Eiffel Tower Scam

Closing is where small mistakes can cost hundreds, thousands, or even your entire house. In this episode, Tim breaks down 7 closing mistakes sellers must avoid before signing the final papers.

You’ll learn:

• Why you must read your settlement statement early
• How tax surprises can shrink your proceeds after closing
• Why sellers should record their own final walkthrough video
• The danger of letting buyers move in before closing
• Why failure to disclose can haunt you years later
• Why FSBO sellers should never DIY legal paperwork
• The #1 nightmare: deed fraud and how to protect yourself

Bottom line: closing is not “just paperwork.” It’s where you protect the money, the deal, and the house.

Intro

Outro

Transcript

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In 1925, a con man named Victor Lustig walked into a Paris hotel, pretended to be a French government official, and he sold the Eiffel Tower to a scrap metal dealer. Now, the buyer gave him a briefcase full of cash, and then Lustig got on a train and just disappeared. Now, here's the part that kills me that same scrap dealer was so embarrassed about getting con that he never even reported it to the police. So well, Lustig, he returns to Paris a few weeks later and he tried to sell the Eiffel Tower again to a different guy. But yes, this actually happened. You can Google it, and I bring it up here on this channel because there's an even more audacious version of this very scam that's stealing homes from American homeowners right now. And it's basically the same play that Victor Lustig ran a hundred years ago. It's a confident individual with official-looking paperwork transferring ownership of a property that they have no rights to. So today we're going to go through the top seven closing mistakes, starting with the ones that cost you hundreds and ending with the fraud that can cost you your entire house. Number seven, this is not reading your settlement statement until you are sitting at the table. Because your settlement statement, sometimes also called an alto statement, it lists every penny coming in and going out of your sale. Your title company will send it to you before closing. Most sellers, they'll just glance at the bottom number and they'll see that it looks about right and then they'll just move on. But it's within those devilish details where a lot of errors can hide. I've seen wrong payoff amounts on the mortgage or incorrect property tax probations and weird little title fees that never were even agreed to in the first place. I've even seen commission amounts going to real estate agents that didn't match what they and the clients had agreed to. And the worst place to catch any of these mistakes is at the closing table because well, fixing it there means the title company has to recoup the numbers, reprint the documents, and you're just sitting in a conference room, kind of wishing you were anywhere but there. So make sure you ask for this statement as early as you can, read it line by line and call out anything that looks off before you even show up. Number six, this is not coordinating with your CPA. Here's a fun surprise that very few people are going to warn you about. If you sell your home, you walk out of closing with a big fat check, and then you go on vacation and you come home, and six months later, your CPA calls you with a tax bill and your stomach drops. Because what felt like life-changing money at the time, especially at the closing table, is now suddenly, well, considerably less life-changing. Two things cause this, and they catch way more sellers off guard than they should. First is the capital gains exclusion. If this were your primary residence that you sold, the IRS allows a single person to exclude up to $250,000 in gain from the sale. For those of you who are married, that goes up to $500,000. Now, most sellers, they hear that number and they mentally check the box. Like, yeah, I've got that, but there are additional hurdles here. You have to have owned the property for at least two of the last five years, and you have to have actually lived in it as your primary residence for at least two of those last five years. Further, every dollar of gain above the exclusion is taxable and it's taxable at long-term cap gains rates. And that can be a five-figure tax bill if you're not prepared. The second is what we call depreciation recapture. And this one is the real gotcha. If you ever rented the house out even for like a year, maybe just as a short-term Airbnb during COVID, the IRS expects you to have taken depreciation against that rental income on your taxes. Well, because when you sell, the IRS is going to make you recapture that depreciation and pay tax on it at a federal rate of up to 25%. Now, here's the worst part. It's actually irrelevant as to whether or not you actually claim the deduction. These parasites, I mean, government officials, treat it as if you did anyway. So if you rented the place out for even a couple of years, you could be looking at thousands of recapture tax on top of your regular capital gains. And that number scales with how long the property was rental and how much it depreciated. On a typical mid-range home, maybe rented for a few years, it's not unusual to see recapture bills in the low to mid-five figures. And almost no seller sees that one coming until their CPA brings them the bad news come April. Number five, not recording your own walkthrough video. See, most sellers they know that the buyer does a final walkthrough before closing, but very few sellers realize how smart it is to do their own walkthrough as well. And here's why you should. If the buyer does their own walkthrough and they claim something was damaged, it becomes your word versus theirs. Maybe they're saying the dishwasher doesn't wear it. Maybe the garage door opener is broken, or there's a giant gouge in the wall that they say, hey, look, that wasn't there when we looked at the house in the first place. And maybe they're telling the truth, or maybe they're not. Maybe your movers cause the damage while hauling the couch out of the front door, but it doesn't really matter because without proof, both parties are utilizing the legal defense known as trust me, bro, and it's not very effective. In order to protect against this very situation, sellers should walk the house themselves in the morning before closing with their phone. Have a video of them opening, turning on every appliance, testing every switch and panning through every room. And that way, if a claim ever does come up, you have evidence supporting your side of the story. Now, look, if any of this is freaking you out, do not worry because I'm here to help. I jump on live consultation calls with my viewers all the time. And if you're interested in speaking with me, the link is in the description below. Number four, letting the buyer occupy before closing. You see, if you let the buyer move in, store boxes, or start work on the house before closing, it's just a bad idea. I mean, look, I understand how this goes. The buyer is maybe like really the nicest person you've ever met. Their lease is ending Friday, closing is on Tuesday. And they ask if they could just pretty please park the moving truck in the driveway over the weekend and maybe stash some boxes in the garage. And I don't know, maybe start painting the nursery so that it's ready when they officially move in, right? And maybe you're like me and you're a gullible idiot who thinks the best of people and you think with your heart instead of your brain. So