsa. He will vouch for him and cash the check and issue a cashier check immediately. I tell him about the possibility the confirmation hearing will not go through on Tuesday and that he should wait. We decide to wait until Monday morning before we go any further.

I finally get an answer about 10:30 Monday morning. The hearing is on but I don’t ask why it was temporarily stricken. My dad is in meetings all morning so I leave a message that I’ll need the cashier check. He finally gets free around two, but has to drive 70 miles round trip. We keep in touch by cell on his progress. I get a call about 3:30 that he is back on the road. We decide it would be best for me to meet him downtown. If everything goes perfect we will be cutting it close. There a great deal of street construction downtown and it seems like it takes me forever to find parking. I call dad back and tell him about the roadblocks and a way to avoid them. We decide that I will meet him outside the County Court House. About 5 minutes before 4:00 he arrives, pulls over to the curb, rolls down the window, hands me the check and I immediately start running. I make it just under the wire. The clerk takes my checks and prepares the receipts. The worst was over I think, or is it?

I suit up the next morning and head off to the courthouse about 8:00. The confirmation hearing is set for 10:00. I find the courtroom listed on the court papers, but notice that the judge’s nameplate on the door doesn’t match. I’m a little early and no one is around so I decide to check if I have the right place. It turned out that the courtroom listed in the court papers. I finally find the correct courtroom but it is empty. It’s only 9:30 so I decide to sit and wait. Over the next 30 minutes the halls and surrounding courtrooms filled with people. Around 10:00 the hall began to empty as people moved into the courtrooms. The courtroom the confirmation hearing was to be heard remained empty. By 10:15 the hall was empty except for another couple and me. I heard them talking earlier about real estate and confirmation hearings. Were they the owners ready to contest the auction, were they attorneys, were they associated with the guy who wanted me to turn over the property for the small profit.

The courtroom is still empty at 10:30. Every one in a while the hall fills with people as a court goes into recess. My attorney happens to walk by, asks how everything is going, but can’t stop and chat. The halls soon clear again except for the couple that had been waiting with me. We sit and wait another 20 minutes when an attorney I had seen several times at the auctions walked out of the judge’s office next to the courtroom. The couple walks over and I hear them ask something about confirmation hearings. I can’t hear so I walk over to them to ask my own questions. As I near I hear the attorney explain that there is no actual court hearing in confirmation hearings. The attorneys simply notify the judges that all requirements have been met, the money has been deposited and the judge signs the confirmation. She explains that the so-called confirmation hearing probably was concluded in her office about 10:01, and that we can check with the judges assistant next door to the still empty courtroom. I follow the couple in and hear them ask about another property. The assistant tells them it has been confirmed and they leave. I ask about mine and she tells me that it has been confirmed also. I think to myself that the ordeal is finally over, but then I think to myself “or is it!”

I run into the couple again waiting for the elevator. They tell me that this is the first property they bought at auction. They ask me if I know when the Sheriffs deed is issued. I don’t know so we decide to go downstairs together to the sheriff’s office and find out. The deputy at the desk tells us that the deeds are signed once a week. If the judge sends the paper work by the end of the day the Sheriff will sign the deeds the next morning. If there is a delay then it will be the next Wednesday before it can be issued.

The next morning go back to the country courthouse. I first go to the county assessor’s office to check on the back taxes. I get the amount required to get them up-to-date, but am told that unless I have clear title to the property I shouldn’t pay the back taxes. I go back downstairs to the Sheriff’s office and wait in line to see if the deed has been issued. The deputy shuffles through a pile of papers, and pulls out a couple of pages. I sign one of the copies and ask what next. I’m told that I need to record the deed with county records. I spend the rest of the morning running to county offices to pay the various taxes and fees, but by noon I had finally ought my first investment property. But what exactly had I bought. I’ve done a walk around and looked in windows but I really knew very little about the shape of the property inside.

This is what I end up with. Guess what’s inside.

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