I finished closing on an investment property; my first one! It was a whirlwind of an experience. It was kind of a disaster. From the coordination and timing of the close itself all the way to the state of the home during the final walkthrough. My agent commented that it was a much more difficult close than average. I hope that you have a much smoother experience when closing on an investment property. Here’s what happened.
The Day Before Closing
I worked with Better.com to get my loan as I discussed in a previous post. Better was for the most part pretty good, but things got a bit complicated before the end. There are rules stating I have to receive my initial disclosure statement at least three days before closing. I received the statement on a Monday with my closing due Thursday.
The lender and title company work together to reconcile the terms of the contract and any amendments. We had created an amendment at the end of the option period that was not included on the initial lending disclosure statement. The seller had agreed to reimburse me for a few items around the house that needed fixing and opted to pay me a little bit toward closing rather than fix himself. Other than that, things looked fine.
The morning of the day before close, my real estate agent and I were beginning to wonder why we hadn’t heard anything yet. I needed to set up a wire, and didn’t have a final number yet even though we were set to close at 10am the following day. I called the lender and my agent called the title company. Each said everything was fine and they were just working to reconcile things. They had everything they needed from us and I would be able to set up my wire that night.
The Night Before Closing
As we approached close of business on Wednesday, we still had no information from the lender or title company. I called the lender at 4pm and they said they would be sending a finalized version to the title company in 45 minutes. My agent called the title company and they said they would stay late to get things done.
Neither of these things happened. Close of business came and went. I spoke with the lender at 6pm (my assigned rep was west coast) and she said they were still working to reconcile but they would certainly get things done by close at 10am the next morning my time. Her office didn’t open early, so I asked and she agreed to get another rep on the east coast assigned to my loan to make sure things were smoothed over by signing time.
At this point, I still didn’t have what I needed to send the wire and I planned to drive an hour and a half the next day to do the final walkthrough followed by closing. It was going to be a waste of time if I couldn’t close, and if I did I would have to wire the money from the road.
The Morning of Closing
I woke up the next morning excited to close on my first property and get to work fixing it up for rental. My army of service providers was set to come out over the next several days and I was anxious to see the house again. The car was packed full to head up there for close and fix a few items from the inspection myself. I was ready, for my first time, to complete a closing on an investment property.
Because I left before the title company opened, I knew I wouldn’t get the final amount to wire until sometime during my drive. I packed up my laptop and hit the road for the final walkthrough. By the time I arrived at 9:15 for walkthrough I still did not have final documents. I called the title company and they said they had issued them to my agent for review. He was in the car heading up for the walkthrough and arrived shortly after. We determined that we would just have to review them when we arrived at closing at 10am.
The Final Walkthrough
The walkway to the front door was not a good sign. The plants were both overgrown and dying compared to the last time I saw them. The seller clearly stopped caring about the lawn when we went under contract. The grass was also overgrown. Just one more thing I would have to take care of before getting the property turned around for rental.
Inside was a bit messy, but not awful considering that I did not expect them to hire a cleaner before they left. I was a little surprised to find a bunch of junk still hanging around. The back yard still had dog toys, dog poop, and children’s toys laying around including a large play kitchen with gross standing water. The yard also featured an old electric smoker with the cord cut off. Basically junk that I would have to find a way to get rid of.
Several walls needed touch up, but on closer inspection four of the rooms painted white needed a full repainting. I checked on smoke alarms. All five expired and needed replacement. Smoke alarms last 10 years and the home was about 10 years old, so I saw that coming. I also checked out the doors for rekeying or lock replacement.
The Surprise in the Garage
Just as we were wrapping up and getting ready to head to our closing, I decided to head out to the garage to have a quick look around. While the garage was in general disarray (old rags and tools laying around), two things caught my eye. First, the large wooden table taking up a full parking spot. Probably a work bench of some kind, but not something that I wanted. The second was the 5ft x 5ft x 5ft cardboard box that was completely full of trash.
As I looked closer around the garage I also noticed that both trash bins (recycle and trash) were both filled to the brim with trash. Not OK! So I figured I would take some junk outside and try to figure out how to get rid of it. That would have been easy except the garage door wouldn’t open. Sometime during their move out, the springs on the door had broken and the seller hadn’t bothered to fix them! At this point, we determined it was time to call the sellers’ agent.
Closing on an Investment Property
At closing, we were about 15 minutes late thanks to the surprises in the garage. I checked in while my agent read his counterpart the riot act on the state of the house and the broken garage door. The seller offered to bring things to the curb and said they had somebody scheduled to come pick up the junk. They also offered $300 for the garage door repair.
I accepted the $300 for fixing the garage door and told them I didn’t want them back at the house moving junk. They had not exactly earned my trust. I asked for receipt or proof of appointment time for the junk pick up they had promised. Turns out the city has bulk trash pick up on first and third Tuesdays of the month and that is what they were suggesting we do. As it happened, we were just past the first Tuesday and I wasn’t about to have the trash all sitting there for two weeks! I learned this after already signing the first few documents at closing, and decided to eat the cost of a junk removal service hoping I could get someone out there quickly.
The close itself was uneventful except for the hand cramps from signing multiple documents. They confirmed the final number at close, which was just about what I was expecting. I had to pull out my laptop to submit the wire form as we began signing documents… talk about last second!
One Last Problem
Everything went fairly smooth after that. The seller signed right after I did and my wire went through pretty quickly and without a hitch. While they were signing I went to home depot to pick up a few items including new door locks and smoke alarms. The title company suggested I come back right after the Sellers’ close to pick up keys and garage door openers.
At the title company (surprise!) there were no keys or garage door openers. I had kept the key from our walkthrough, so was still able to access the property fortunately. I changed the locks anyways, so didn’t really need the keys. The seller had brought everything to close but forgot to leave them because “nobody asked for them.”
The next day the seller kindly dropped off the keys and garage door openers… directly in front of the front door. I left the day before and live a ways away, but fortunately I had already changed the locks and the garage door was broken, so nobody could get in.
My First Investment Property
It was quite the day. I spent a couple of hours that I had intended to use getting my property up to speed instead calling up service providers and dragging junk to the curb. I needed junk removal ASAP as well as a painter and someone to fix the garage door. Fortunately I was able to get junk removal the next day and a garage door company signed up to come out. I also got a couple of painting bids scheduled for the following Monday, though who knows how long it will take to actually paint. Unfortunately the garage door company never showed. I can only hope it will get fixed soon so I can move forward with renter showings.
All in all, it was quite a stressful day compared to what I expected. Everything was last second and the seller certainly didn’t help by leaving the house a total mess. I hope that I can rent the place out quickly at a great rate and the whole process ends up being worth it!
