First assignment off my own default list paid 11k, after title nearly forced a double close

I have been building a list for about seven months and said in here more than once that I was not buying. Technically still true. I sold a contract instead.

The lead was a 1,400 square foot ranch, owner two years into a divorce and five payments behind, second lien from a home equity line at about 38k on top of a 191k first. That second is why nobody else on the street wanted it. Retail comps were 305 to 318 depending on which side of the arterial you count, and the house needed roughly 45k of real work including a foundation crack that a structural engineer looked at for 550 of my money.

I contracted at 236 with a 45 day close and a clause letting me assign. Total payoff needed was around 231 plus fees, so there was almost nothing left for the seller, and I was honest with her about that on the second call. What she wanted was to be out before the sale date and to not have a completed foreclosure on her record, and a licensed attorney walked her through what that actually meant for her, not me.

The part that nearly broke it: the end buyer's title company would not process an assignment on a file with a junior lien payoff still being negotiated. They wanted one buyer, one seller, one settlement. I had eight days to either lose the deal or fund it myself, and I do not have 236k. What worked was moving the file to a different closing attorney who would do back to back closings and lining up transactional funding at 2.5 points for a same-day double close. That cost me about 7,100 in fees and points against an 18,200 spread, so my 11,100 is what actually landed.

The junior lienholder settled at 9k on the 38k, which the seller's attorney handled and which I had no control over. If they had held at 20k the deal dies and I lose the 550 engineer report plus six weeks.

What I keep: paying for the structural opinion before contracting, and asking the closing attorney in advance whether they will close an assignment on a file with a short payoff. Whether double closings and assignments are permitted, and whether marketing a contract triggers licensing, varies by state, so I got that answered locally before I did any of it.

3 replies

1carlos_nunezActive

The 9k settlement on a 38k second is the whole deal and you got it from someone else's negotiation. That is fine, it happened, but I would not build a model on it. I have had a second position lender on a similar file refuse to take anything under 60 percent because the borrower had other assets and they knew it. Did you have any read on why they cut it that hard, or did the attorney just come back with a number one day?

1samantha_ruizAU4APRO6

Seven months of list building for one assignment is a real answer to something I have been arguing with myself about, so thank you for the timeline. The part that sounds easy in your telling is finding a second closing attorney inside eight days who would do back to back on a file with an unresolved junior payoff. I have called five in my county and three of them will not touch a double close at all now. If your first title company had been your only option, does this deal exist? I think it does not, and that makes the fee look less like skill and more like you had a phone number nobody else had.

1Rena Expert

Your exit depended on the junior lienholder discounting, which is the variable to watch if you repeat this. A junior lien behind a first that is already near the property's as-repaired value has weak economics at a completed foreclosure sale, because in most states the sale proceeds pay the senior lien first and the junior can be left with nothing recoverable from the property itself. Whether the debt survives as a personal obligation, and whether pursuing it is worthwhile, depends on state law and on the borrower's circumstances, so that is an attorney question rather than a rule you can carry between deals.

What that means practically: the discount you got is a function of how thin the equity cushion was, not of your negotiation. Your 236 contract against 305 to 318 comps with 45k of work leaves a first-lien payoff at 191 comfortably covered, so the junior had less pressure on it than you might assume. Model the same deal with a 240k first and a 20k second and the second has almost no leverage, and the seller ends up with even less room.

On keystone's point, closing capacity is a real constraint and it moves. Assignment and double-close practice, and what a title company or closing attorney will underwrite, differ by state and by individual firm, so a working relationship with more than one closer is part of the infrastructure at this stage rather than a nice-to-have. Confirm in writing with each closer what they will and will not process before you contract.

One number to track going forward: your 7,100 in transactional funding and fees was 39 percent of the gross spread. At a 12k spread instead of 18k, that structure does not clear.

First assignment off my own default list paid 11k, after title nearly forced a double close

3 replies