Tag Archives: foreclosure

Buying a foreclosure – Part 7

We have read a lot and had numerous discussions with friends who have bought houses. Everybody has a story how something goes astray last minute. We are no exception – and just in case you are interested – here is our account of how our resolve got tested:

3 days to closing

We really need to get the mortgage commitment letter from ShoreBank so that we can formally schedule the closing that has been set for this Thursday (see also 04/13/2009 post). I started to poke around and finally found out that nothing is moving or happening because ShoreBank had no proof of insurance and no loan approval.


Didn’t I just send our proof of insurance (see also 04/13/2009 post)? It turns out that the preparation of closing documents is passed from Phil (our banker) to a different person (Pat) in a different ShoreBank branch office. Resolving the proof of insurance issue is easy: I just e-mailed Pat the documents.

2 days to closing

I receive an e-mail from Joe Ziccardi (our attorney) that the proof of insurance has to be re-issued. ShoreBank needs us to change the mortgagee information on the document and also a copy of the receipt as proof of payment. I scrambled to get the insurance broker to re-issue our proof of insurance and e-mailed it with receipt of payment to ShoreBank.

29 hours to closing

The loan approval is still missing! I am back on the phone to find out that it got somewhere stuck in the transfer from Phil to Pat. The seller told us in no uncertain terms that closing would not be delayed again and we are still fussing around with a critical document lost in transit. Phil was very apologetic and went personally after the documents to make sure they arrived at Pat’s desk. Finally, the mortgage commitment letter went out.

25 hours to closing

We receive good news from Joe . We have our closing scheduled, with confirmed location and time. We will still close on Thursday – hurray, no further delays!

20 hours to closing

We stop by the two-flat to have a last look before we purchase it. Everything seems normal until I notice that the front basement door is not closed. The locks are busted! Thanks God I have the tool bucket in the car. Cathy and I are able to barricade the door and have the property secured again. Not how we wanted to spend the evening.


16 hours to closing

Back home, we had the HUD-1 settlement statement and other paperwork in our inbox for us to review. We e-mailed a couple of questions to Joe.

What is a HUD-1?  (HUD – U.S. Department of Housing and Urban Development)

“The HUD-1 Settlement Statement is a standard form which is used to itemize services and fees charged to the borrower by the lender or broker. The borrower has the right to inspect the HUD-1 one day prior or day of settlement. The form is filled out by the settlement agent who will conduct the settlement. Borrowers may compare their Good Faith Estimate to the HUD-1 Settlement Statement and ask their lender or broker about any changes.”

Source: Wikipedia
Other resources: HUD1 Settlement Statement form

14 hours to closing

I had a few beers to calm me down, and am pleased to report that this proceeded without any delay or glitches – which was very refreshing indeed.

7 hours to closing

We got a prompt, first thing in the morning and straight forward response from Joe on our HUD-1 questions. This is what we love about Joe: very responsive, extremely reliable, and really good at explaining things.

2 hours to closing

Michael (our Realtor) called: The seller’s Realtor does not have the earnest money! Well, we are confident that they received the earnest money, but probably misplaced it – which would fall right into the pattern they displayed in the past (see also 04/08/2009 post).

OK, let’s assume that, for whatever reason, they did not receive the earnest money. Why on earth are they noticing 2 hours prior to the closing? I can’t believe they are still in business, operating like this…

We resolved the issue by agreeing to bring another cashier’s check to the closing table to cover the missing earnest money.

1 hour and 30 minutes to closing

Cathy is back from the bank with the earnest money cashier’s check. She also made sure to stop payment on the original earnest money check.

1 hour prior to closing

Departure to the title company office for the closing.

At closing

I have to say that I had imaged the pile of paper we needed to sign to be much more intimidating and big. It was not that bad at all. There was not one document that we did not expect or did not know about.

In addition to that, Joe did an excellent job walking us through every document, explaining it, and making sure we understood the legal jargon and knew what we were signing. We also took our time in reading through some of the less familiar documents.

