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Saturday, November 7, 2015


(The following is part 2 of the series "A Disgrace to the Profession".   While the two posts stand independent of each other, I would commend you to read Part 1 first).


You won’t believe what I am about to write.  Indeed, I didn’t when someone first told me the story.  But it’s not a story and instead it’s the truth.  So I will tell it from the first and let you decide if something like this could actually happen.

I received a call from a real estate agent who had a friend who had received certain documents relating to a foreclosure action that they didn’t understand that they wanted me to review.  They had purchased the house in a short several a few years ago and the bank that was prosecuting the foreclosure action was paid off and the homeowner had obtained their own mortgage.  For whatever reason, the attorneys for the bank that had gotten paid off had sent these foreclosure documents to the homeowner.  Perhaps they were nothing.

When I reviewed the documents, it seemed as if the foreclosing attorneys were mistakenly continuing to prosecute their long standing foreclosure action and were now actually nearing a sale date.  For whatever reason, no one had informed them that the house had been sold and that their client’s loan had been paid off.  I figured it would be simple enough to stop this mistake quickly by simply printing out the deed and Satisfaction of Mortgage from ACRIS and presenting them to the foreclosing attorneys.

However, when I checked ACRIS, I found nothing about the transaction.  The Deed in favor of the homeowner had not been recorded, nor the new mortgage nor a Satisfaction of Mortgage for the old mortgage.  At first, I thought that what may have occurred, as does on rare occasions, is that the title company may have lost or misplaced all of the documents to be recorded.  Perhaps instead the documents were misindexed against another lot?  I did a name search and the relevant documents were still missing.

Curious, I asked the client to bring their entire file to my office so that I could review it as there must be something in such documents that would be both valuable and helpful.  I could then forward the same to the foreclosing mortgagee and the house would be saved.  However, the documents that the homeowner was given were rather sparse and were conspicuously missing pages that were vital.  Also, there were inconsistencies as there were three versions of the HUD and there were bits and pieces from title reports from two different title companies.  By some coincidence, the title company listed on the HUD as having been the one that closed the deal happened to be the company that I use as well.  When I contacted them, they advised me that a certain attorney had ordered a title report from them but that such deal had never closed.  I then contacted the other title company that had also issued a report and they mentioned that the same attorney had ordered a report from them as well, but that the deal had never closed either.

When I eventually pieced everything together, it was clear what had transpired.  One attorney had represented everyone and had controlled everything and she had stolen ALL of the money for the transaction.   Thus, the deed into the homeowner was not recorded and as she pocketed the funds to payoff the homeowner's mortgagee, this is why the foreclosure action was still continuing.   The new mortgage executed by the Purchaser was also not recorded as well, as why would she bother to do so if she was pocketing all of the other funds?
Remarkably, she had convinced the two parties that she should represent the seller, the purchaser as well as the incoming mortgagee for the purchaser.  To make things look legitimate, she had some person attend the closing pretending to be a title closer who had notarized documents, but nothing was ever done with those documents.  This is why conspicuously all of the notary pages were missing from the copies that the homeowner had.

The new loan was NOT a fiction.  The Purchaser had indeed applied and been approved and the new mortgagee wired money to this attorney.   However, instead of using such funds to pay off the outstanding mortgage, as well as paying all closing costs, she had just kept the money, which was approximately $500,000.

You might then ask if the new homeowner was protected as he had title insurance.  No.  Unfortunately, as she stole the money, the title insurance policy was never paid for and thus the Purchaser was not covered.   Ditto for the incoming mortgagee, as their title insurance policy was not paid for, there were not covered as well.

When I confronted the foreclosing mortgagee and told them my remarkable story, they were decidedly unimpressed as they said that they already knew what had occurred.  Indeed, they forwarded to me  a memo from the District Attorney’s office about the attorney in question and how she was being prosecuted for various offenses, like the one involving the homeowner.  Sadly, she was still practicing even though the transactions in question were several years old and had caused the ruin of several families.

She had apparently gotten away with this for so long for two reasons.   First, she blamed her boss and made the excuse that she was just am employee.  However, nothing had happened to her boss as he claimed that she was a rogue employee.  Second, her family was apparently politically connected as her father was a federal judge.

