“Everybody makes mistakes!” That’s what we said at my house when the kids were young and somebody spilled the milk or dropped a dish. It took away the sting of shame and guilt from the person who caused the “accident.” The quote was taken from Big Bird on Sesame Street.
I was talking to a Medford lawyer last week after finally completing the settlement of a hard fought foreclosure defense case which resulted in a loan modification. “Maybe I need to hire you for my own mortgage,” he said. “What do you mean?” He proceeded to tell me about the 30 year fixed mortgage he applied for, but when it came time for closing, the terms were changed to an adjustable rate with a balloon payment after ten years. This is what is called in Consumer Law a “bait and switch” tactic by the mortgage broker. A “simultaneous closing” was scheduled by the broker, meaning that if the Medford lawyer backed out of the deal, the seller’s closing on the new house they were buying would also fall through. Because others would be impacted, he decided to go through with it, even though the loan terms were not as promised. Now, along with many of us, the Medford lawyer is stuck with negative equity and is anxious about whether the market will recover before the loan is due in five years.
Since he had shared his “big mistake,” I decided to share my own “D’oh!” moment (quote from Homer Simpson). I was looking to downsize a year ago and found a condo I made an offer on. I wanted to impress the seller, a local developer, how serious I was, so I put in a $5,000 earnest money deposit. I used a reputable real estate agent. After the offer was accepted, the agent started talking about the developer working with the bank to release liens so the condo could be sold, because the property was in foreclosure. “What?!” (“D’oh!”) Imagine how stupid I felt, as an Ashland lawyer and a real estate license holder myself. I hadn’t asked enough questions about the seller’s financial integrity and the status of his title to the property. When the preliminary title report came in, I realized the deal was never going to close because there were too many liens against the property. I demanded my earnest money back. The developer, thankfully, agreed to release my five grand. (Once the money is in escrow, the title company can’t release the funds unless both parties agree). The last time I saw the developer was at his Creditor’s Meeting in bankruptcy court.
Here are the morals to these stories: 1) Don’t be pressured to sign something you didn’t agree to. The incentive of the professionals involved (mortgage broker, realtor, escrow officer) is to close the deal: that’s how they get paid. Don’t sign if something’s not right. 2) Go skinny on your earnest money ($500 will do). You might not get it back if you have to walk away from the deal. 3) It is likely that nearly every mortgage and foreclosure started after 2004 has problems. You won’t know unless you get a professional evaluation of your circumstances. 4) “Everybody makes mistakes.” When you do, it’s better to admit it, get over your guilt, and seek professional help in fixing the problem. If the mistake involves real estate, mortgages or personal finances, give us a call. We’re here to help.