you say, sure, why not? What could go wrong? It turns out everything can go wrong because until the deed legally transfers at closing, you still own the home. And so anything that goes on in that home over that weekend that you let them in early on your property, it's on your insurance with your liability. So if one of their movers slips on the stairs, they sue you. If they scratch the floors, hauling a dresser through the hallway and then the deal falls through on Monday because their financing blew up, well, you just inherited that damage. And now you are listing a damaged house. But here's the one that nobody really thinks about. If the sale collapses and the buyer is already half moved in, a lot of times you don't just to call them and say, Hey, come get your stuff. You actually now have a person occupying your property without a lease. And in a lot of states, removing them can be an eviction, not just a phone call. That means you can be weeks or months getting your own house back. So I hate to be a jerk here, but here's the rule: nobody goes into the home until the deed transfers at closing. No early access, no garage storage, no exceptions. If the buyer is genuinely in an impossible spot and you were feeling super charitable because you're a nice person, maybe you could offer to pay for a storage unit and a hotel for the weekend. But really, it's kind of their problem to solve, not yours. If you insist against my better judgment, that there is some unusual situation where early access truly makes sense, then what you need to do is have a legal document drafted with a short-term occupancy, daily rate, a security deposit, and a firm move out date that triggers if the sale doesn't close. Look, it's okay to be nice. I appreciate that, but it doesn't mean you have to be a victim, okay? Number three, failure to disclose. And this is the number one reason for real estate lawsuits, and it's unique because you can be found liable by a judge years after you close. Let's say you found a hairline crack in the foundation. So you call a contractor out, but they just told you it was cosmetic. It's not entirely unreasonable for a seller not to disclose it because well, they either forgot or it seemed minor in the grand scheme of things. After all, the contractor said, Hey, no big deal. Well, the way that this usually goes down is months after closing, the buyer finds the contractor's invoice in the junk drawer of paperwork you left behind. And well, they decide to get their own foundation contractor. And maybe it's even the same guy that gave you the original opinion. But this time he's changed his tune and he no longer believes that's cosmetic. The next step here is the new owner is calling a lawyer, and you will be tap dancing in front of a judge explaining how and why you decided that that was no big deal and you fudged your disclosure paper. So the rule of thumb here is disclose, disclose, disclose. It's not a crime to have a home with defects, but it turns out it is a crime to try to cover them up. Number two, deciding to DIY the legal paperwork. This one catches my for sale by owners the hardest. And I want you to hear me out. Just because something is legal does not mean it's smart. And yes, while it's totally legal for you to handle every single aspect of selling your home from the marketing to the negotiation to the paperwork, it's definitely not necessarily smart. And look, I'm the biggest fan in the world of selling by owner. I think there are plenty of people out there who are perfectly capable of doing this without a real estate agent. But it's important that for those people who are trying to go out alone, that they understand their limitations. This is not the time to be pennywise and pound foolish and save a few hundred dollars of peace of mind that a competent legal team would give them, only to wind up back in court six months later facing a five or six-figure lawsuit. So please, for the love of all that's holy, do not DIY the legal side of these things. And this brings us all the way to number one. This is deed fraud. Now, here's how this works: a criminal somewhere pulls your name and property from public records, which, by the way, are freely available online in every county in America. They forge your signature on a deed, they record the deed at the county's recorder's office, you know, offered for like $50. And just like that, on paper, your house now belongs to them. They do one of two things here. They either take out a giant home equity loan against the property and then disappear with the cash, leaving you to deal with a bank that thinks, hey, you still owe us a ton of money. Or even worse, they list your home for sale, find a buyer, and close on it before you even know what happened. The FBI, for its part, has been warning about this since 2022 and it's only gotten worse ever since. Now, let's talk about the part that matters for active home sellers because right now you are especially exposed. Your home is already in the public conversation. The MLS listing, the Zillow page, the county records, the FISBO sign in the art if you're going that route. All of it tells a criminal, hey, this property is actively changing hands, and now is the perfect time to muddy the waters. A fraudulent deed filed during your active listing can blow up your closing at the last minute because the title company is definitely going to find it. And then that's going to stop the sale until that is cleaned up. And that cleanup can take months. It can cost you thousands in legal fees. And in the worst cases, it forces you to file a quiet title action in court just to reclaim your own property on paper. So here's three things to do. First, sign up for your county's free property fraud alert system. Almost every county recorder's office has one now and it text or emails you anytime a document is recorded against your property. Second, if you are actively listing a home, tell your title company up front that you want a pre-closing title check, usually about a week before closing. And this is separate from the standard title search at contract. And this catches fraudulent recordings that showed up after the initial search and it's going to bite you in the end. And third, if something does show up, do not panic and do not try to handle it yourself. Call a real estate attorney that very day because the faster you act, the faster we can get started fixing it. Now, to those of you who stuck with me all the way to the end, genuinely thank you. If anything we cover today has happened to you, I would love to hear about it in the comments. And the story itself does not have to be dramatic. In fact, the small ones are often the most useful because, well, they're the ones that other sellers are about to walk into without realizing it. And what I'll do is I'll take the top comment from this video and I'm going to invite that person onto the channel and we could talk in real time and sit down and talk through what happened because what you went through might be exactly something that saves another person from having to go through it themselves. And speaking of saving people, knowing how to protect yourself at the closing table is only half the battle. You see, none of it matters if we don't get you to the closing table in the first place, which means we have to get you an offer. And that's why I put this next video together right here. And this is where we break down the repairs that are worth making before you list and the ones that you should leave exactly the way they are. And I'll see you over there.