The hope was that the foreclosing mortgagee would be compassionate and would voluntarily stay its foreclosure action.  However, their position was that as they were never paid, their sole and their natural recourse and remedy was to foreclose.  Indeed, by simply relating what had occurred, you were also admitting to the fact that they had not been paid.   Thus, they felt that they had every right to foreclose.  

Moreover, they should not be punished for the crimes of the guilty party and while they felt bad for the homeowner, his recourse was to seek restitution against the attorney that stole all the money.  Indeed, they were victims as well.

My solution was to enlist the help of the mortgagee for the new owners, the ones that had purchased the house.  I implored them that if the old mortgagee was permitted to consummate its foreclosure action, then they would lose their collateral and they would be left with nothing.  Thankfully, their attorneys then filed a final last ditch motion to stay the foreclosure sale that was scheduled to take place this past Friday October 30, 2015 so as to save their house.  The court denied their request...

Friday, November 6, 2015


Well, that may be a bit hyperbolic, but you get the idea.  While Chase may not be the worst, it is certainly in the top 5.  I have had a few recent mind numbing experiences with Chase that have irretrievably scarred me.  Let me relate two of them quickly.

The first was simply trying to obtain a mortgage payoff from Chase for a second mortgage that they held for a client.  It took our office nearly a week and over ten (10) hours of phone time with them.   During the course of those conversations, we were remarkably told ALL of the following things:

– That the loan did not in fact exist;

– That the loan was paid off a couple of months earlier;

– That the loan was forgiven;

– That a payoff had already been ordered at a specific date and time;

– That they had no record of any prior phone calls that were made (which was right after the conversation where we were told that the payoff had been ordered and after at least 6 phone calls to them);

– That it wold take 2 to 3 hours for them to send a payoff;
– That it would take them 6 to 10 business days to send a payoff

– That they had no idea when they were going to be able to send a payoff.

A few tips then if you are thinking of calling Chase for a payoff:

 1) Don’t speak to the initial person that answers the phone and tries to help you.  They know nothing and they can’t help you.  Always ask for a supervisor;

2) Make sure that you have another activity to amuse yourself with as you are going to be on hold for a long time;

3) Be  prepared for the grave disappointment of being on a lengthy phone call and then being asked if you would like to hold, when you have no other  option.  After you are placed on hold indefinitely, the Chase employee will disconnect the call and you have just lost an hour of your life and everything that transpired during that time has no record with Chase.

4) Laugh at anyone who claims that they are going to help you.  At one point, someone from Chase emailed us and advised us that his job was to provide immediate help to homeowners in distress.  After a couple of email exchanges, it became clear that the one thing that he couldn’t do was help and instead his job merely consisted of him saying that he helps people.

The other scenario that occurred when a client obtained a mortgage from Chase and for some reason the employees at Chase thought that the real estate taxes on the house were $34,000 per year when they were  instead actually about  only $4,500 per year.  We kept sending them proof  from the title report of what the actual taxes were and they nevertheless delayed the closing and kept charging our client additional fees.  They finally advised us that they had corrected their system and when we went to the closing, they still had the taxes listed incorrectly as $34,000 and we had to sit and wait a few hours for them to correct it.

While the mortgage division at Chase is horrid, their banking division is top notch.  Indeed, while their mortgage division seemingly hires the most unqualified, rude and mindless individuals who surely have, at best, a single digit iq, their banking division hires typically very well mannered and professional people who genuinely wish to help.  Alas, the two seem to cancel each other out rendering Chase rather mediocre overall.

A DISGRACE TO THE PROFESSION (How some real estate attorneys either skate or steal)

Sometimes I receive a phone call from a prospective client, or a referral from an associate, and I can’t believe what I am hearing.  What follows are two recent scenarios that I have witnessed which are beyond belief and hopefully will serve as a cautionary tale to anyone involved in a real estate transaction.   Regrettably, the guilty parties in both scenarios were compromised attorneys who either acted with poor judgment or committed an outright illegal act.  To exacerbate matters, the attorneys involved were all real estate attorneys who were experienced and who knew far better.  Thus, while I typically preach about using an experienced real estate attorney for a transaction, the sad fact is that some attorneys either skate while others steal.  Obviously, I can’t reveal the names of the attorneys involved, so do be advised that their names are being omitted to protect the guilty.

