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How to Lose $1000 in One Hour

by Brandon · 3 comments

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$1000 can buy a lot of cool things. A round trip ticket to Italy, new tires for my truck, or even a brand new 52” flat-screen television. $1000 also could have bought me half of my granite counters or a new garage door on my new house. However, instead I decided to “donate” my $1000 to HSBC Bank because I didn’t read my contract.

Buying From A Bank

Let me start at the beginning. I recently purchased a new home for myself and my wife to move into. It was a bank REO that needed some cosmetic work, but was priced significantly lower than any other house on the market. After some struggle to get the house under contract, I finally received a call from my agent telling me that the bank finally accepted my offer! My agent asked me to come in and sign the bank’s forms to make it an official agreement.

For those unaware of how this process works, a potential buyer (me) submits an “offer” through a real estate agent to the seller. The seller then chooses to accept, deny, or counter that offer (suggest another price back to the buyer). If the seller sends a counter offer, the buyer can then choose to accept, deny or send another counter-offer back. Once both sides have agreed to a price, the bank will send over their version’s of the “purchase and sale agreement” which their attorney’s draft up. This is special with banks, as private sellers will simply use the agreement that you submitted via a real estate agent.

Back to my story: The bank accepted my offer and faxed over their forms for me to sign. On page one, in large, bold print, the seller made it very clear that this offer included a $199 “electronic transaction” charge that was being added to my purchase price. Throughout the paperwork, they mentioned this “$199” charge at least a dozen times, even having me sign a special form acknowledging that I would agree to this $199 charge.

I can handle the $199 charge, so I quickly scanned the rest of the bank’s documents and signed each one.

The Thousand Dollar Mistake

Did you notice my mistake? I quickly scanned the rest of the documents.

Quickly scanned = Didn’t read.

Big mistake.

One page 22, at the very bottom was a single line that simply said, “buyer agrees to pay all excise taxes normally paid by seller.”

No one caught this line. Not me, not my wife, not my agent. It didn’t even come up until closing when I was reviewing my settlement documents and was trying to figure out why I received $1000.00 less at closing than I thought I would (I borrowed extra money for the repairs on this job, which is why I was getting money back at closing. This is not normal. Usually you need to pay money at closing!)

It was a classic, but underhanded, negotiating technique. Distract me with a dozen signs about the $199 charge and slip in a $1000 charge in the fine print.

How long does it take to read a twenty-five page document? Less than an hour, for sure. It wasn’t written in real complicated language and I could have taken it home to review it before signing. Instead, I jumped the gun and just signed my name where ever I was suppose to.

A Thousand Dollar Lesson

Granted, I would have needed to send a counter offer back over to the bank to remove this line – and it may have even cost me the deal (doubtful, though). Maybe the bank would have even refused to change that one line. Obviously $1000 wouldn’t be worth losing the amazing deal over – but to lose that money from such an underhanded trick just makes me mad.

So I have $1000 less to work on my new dream house. I can guarantee that I’ll never make that mistake again – and hopefully will save others from making the same.

If you learned one thing from this story – remember to always read your documents in full. This is especially true when it’s the documents from the seller. Never assume anything, but verify everything. The small time it takes to read a contract could save you thousands of dollars so you can get that flat screen TV, the trip to Italy, or just new counters in your home.

About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the Senior Editor and Community Director and owner of He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

P.S. looking for hard money loans in California? Be sure to check out my friends over at They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

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{ 3 comments… read them below or add one }

Lance@MoneyLife&More June 30, 2012 at 6:39 pm

As an accountant I know how important reading contracts is. I read all of my closing documents before I signed them and suggest everyone do the same.


Brandon July 5, 2012 at 3:41 pm

Agreed! Feel free to tell people THIS is why it’s so important!


Tim July 18, 2012 at 6:05 am

Good post. I came to this from SPI (your comment), and I am impressed. Busy with a handful of projects, but once I’m back to keeping normal hours, I’m coming back to better prepare some investment plays in RE.

Good luck with the new house!


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