Is my real estate agent doing a good job? This reader feels like their agent didn’t fully explain the process of selling their home and all their options.
Q: I sold my dad’s house late last year and feel like I was taken advantage of by my agent and my real estate attorney, who was referred to us by our real estate agent. I totally lack experience in this process, which likely didn’t help.
I have two questions, and the first is about property taxes. I’m so confused about the city taxes paid out of the proceeds at closing. We paid out about $3,000 at closing yet when I called my dad’s mortgage bank, they told me they paid over $3,000 out of escrow towards taxes. My dad usually pays around $6,000 in taxes for the whole year. But the new owner would be responsible for the rest of the year’s taxes so why did we still pay $6,000?
My dad has dementia and fell behind on his mortgage payments, so during the selling process our agent said I didn’t have to continue to pay the monthly mortgage payment. But that turned out not to be the case. We were expecting to pay around $250,000 at closing but ended up paying around $275,000. Why were we given that advice?
My dad was never offered a loan modification and went into foreclosure while this process was ongoing so I was forced to move fast. There were a host of other issues with the buyers and it was a huge mess.
Now I’m alone feeling so used and betrayed by both the agent and the attorney.
Is My Real Estate Agent Doing a Good Job?
A: There are times in a real estate sale when nothing goes right, and everything feels as though it is stacked against you. However, that doesn’t mean your broker or your attorney did anything wrong.
Your list of where your sale went wrong is long – and we feel for you. Some buyers can be real pains and their behavior truly tests everyone in the transaction. It seems that you might have had that kind of a buyer.
But let’s walk through a few of the “highlights.” By your own admission, you didn’t have much, if any, experience selling a home and were relying on your real estate agent and attorney to help you out. The weak link here is probably your father: Once he stopped paying his mortgage payments, his loan started down the foreclosure path.
When your father failed to make his first payment to the mortgage company, assuming you knew and had power of attorney for his financial matters, you could have stepped in and made that payment along with any penalties owed. Once, your father failed to make three or more payments, the loan went to the foreclosure department of your bank. At that point, your father owed three months of payments, three late fees and other fees that were quickly piling up.
When a loan goes into foreclosure, the lender may refer the loan out to a law firm to start foreclosure proceedings against the homeowner. Those attorneys’ fees and costs get added to the loan along with any filing fees and court costs. We don’t know at what point you came into the picture and realized there was a problem. If you had the money to make all the payments on the loan, you could have taken the property out of foreclosure.
Why Didn’t My Real Estate Agent Explain All of My Options?
If, on the other hand, you didn’t have that money in hand, your real estate broker may have just assumed that the entire amount owed to the lender would get paid when the deal closed. While we would hope that your agent and attorney might have explained the process and costs to you, it appears that you didn’t fully understand what was going on. In that respect, you might be right that your agent and attorney are at fault for not going over all the intricacies of the foreclosure, the costs and timing.
In the end, if you couldn’t come up with the money to bring the loan current — that is to say to pay all delinquent payments, unpaid interest, unpaid late fees, unpaid court costs, and attorneys’ fees, then that’s how it would be settled at closing. And, if it cost you $25,000 of the sale proceeds, that’s understandable.
On the real estate tax side, you need to know that in some states, real estate taxes are paid a year in arrears. So, in 2019 you pay the taxes that were due in 2018. If you live in a state where taxes are paid in arrears, it’s common to give the buyer a credit at closing for taxes for the time you owned the home but don’t get billed until well after you close on the home.
How Are Property Taxes Paid at Closing?
It appears that your lender paid part of the tax bill for the year in which you closed and you might have needed to pay the balance of the taxes owed for that year. We think it’s likely that your real estate taxes were due in the year you closed on the home, so your lender might have paid the taxes for the first half of 2018 and by the time you closed, you had to pay the tax bill for the balance of 2018.
Take a look at your closing documents to see if your buyer reimbursed you for some of the tax money you paid. Here’s how it might work: Let’s say you paid the property taxes for all of 2018 and closed on the sale of your father’s home on November 20, 2018. In jurisdictions where taxes are billed and paid for the same year, you would have paid for 12 months and the buyers should have paid you for the one month after closing.
Real estate transactions are difficult to understand but at least there is (or should be) a paper trail explaining various expenses. Now that you have some distance between when you closed and today, you can go back and look at the details and hopefully get your questions answered.
Finally, while you found yourself in a difficult situation that seemed murky (at best!) it doesn’t mean your attorney or real estate agent betrayed you. If you have family members or friends that have more knowledge of real estate transactions, talk to them and go over what you went through. If after you talk to them, you still have issues, you might want to talk to a different attorney to get more advice.