Part 1.   THE SKATER   

The first situation involved a client who was purchasing a short sale and had executed a contract to do so several months ago.  He contacted me as he had an inner sense that something was seriously amiss, which suspicion was further aroused by the fact that his attorney had gone into hiding and was not answering him.  Boy, was he right.

It turned out that he was purchasing a house for a sales price of $320,000 and he was told by the broker that he should be able to close in about three months.  Of course, this is false as short sales normally take far longer and a year is a far more reasonable time estimate.   Then the story got worse.  The client also advised me that when he executed the contract, he had paid $200,000 as and for his down payment thereunder.  Yes, $200,000 or more than 60% of the sales price.  The normal down payment at contract on a short sale is a de minimis $1,000.00.  What made matters worse is that he had borrowed the money and was paying $1,300 per month interest on such loan and had been doing so for more than seven months.  He had also paid the attorney a fee up front, as well as a fee for the title report upon front, which is very unusual and suspicious. 

I then reviewed the contract that he had  given me a copy of.  It was the standard form which remarkably did not contain a short sale contingency.    How could anyone possibly miss this if they were paying any attention whatsoever?   The contract was remarkably missing the single most important element of the transaction which made it rather clear that neither of the attorneys had done any work.

It was quite clear that his attorney had not reviewed the contract, nor the transaction, critically.  He had basically met him and told him to sign and then took his money.   His attorney had not advised him about how obscenely high the down payment was nor advised him about anything else for that matter.   He was either a pawn of the broker or simply skating his way toward a paycheck.  

When I contacted both attorneys for the transaction, they unsurprisingly had no answers for me.  Upon receipt of my initial accusatory email, my client’s former attorney emailed me back to say that I was not aware of the peculiar facts and circumstances involved in the transaction and that he would call me the next morning to discuss them with me.

Before I get to the phone call, a quick aside on my initial phone calls to his office.  It turns out that he also owns  the title company that he was using, the one that he also took a check for.  I later learned that no title report was ever produced, although my client paid for same.

When I asked the woman that was answering for his office a copy of the title report, she gave me the phone number for the title company.  When I called the title company, it was the same woman who answered the phone.  When I confronted her about this, she then couldn't tell me who she worked for and if she worked for either the attorney or the title company.  Then she stopped taking my phone calls altogether as I was apparently too aggressive and instead she took to hiding underneath her desk.

When her boss then called me,  he had nothing to say.  I asked him to tell me what the peculiar circumstances were that had alluded to which would change my mind.   His response was that he would have to go to his office and check his file with regards to what had transpired.  So, in sum, he was unaware of what he claimed that I was unaware of.

His subsequent defense, upon reviewing his file, consisted of him advising me that the parties were related, which statement actually hurt his cause.  Indeed, if the parties were related, then a down payment could be dispensed with altogether.  Also, if they were related, then I asked him how we would tip toe  around the requirement on a short sale that that the parties execute what is referred to as an “Arm’s length affidavit” which basically provides that the parties are in fact NOT related.  Did he expect his client to swear to an affidavit which was clearly and demonstrably false?  By the way, when I spoke to my client about this supposed relation, he advised me that the parties were not related.

My client’s former attorney then advised me that the contract could have been canceled by my client at any time.  I asked him exactly where in the contract it provided for such right and he fell silent.   Eventually his response was “Well he knew could cancel even if the contract didn’t say he could”.  I asked him what other clauses did the client know about which weren't contained in the contract.  He fell silent again.

The real estate broker, who was abroad, then chimed in.   He started with a bombshell as he gave me the shocking news that the short sale had been denied by the mortgagee a couple of months ago.  My client, however, who was never advised of such denial, was incensed when I did.  The seller’s attorney was still holding his $200,000 and he was paying interest on same and the transaction was dead, except no one bothered to tell him.   