1 hour and 30 minutes into the closing

S. O.  L.! Because of the missing earnest money check and having to replace it with a cashier’s check, our HUD-1 has changed: the line item for the earnest money needed to be removed to reflect the fact that we were now bringing it to the closing table. To finish the closing process, everybody has to sign the new HUD-1, including the bank that owns the property – that bank that has been so unbelievably elusive. “May be we’ll hear back from them today, if not hopefully tomorrow…”

We have to leave the closing table without completing the deal, without any keys. Actually, there were no keys anyway. The seller’s Realtor, who misplaced or lost our earnest money check, did not show at the closing. So we will have to go to the property and retrieve the key from the lock box – once we have the signed HUD-1 back from the seller… Can it get any more anticlimactic that this?

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Buying a foreclosure – Part 6

Will our loan application be approved? (see also 04/12/2009 post) Next Thursday’s loan board meeting by ShoreBank was still a few days out. I decided to use the time effectively and get the mandatory homeowners insurance.

I’d met with our existing insurance agent at the two-flat for an inspection and to get the home owners insurance process started. Our agent was very polite and diplomatic. He did not laugh at us when he saw the property, but informed us that it is very unlikely that we would get conventional homeowners insurance, considering the conditions this property was in.

He referred us to another broker that specializes in policies for vacant dwellings, a policy that is often used by builders and developers for their properties that are under construction. We got quotes and shared the details with ShoreBank to make sure the policy would meet their requirements.

We can buy vacant-dwelling insurance for three-month terms. This kind of policy is a little more expensive than your typical home owners insurance. Our hope is that we renew once. We would like to be far enough along in the green rehabbing process after six months to switch to a regular homeowners insurance policy.

I prepared the policy application, took it to the broker’s office to get the last details ironed out, paid for the policy and left with the magic ‘proof of insurance’ in my hand. I forwarded the document immediately to Joe Ziccardi (our attorney) and ShoreBank.

The magic Thursday, the day of our loan application review, came along and we received a phone call from Phil (our banker) that our application was approved. So we passed another milestone and are one step closer to closing.

To schedule the closing, the seller requires a written mortgage commitment from ShoreBank (our lender).

Mortgage Commitment: “Written confirmation from a buyer’s bank to a seller of a property that the bank will advance the specified sums (usually as a mortgage loan) enabling the buyer to complete the purchase.”

Source: BusinessDictionary.com

We need to get that commitment, and we need to get it fast, because closing is next Thursday – in 6 days already!

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Buying a foreclosure – Part 5

Time is ticking away and we are trying to get a handle on what has to be put together, and when. Not an easy process if you are a first-time buyer. We finally (sort of) got a schedule from ShoreBank:

  1. Determine project budget
  2. Commission appraisal of property
  3. Take loan application to ShoreBank’s loan board for approval

Project budget

I scramble to put a budget for our green rehab together. We need to determine how much money is going into the green rehab to set the total loan amount (purchase price + rehab budget).

Fortunately we have our project rationales and principles in place to guide us through this process. We shared this information with developers, green building experts and friends that had rehabbing experience and could help us with our project budget development. We also contacted various specialists (such as energy experts), vendors (such as solar hot water), and contractors for pricing information.


Once we have the budget number, there is no guarantee that ShoreBank will lend us that much. The upper limit of the loan amount is determined by two factors. The first one – how much we feel we can take on – is controlled by us. The second is determined by an appraisal commissioned by ShoreBank. This appraisal takes into account all of our planned improvements to the house – it is a post-improvement appraisal.

Our worry is that the dollar amount of the post-improvement appraisal will be lower than our project budget. That would through a big old wrench into the process. We would need to conduct more pricing research to figure out how to cut our budget with the closing date fast approaching.

To get to the appraisal commissioned, ShoreBank was pressing for our project budget and I was able to deliver half a day early. That did not help us. It turned out that the appraisal would take longer than usual due to the sustainable scope of our rehab plans and the associated extra research.

Loan approval

ShoreBank’s loan board in Chicago currently meets once a week (every Thursday) to review and approve loan applications. Phil (our banker) worked hard on getting our application in front of the board as soon as possible. He needed the appraisal on Wednesday for the Thursday’s meeting. But unfortunately the appraisal arrived on Thursday and we missed this week’s opportunity to have our application reviewed.

