My Buyer clients recently closed escrow on an over size SFR on Avenue D in South Redondo Beach for $1,851,000. This transaction is a good example of no deal is easy and how easy it is for transactions to get off track as they get more complex. Its also a great example of how a few times a year I am fortunate enough to meet clients with incredible positive energy committed to making things happen no matter what.
I'm going to discuss a lot of parts of this one and we'll take a look at relocations sales, contingent sales, contingencies, buyer defaults, special recordings and more. All in all a great example of why experience counts.
1021 Avenue D Redondo Beach CA MLS OC17159660
My Buyer clients had a number of specific requirements. After driving around and looking at a number of listings I had put on the tour, they inquired about one I did not include - specifically because it didn't fit the parameters. The pictures looked like it was vacant so being the pushy agent I am we just drove over there not knowing if we could get in or not.
"Great location in South Redondo Beach on cul-de-sac. Fabulous roof top decks with outstanding views. Entry level features master bedroom with fireplace and retreat, secondary bedrooms as well as laundry room. 2nd level features living room, kitchen, dining room and huge family room. Lots of light and views from this upper level. Home also feature large roof top deck. Kitchen features 5 burner gas cooktop along with double oven, stainless steel appliances, island, granite counters and wine cooler."
Four bedrooms, 3.5 baths, and 4112 Sq Ft and the price was recently reduced to $1,799,000. What's the catch? Somewhat dated needing updates but mostly cosmetic. And of course at this price we were in a multiple offer situation with the price set to be bid up. Way up as it turns out.
Showing went well and my clients loved the property (great located, schools and more) so I called the listing agent. Since the price was lowered they already had one offer. And it was a relocation sale. And my client's home in San Diego wasn't in escrow. Hmnn. I can make this work!
What's a Relocation Sale
A relocation sale is a particular term of art used when an intermediary, the "relocation company" purchases the home from the current home owner sometime during escrow and then becomes the seller to the buyer. This is offered as an employee benefit to offset some of the costs of making the move. The employer absorbs a lot of the costs of the sale for the employee. Totally legal and passes IRS muster but certain very strict guidelines need to be followed. It also requires a lot more paperwork up front and from a brokerage perspective, the file is often weird because the relo company won't sign certain documents. In this case it was any brokerage disclosures (standard) or disclosures they considered to be opinions such as my AVID - agent visual inspection contingency.
Because relo companies don't want to be holding properties in their inventory - which can easily happen depending on where in the process they acquire the asset, there's a lot of scrutiny up front to make sure the deals are solid. And we were doing a contingent sale. And not just a contingent sale. There was a down leg for the buyers of my client's home in San Diego so the buyer's were buying my client's home contingent on the sale of their home. Degree of difficulty on a scale of 1-10? 17.5.
What's a Contingent Sale?
Hey Ellis, I thought there are contingencies on all purchases? Yes, typically the buyer has three contingencies: loan, appraisal, and buyer investigations (inspections). This adds a fourth - the sale of the buyer's home.
The C.A.R. form "COP" can be filled out a lot of different ways. We opted for the sale contingency to remain in place until the deal closed.
On standard sales sometimes we can get a contingent offer accepted if the down leg buyer has already done their inspections and removed all their buyer contingencies. Very rare to get an offer accepted when both escrows are more or less running parallel.
Not only that, as it turns out and as mentioned above, the buyers for my client's home had to sell their home first. So two other escrows would have to close in order for the sale of Avenue D to close.
One of my attorney clients says I am very good with "wiggle" words. I think he means that as a complement. I had to do a bit of wiggling on this one when the listing agent asked me if the buyers for my clients home were also doing a contingent sale. My stock answer: "I don't want to make representations regarding escrows I'm not involved in. Here's their listing agents contact number." Very fortunate I took that route as I'll discuss below.
What Happens When a Buyer Doesn't Perform
It was very fortunate that I didn't make any representations regarding the double down leg buyers because when it came time for them to sign their loan documents - they didn't! That's an extremely rare situation. It has only happened to me once previously and that deal didn't close. So let me be clear as to what I'm referring to. Buyers go to escrow, loan docs are there and they don't sign. Wow. Without getting into why (which would be pure speculation on my part) I thought the subsequent sales were done at this point.
Also, because of some very poor real estate practice by the other agents, the down leg buyers loan contingencies had never been removed. Fortunately the buyers were able to arrange a private loan and close but before they did so their agent threatened to pull the recording unless they got further concessions which I believe they did.
Can Lender Require a Termite Clearance if it is Not in the Contract?
Apparently they can. In the pre 2014 RPA, Section 1 repair and allocation of costs would be stipulated. In the current iteration it is part of the request for repairs. None the less the lender on this one wanted Section 1 termite work done and sprung it on us at the last minute. The property had been tented previously but there was dry rot on the French Doors. Truthfully some putty would have probably solved the problem. Even more fortunate the loan officer was able to convince the lender that it was not a health or safety issue and we were able to move forward.
In LA County we don't fund and record the same day. That means if your loan funds on Monday, it records on Tuesday. Unless you do a special recording meaning one of the principals has to meet the title company at the recorders office. In that case, funding and recording can happen the same day and that's what we set up. Except for the fact that instead of going to Norwalk where the local courthouse is for recording, one of the buyers had to drive to Palmdale! Why? Because the relo co was using a title company who had their local office and people there. Speaking of the relo company there was one last little twist in that the person from relocation who had to sign off on everything was in Boston - with a 3 hour time difference, and we needed the CD signed before we could close. Fortunately the loan officer was able to get the funder to send the money before the cut off time and we closed on Tuesday well before the moving trucks showed up with furniture. But not to worry, the house was vacant and there was no way I was going to let me clients have their furniture out on the street!
Just a day, or rather a month, in the life of a real estate agent.