This episode walks through line-item settlement statement review on the messy Texas title deal that nearly collapsed, revealing $3K in recoverable costs including a $700 attorney deposit that should have applied to the $1,800 affidavit of heirship charges and $2,100 in prorated taxes the buyer should never pay. The review happened Friday evening before Monday closing, demonstrating the importance of exhaustive financial statement verification regardless of fatigue or deal complexity.
Key Takeaways:
- Every Line Requires Verification Settlement statement review demands examining each charge even when exhausted—the title company initially charged both the $700 deposit and full $1,800 for affidavits until challenged with the original invoice.
- Prorated Taxes Default to Buyer Traps Title companies will attempt to charge buyers for prorated current-year taxes based on purchase agreement language, creating double taxation since you’ll pay again at disposition—this $2,100 hit required immediate pushback despite sensitive seller relationships.
- AI Contract Review Prevents Surprise Fees Running legal agreements through Claude before signing identifies potential cost escalation risks in attorney retainer structures, preventing situations where you’re contractually exposed to runaway fees on deals that may not close.
Listen to the full episode for the complete settlement statement negotiation tactics and specific line items that most commonly contain recoverable costs.
(Podcast transcript below)
Welcome to Get Serious. So in yesterday’s episode, was previewing that we were going to talk about the resolution to purchasing that messy title deal. So again, if you haven’t listened to any of those, it’s a deal we’ve been working on in Texas for over eight months, crazy airship situation, a lot of upfront costs.
Hard costs on the deal like roughly five grand out a ton of time involved in it And it seemed like the seller just ghosted us right at the end even though he had been super cooperative The entire time just took us by completely complete surprise. So We were considering. Okay, are we going to take this in a more legal direction if needed? But first can we bring him back into the fold with a friendly direction? So and yesterday I talked about how we used
know, Claude to very carefully craft email and voicemail scripts to very, very subtly indicate that we aren’t going anywhere, but like not explicitly mentioning illegal direction because we weren’t even sure whether we would have gone the legal route anyway. And depends on all the involved costs and timeline, et cetera. It was going to be a coin flip if it got to that point. But like I mentioned yesterday,
We did all of that work to prep that approach and strategize around it, built up the email and voicemail. then like right as that was being done, the seller came back into the fold. working through this, and this is like, you know, there’s some general tactics related to settlement statements, HUDs, as well as, you know, some specific to this particular situation.
So, this was late on a Friday, it had already been a stressful week, a lot of like back and forth potential legal, just, your eyes start to hurt, brain, it’s just not working properly, but it’s like, okay, I still finalize because, title companies always tend to drag their feet right up until the point of closing.
And then it’s always like, okay, rush, rush, rush. Let’s try to get this done. You know, they’re emailing at, you know, 530 PM on a Friday and getting the seller to come in early on a Monday morning, which like, right, you know, showing some urgency there, but you know, it forces us to have to react to this too. But it’s just like the nature of real estate. I don’t know if that’s ever going to change. Certainly hasn’t in our time in the business.
And so like I was reviewing the initial settlement statement. And again, the kind of overarching, if you only take one thing away from the episode here and it should be like, you know, business 101, right? Whenever there’s, you know, your money and financial statements involved, but like every single line of them, you got to go through it. And that is the takeaway for closing statements. doesn’t matter how tired you are or whatever. Don’t just do a quick scan through, like really look.
Okay, what am I being charged for? Especially like a deal that’s been going on forever. we agreed to fund this one, know, eight months ago. So I really wanted to make sure, and I wasn’t even positive on some of the potential legal expenses because we had already done 3,500 roughly in hard costs for a survey before we figured out all these title issues. Like that was mistake number one that I talked about in a previous podcast.
And then we had to get these affidavits of airship done in order to get the deal to close. And a separate legal, you know, attorney’s office had gotten a roughly $700 deposit from us to get these affidavits of airship done. And we had signed, you know, when you sign some of these
You know, like it kind of agreements to, and I should have asked more questions than, honestly, this was like probably a little bit before we were using AI for everything. Like should just have AI go through this legal document before you sign this, like what are the key questions, like as legal advice to my own end and go back, make sure all those are answered, make sure you’re not getting charged any, you know, potentially running up extra fees, from the attorney, besides whatever a, like kind of the firm document.
cost was because our understanding was that it was going to be 600 bucks per affidavit of airship and they needed three of them. So again, that was still like adding on extra cost to this particular deal when already it was starting to become more borderline. The market was getting tougher in Texas anyway, compared to when we wanted to buy this at the end of December 2024. It was just like a better market in general.
And that 700 in hard deposit that we had to go to the attorney, our understanding was that was being attributed to the 1800 for the affidavits. But there was like so much back and forth. Like it took months to get this done. So I just, wasn’t positive. Okay. Am I, we going to be charged like a significant extra fee, both from the title company or the attorney on the HUD here? And that’s something I should have clarified a lot earlier. Again, that’s just like a simple AI.
contact requests to figure out, what are these questions being made? Like what’s my true risk here from a monetary side in case this deal falls apart? Or even if we do close on it, like am I in for a big eye opening surprise for a line item that just like makes the deal unfeasible, but we’re still on the hook for these legal costs. So that was another bigger mistake that.
Luckily didn’t come back to buy this this time, but I would have handled a lot but better in the future and and again we would have More rigorous agreements, which we do have now built into our documents working with land investors that will require a certain deposit on a deal just in case it goes sour so that we’re not fully on the hook for
something that might not work out. Like there’s just a bit of, like we’re funders, right? Like we provide the capital, but like those ones that might require a bit more DD, like it can kind of be a death of by a thousand cuts, right? If some of these deals don’t work out, so just some share responsibility that will still pay back the land investors, assuming the deal closes and we get a profitable exit.