When I subsequently spoke to the seller’s attorney, the hilarity continued.  My prior experience with him was three years earlier when I had met him on a Saturday afternoon outside of a supermarket as he had held onto my client’s certified check for several days and made excuse after excuse of why he couldn’t return it to me.   When I finally told him that I was going to file a complaint with the District Attorney’s office, he relented and agreed to meet me.  Thus, he didn’t have the greatest credibility with me when our conversation began.  Remarkably, his credibility sank to new depths during the course of our phone call.  

He advised me that he didn’t know that the transaction involved a short sale.  He advised me that he didn’t know what a typical down payment was on a short sale.  He then advised me that he didn’t know what a typical down payment was on a regular deal.   Basically, despite the fact that he regularly practiced real estate law, he knew nothing about real estate law. Unfortunately for this attorney, Hogan’s Heroes was canceled a long time ago as he would have made a perfect modern day Hans Schultz.

While the story has not yet been concluded, so far my client has gotten back his $200,000 and I am going to make sure that both attorneys involved reimburse my client for every penny that he paid out of pocket to date.

(The second situation will follow soon in another post and it is infinitely more serious and troubling than the one related above.)

Sunday, June 14, 2015


    While this may be a bit esoteric, and beyond the scope of what most people come to this blog to read, there is a little known rule about a party filing bankruptcy and its effect on judgments against them.  

    The narrow context in which we are focusing our attention on is the situation where a party had a money judgment entered against them and they subsequently filed a bankruptcy petition and they are now selling real property to a third party.  The issue is whether the judgment was wiped out by virtue of the bankruptcy filing. That answer, while clear, may not be as widely known as it should be.

    The simplistic thought that most people have, even many attorneys, and their level of inquiry, is simply this.  Did the Seller receive a discharge in connection with their bankruptcy filing?  If so, then they reason that the judgment must have been wiped out.  This assumption is wrong.  The judgment will only be wiped out if they named the judgment creditor in their bankruptcy petition.  However, we aren’t done with the inquiry.  Not close.

    If, upon reviewing the bankruptcy petition, it is determined that the judgment creditor was indeed named, most people think this is sufficient and think that it is then ok to proceed with their purchase of the judgment debtor’s real property, as the judgment will no longer affect their property.  Unfortunately, this isn’t true, although this is a false assumption that most people hold.

    Instead, what most people don’t realize is that what the bankruptcy filing only serves to release the judgment debtor from their obligation to pay the judgment and nothing more.  The judgment is still attached to the property, and is still a lien against the property, and any subsequent purchaser of any real property owned by the judgment debtor will take subject to the judgment.

    What is actually required from the judgment creditor, other than to vacate the judgment, is a property release for the property in question.  This is typically obtained by paying the judgment creditor a negotiated sum, which should be somewhat lower than what they would demand in order to vacate the entire judgment. 

    Even if a property release is obtained, such judgment will still be attached to any other properties that the judgement debtor may own.   This is why the judgment creditor may take a reduced sum to provide a property release, as they will continue to hold the judgment against other properties that the judgment debtor  owns and thus the judgment creditor expects that the same scenario will play out again and that they will be paid for a property release for such other properties.  Of course, the judgment creditor may also see this as their only bite at the apple and may seek a princely sum to release the property.

    One final thing to remember is that foregoing applies even in the context of a short sale where the judgment debtor has no equity in their real property.  Whether or not they have equity is simply irrelevant. 

    As can be expected, this issue actually comes up most often in the context of short sales as a seller of a short sale property may unfortunately have had various financial reversals that caused them to have a judgment filed against them, and which may led them to file a bankruptcy petition.  It is accordingly imperative that you have an experienced real estate attorney representing you when purchasing a short sale as there are a myriad of title issues that can have serious consequences post closing if they are not both identified and properly addressed prior to closing.

Saturday, May 30, 2015

DOES A CONTRACT OF SALE EXPIRE? (Is a contract of sale like a carton of milk?)

    One statement that I hear quite often, and one which is completely incorrect, is that a contract of sale has “expired”.   However, the simple fact is that a contract of sale is not like a carton of milk.  It does not expire on its own.   Instead, there is a process that must be followed in order to effectively terminate it.