The bad news is that this set us back a whole week to next Thursday. That is the same Thursday on which our closing should have taken place! The good news is that the appraisal was actually higher than our requested loan amount.

We now have to worry about pushing the closing date back again. We were not sure if the seller would just cancel the deal or go along with another extension. This is where we could rely as usual on Joe Ziccardi (our attorney). He managed once again to have the seller agree to the new closing date and to have any penalties for the delay waived. Thank you Joe!

We coordinated with ShoreBank to make sure that the new closing date was realistic: The seller had insisted that this was the last and final extension granted.

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Buying a foreclosure – Part 4

With a ratified and executed agreement in hand, we immediately contacted ShoreBank. The first question Phil (our banker) asked: “When is your closing date?” Our answer: “In one week.”

I think I heard our banker Phil fall out of his chair. He informed us with great urgency that this is an unrealistic time frame. He would need about 30 days to get the loan application approved and all other paperwork in place.

Of course that’s not what we wanted to hear. On the other hand, we know that this is an unusual project that may require more than the usual time. Life would be easier if we could finance the purchase with our own cash (a practice not that uncommon as we heard on This American Life). But how would we pay for the rehab? You know, waiting for paperwork to get done suddenly doesn’t sound that bad.

Except – what is our convoluted seller with his erratic response times saying to this? We had the vision of the deal floating away from us again. This is where Super Joe (our attorney Joe Ziccardi) came to the rescue. He managed again to get the sellers attorney on the phone and re-negotiated the closing date. Not only was he able to get the date pushed by three weeks, we were also spared any penalties for the delay. Thank you Joe!

Three weeks was less than the 30 days ShoreBank asked for. But having gotten to know the seller, we were in no mood to push this any harder.

If you live in the Chicago area and need an excellent Real Estate attorney, we recommend you contact Joe:

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Buying a foreclosure – Part 3

We are happy about the recent price drop for what we started calling “our two-flat” and submitted a new offer for the $60,000 asking price. This time around, things happened at the speed of light. Not only did we get the usual verbal confirmation of the offer acceptance, we actually got the sellers counter offer and addendum within days!

Seller’s counter offer and addendum

What is a seller’s counter offer and addendum? We initially submitted with the help of Michael (our Realtor) a standard Chicago Real Estate contract with a preapproval letter from a lender and a copy of our earnest money check. That package is basically our offer. If the seller accepts our offer, they issue their own contract, comprised of a counter offer and an addendum. Most people think of a counter offer as being related to the price of the property, but this negotiation has nothing to do with the price, which is set.  The counter offer has to do with the seller’s contract, which absolutely supersedes our original contract, except for those terms that are not inconsistent with the sellers counter offer and addendum. Got it? To figure out what supersedes what, some careful reading is required.

Response to counter offer and addendum

That is exactly what we did and identified a number of items that were inconsistent, did not make sense, or that we disagreed with. Our attorney, Joe Ziccardi, summarized those items in a response to the seller, basically requesting changes to the counter offer and addendum.

Ratified and executed agreement

Only a couple of days later (yes – things suddenly started to move fast!) we got the fully ratified and executed agreement. This basically means that our response or request for changes to the counter offer and addendum were accepted and all parties are in agreement on the terms. It was almost too good to be true… except that it the “fully ratified and executed agreement” had no reference to our response and request for a few changes to the counter offer, and did not even acknowledge  receipt of our request.

The reference finally arrived a few days later from the seller’s attorney, with six out of our seven request for changes declined. Initially, we were not sure what to make of it, but began to realize that these items could be resolved through negotiation or a request of clarification. The problem is that like with the seller’s agent, the seller’s attorney was not very responsive. Thanks to the persistence of our attorney, he finally reached a warm body picking up the phone and worked his way to the person who dealt with our case. Not only that, but Joe was able to get clarification on all the questions and disagreements we had. A few more days of nail biting and we were finally in possession of a truly ratified and executed agreement – hooray!

We now were also finally able to secure the building by boarding up the back porch windows. You have no idea how much weight this took of our shoulders!  (Especially after we got down off the ladder after holding ¾” sheets of plywood up there in the rain while we secured them.)


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