But it at least reduces our downside a bit too. So it would have adjusted that Strategy and so we noted on the settlement statement first that there was you know $1,800 attributed to the affidavit’s fairship. So we pushed back on that or like, you know We we here’s the invoice we had received before from the attorney’s office, you know paid like roughly 700 bucks So our understanding that was a deposit being checked in on that it turns out. Yep
we were right on that side. they reduced the cost on the closing statement. They got our address wrong. That was one key thing that you should always be paying attention to. most kind of critically here and just like, you know, really annoyingly is that, you know, they provided the first closing statement and then like within five minutes, they’re like, hey, now we looked at the original purchase agreement and it said that the…
Buyer it’s going to be paying all taxes. So, you we’re you know, you’re also gonna get charged the Pro rated taxes on the deal and that is something we generally never do And these ones were pretty significant, right and and so like this This was also a timing issue plus a contract issue. So again, the intention was We had planned to purchase this property at like the end of December right right at the start of January last year
In which case there had been like negligible, pretty much no prorated taxes at all. But you know, because, you know, here we are, end of July, like there was, you know, significant taxes that accrued. And if it’s like a negligible amount, who cares? Or if it’s like ag exempt, but this one wasn’t, right? So there was like $2,100 of prorated taxes that were going to be owed.
That’s a pretty big hit, especially when it was already a borderline deal and we ran up all these other costs. The market got tougher and it’s like, man, we’re going to have to eat this as well. And, again, generally we never agree to pay pro rated taxes because you get a double tax hit, right? Like you, you generally the seller is always going to pay for them. because, you know, the buyer is just going to have to pay it when, when, know, we as land flippers sell, sell later on. so you don’t want to be paying,
previously owed taxes more on the potentially delinquent side or like the past year’s taxes potentially at most here, but like the current year, especially depending on the time of year that you’re closing, it just doesn’t make sense to do that, especially when it’s like a pretty significant tax hit. And so I had pushed back on this in the email. I was like, yeah, we don’t pay that hike.
And then I also asked our land investor partner in the deal, hey, can you try to work this out with the seller? And separately, we were having a text conversation. like, this is definitely not ideal here. And he was saying, yeah, my mistake completely, him speaking for himself. Again, we were intending to close on this end of last year without that tax run up. But because we thought we were potentially getting into a legal situation, I don’t really want to push the seller here.
You know, if we don’t push back on this, like he was going to eat the $2,100 cost from his share of the profits, meaning we would get paid that back first before any profit split would come into play. You by the time we sold the property as, you know, him eating the cost of those extra taxes, and so it would be a double tax hit.
Which we agree to, but it still doesn’t like make me feel the best because it’s not that as downside protected. because even if we’re getting those taxes, that tax hit back at the point of a sale, it’s still risked downside in case we can’t sell the property for what, what we bought it for. so. Yeah, I probably would have preferred a deposit from, from that.
But ultimately, like when I really looked at this deal again, this was a late late Friday and I just had to go back to our diligence, like, you know, really, really finalizing. OK, price per acre here. Here’s all the extra costs we’ve got from the closing. Here’s our anticipated commission on on the deal here. You know, the property characteristics and we probably had like close to 30 comps on this particular property. And I’m just like looking at.
Is there any example where our purchase price, price per acre is not at least the exit price per acre on any of these other comps? Like not even accounting for characteristics here. And we’re also including all the closing costs commission, et cetera. So like a true final breakeven. And we were below all of them by like a pretty substantial margin.
You can never fully predict the future, but I… It’s like a near gun to my head situation. I’m like, I don’t see any possible route where we could lose money on this property. Maybe I eat my words in the future, but like there’s just, I don’t see it. Like we are buying so far below what any of these other properties, a lot of them inferior, like without electricity or way worse access.
even sold for, so that, led me to believe, okay, yeah, this is still worth taking the risk here. for that extra prorated tax hit to get this deal over the table. Again, we thought we might be getting in a legal situation. and, know, again, the land investor working with us is giving us a better deal here, even if we have to get the double tax hit.
but we came back to it on this Monday morning and title, with their own prerogative. That’s why I was like, you know, try to posit it back to them. Hey, we don’t pay prorated taxes, at least see if they can try to solve it. and, they did, they, they reached out to the seller, explained the situation on, their own behalf and got the seller to accept, well, he’ll eat the prorated taxes as is, you know, typical for real estate transactions. and so we don’t need to.
take that double hit with the extra 2100 bucks plus you know they took off that 700 for the other deposit on the affidavit’s fair ship so we were all squared away to get this thing closed up here so all that to say again check every single line item push back when anything is a little bit unclear or you know can work a little bit more in your favor
It’s always worth asking the question, you know, the worst they can say is no or you got to go back to salary, you know, potentially renegotiate or the buyer on the flip side. But I never really have any hesitation of just asking because every title company works a little bit different. Some line items don’t really make sense to me. All right. I just want additional clarification. It’s like, OK, it doesn’t doesn’t hurt to ask to figure out what’s going on here. So this was one where we could chop off.
you know, almost $3,000 on anticipated closing costs at worst case. So, you know, it really came up in our favor here. So hopefully this helps serious land capital for any of your funding needs. 50K minimum, 150K plus purchase price preferred zero cost review of your land deals at land daily diligence, Facebook group and landpricer.ai for the
most reliable land pricing tool on the market. that, subscribe and share everybody. Talk to you tomorrow with more good news on further legal resolutions. Take care. Bye.