    The mistake that most people make is to assume that the closing date contained in a contract of sale is akin to the expiration date that they see on the aforementioned carton of milk.   It isn’t and the milk carton   and a contract of sale aren’t really that analogous.

    Simply put, in the vast majority of contracts, the closing date is merely an approximate date as to when the closing may, but not must, take place.  It’s a ballpark date and nothing more and the contract of sale will not expire the minute that such date passes.  Instead, the side that wants to cancel the contract must serve an appropriate notice fixing a “Time of the Essence” closing date and, if done properly, then once that date passes, the party serving such notice may then cancel the contract and avail themselves of various remedies.

    An exception is if a contract of sale already has a “Time of the Essence” date, which is highly unusual and occurs typically only in limited kinds of transactions, for example, new construction, foreclosure and REO sales.   If a contract has such a closing date, and if the parties don’t close by such date, then the contract will indeed expire.

    Typically, most contracts of sale contain an “on or about” closing date which accords both sides the right to adjourn the closing by one month from the closing date contained therein without the permission of the other party.   However, this additional period does not in and of itself contain a deadline unless one party has fixed a “Time of the Essence” closing date.

    While many clients and brokers will call me and frantically or matter-of-factly tell me that a contract of sale expired, very few attorneys do.   If I do receive such a phone call from an attorney, it is typically from one  that doesn’t practice real estate.  Typically, it is a litigation attorney and I will counsel them to research the matter and then to call me back if they want to discuss it with me intelligently.

    There is one context in which, as a Purchaser's attorney, I like to add what I would term a "sunset" provision.  Namely, when I have a client purchasing a short sale, and as the transaction can become overly protracted, I like to address this possibility at the time that the contract is first executed.    Accordingly, I will typically add language that if written short sale approval, consistent with the terms of the contract of sale, is not received by a date certain, then the purchaser has a unilateral right to cancel the contract and receive a full refund of his down payment.   Unfortunately, I have had to avail myself of this "out" quite often, far more than I would like.

    One final note.  Upon doing some further research into dates on milk cartons, apparently the date contained thereon is a sell-by date and not a use-by date.   Like a contract of sale, you still have some more time...

Thursday, April 30, 2015


The following post, for most real estate attorneys, would be suicidal.  It would cut-off their biggest source of new business and perhaps their livelihood altogether.  Thankfully that is not the case for me as due to my longevity and the nature of my practice, I have great independence.   Thus, I can freely tell you what everyone else knows, which is that typically the least credible and knowledgeable persons in a real estate transaction are the real estate agents.  Indeed, they are Hillary Clintonesque in their sheer lack of credibility, transparency and honesty.

    Certainly, I have to add the important caveat that there are some very knowledgeable and honest real estate agents that I have worked with over the years.  They help matters greatly and will help a deal close more quickly and smoothly than it otherwise would.  Sadly, this is the exception rather than the rule.  Instead, what I find is that I spend a great deal of my time correcting patently incorrect or misleading statements that a real estate agent has told a client.

    A simple case in point was what occurred yesterday. I am representing a seller and they contacted me very upset and confused.  Their real estate agent had demanded a copy of the survey for their house from them.  When they told her that they didn’t have it, she advised them that as their attorney, I would have a copy of it.  However, this made little sense as there is no reason for me to have a survey unless I had represented them when they had purchased their house and if I still had my file from such transaction.  As it turns out, they had purchased the house in 1984 when I was still in high school.   The real estate agent was of the mistaken belief that as I was representing the seller, I would automatically, perhaps magically, have a copy of the survey in my file, and, perhaps, every other document relating to the house from the beginning of time.   This is plainly not the case as I would only have the documents that either they or the title company had provided to me.

    The above is an example of ignorance, which unfortunately is not as bad as outright willful deceit.  This can take the form of misleading a party about the legality of a structure, playing bait and switch with various terms, misleading either side about closing costs, dissuading a buyer from taking protective measures, etc.   Other classic examples are telling a buyer not to get an inspection, pressuring a buyer by telling them that there are multiple offers behind them and they must act quickly, telling a buyer that a structure is legal, when it isn’t, etc.  What really irks me is that when they are called out on it, they will claim ignorance and use the excuse that this was a matter for their attorney to address.  Shifting blame for their actions is quite in keeping with their Clintonesque approach to things.

    As you can well imagine, I don’t get a lot of business from real estate agents and many will try to dissuade their clients from using my office.  They realize that having an independent attorney poses a real threat to them and they would rather retain control of the deal by instructing a party to use a certain attorney who will play along with them.

    While an agent may say after the closing, “What difference does it make?”, it certainly does if you are saddled with issues that could have been avoided.

Sunday, April 19, 2015


    One issue that I am discussing more and more with clients, and something that should be routinely discussed during a contract signing, is the following:  Is the buyer's obligation to proceed contingent on a satisfactory appraisal of the subject premises?   To wit, what are the consequences to both parties if the property fails to appraise for the contract sales price?   Obviously, in a market where prices are rising rapidly, the results of an appraisal are of paramount importance.   Before we answer the question at hand, let’s first consider how an appraisal is conducted.

    An appraiser will look at three (3) recent comparable properties in the area (known as “comps”) where the property is located that have closed.   This requirement of a closing is very important.  The appraiser does not look at properties that are simply listed or just in contract.  Instead, they will look at properties that have already closed.  As the properties must have already closed, they represent a snapshot of what the market was a few months or perhaps a year or longer ago when prices were probably lower.  The appraiser then either adds or reduces the relative value of the house being appraised by comparing the given comp with the house being appraised for such things as lot size, location, updated kitchen and bathrooms, etc.  The three (3) comps are then averaged and a final number - the appraisal value - is produced.

    One of the biggest sources of fraud before the housing crash were manipulated appraisals.  Indeed, the appraiser is given some latitude in choosing what comps to use and if they get  creative, then they can easily inflate their appraisal.  The higher an appraisal is, the more that a mortgagee will lend.   Thankfully, since the housing crash, various rules regarding appraisals have been apparently been tightened to prevent such creativity.

    Getting back to our topic at hand, and keeping the above discussion in mind, it is easy to understand why the issue of a satisfactory appraisal should be of great concern to both sellers and purchasers.  The simple initial answer to the question is that the form contract that is used by most attorneys does NOT have an appraisal contingency.   However, this does not end the inquiry and as I like tell my clients, an appraisal contingency is implied in the contract.  What I mean by this is the following.

    If your contract contains a mortgage contingency then you are probably protected if the property fails to appraise.  This is because a mortgagee will typically lend based on the lower of the appraisal value or the contract sales price.  If the appraisal comes in low, then depending on the ltv (loan to value ratio), the mortgagee will deny your mortgage application and you will be entitled to receive a refund of your down payment.  Let’s use some numbers to clarify this point.

    Thus, if you are buying a house for $500,000 and applying for a loan of $400,000, then your ltv (loan to value ratio) is 80% and your mortgagee will give you a loan which is 80% of the lesser of the contract sales price of $500,000 or the appraised value of the house.  If the house is appraised at $450,000 then your lender will give you a loan of $360,000 and as you didn’t receive an approval for the principal amount of the mortgage contained in the contract, you can then cancel the contract of sale and receive a full refund of your down payment.  If the house appraises at $600,000, then your bank will still only give you a loan of $400,000 as, remember, they will give you a loan of the ltv of the lower of the sales price or appraised value.

    Where a buyer may have problems and where they will not be protected by virtue of a low appraisal is when their ltv is very low and the lender may then bump up the ltv.  Hence, using the same sales price of $500,000, if you are applying for a loan of only $100,000, you then have a ltv of 20%, which is extremely low.  If, like above, the house appraises at only $450,000, the lender will likely still give you a loan of $100,000 as your ltv is 22%, which means that there is little risk to them.

    A few final notes.  If you are purchasing a house and will only proceed if the house appraises for the sales price, regardless of your ltv, then you should ask your attorney to insert an explicit appraisal contingency.  Finally, beware of contracts that contain express language that the obligation of the purchaser to proceed is not conditioned upon a satisfactory appraisal.  I typically insert such a clause into my contracts when I represent a Seller to the detriment of various buyers.