by Peter G. Miller
Question: We purchased a house for $440,000 including closing costs and other fees last September 2006. The house value then was $488,000. This year we wanted to refinance so we could lower our monthly payment, but unfortunately the market value of property is said to be $418,000. Now we are facing a hardship paying our monthly mortgage, so I asked our lenders for a modification. The first lender ($352,000 loan) agreed and sent me an application form, but the second lender ($88,000 loan) did not accept my appeal. Right now we are paying $2,490 and $940 per month, respectively.
If we vacate the house and just rent it, do we have any obligation to our lenders if we are already broke? If we cannot pay our next monthly mortgage anymore, can we ask for short sale?
Answer: You paid $440,000 and borrowed at least the same ($352,000 + $88,000). If the property was worth $488,000 you would have paid that much. In effect, you bought with 100% financing and paid what the property was worth in the open market.
Since the first lender will agree to a modification you should, of course, follow-up with them to see exactly what they're offering. As to the second lender, forget them and go find replacement financing.
If you rent the property the obligation to your lenders remains unchanged. If you cannot make payments, you will be in default and can be foreclosed. Yes, you can ask for a short-sale, but to do this properly you should have the assistance of a local real estate attorney. Moreover, lenders are not required to agree to a short-sale.
Is there any chance you could refinance with a fixed-rate FHASecure mortgage and a new second loan?
HUD says "loan servicers and lenders can advise borrowers who are current on their non-FHA adjustable rate mortgage to consider refinancing to an FHA insured mortgage. For those borrowers who may owe more than their property is worth, lenders have the option of placing a second lien on the property that when combined with the first lien exceeds the property's value as well as FHA's geographical loan limits."
Question: My husband and I had recently purchased a home. Based on the home inspection report, we asked the sellers to replace the electrical panel due to safety concerns and they agreed. We were informed by the escrow officer, on the day escrow closed or the day that we picked us our key to the property, that the panel has not been permitted. Long story short, the panel did not pass inspection. We immediately emailed a copy of the inspection notice to the sellers, their agent, and our agent, but no reply. It has now been two months since escrow closed and we're feeling abandoned with an un-permitted electrical panel that should have been installed according to the safety codes.
Answer: As a condition of closing you should have required that the sellers set aside sufficient money in an escrow account to assure that the work would be properly done by a licensed professional. Also, does your sale agreement allow notices by email? That's not always the case.
If there's a fire at the property because of the improper electric service box the insurance company is unlikely to pay any claim because the box was not installed up to code and you were aware of the problem.
This is not a minor matter. Everyone in your household could be in danger. Have the service box immediately inspected and, as necessary, fixed or replaced by a licensed professional. Do this now, today.
Then take the seller to a small claims court to recover your expenses.
Question: I signed a contract to purchase a new home earlier this year. With the markets slowing down, the builder sold me a spec home in the sub-division at a discount. My contract purchase price is $335,000 for a 2,000 sq/ft. property. A 2,250 sq/ft spec home was listed for $345,000 and they let it go for $299,900. My home is a larger lot, has a lot of upgrades and a three-car garage but the lender did an appraisal and used the most recent comp which is $299,900.
There is one paragraph in an addendum attached to my contract which says "by signing this addendum, buyer waives any and all contingencies and conditions precedent, including but not limited to financing contingencies and agrees to forfeit earnest monies plus 5 percent of the purchase price." Before I signed I was told that was only for home flippers and the most I would lose would be my earnest money. Looking back, I should of just had them remove that addendum.
Am I stuck if they choose not to negotiate the price of the home? I assume they might not choose to enforce due to ethics/bad publicity in a slowing market but it sounds like I'm stuck in purchasing if they force me?
Answer: There is no ethical issue here. You made an agreement in the marketplace with a builder. You are an informed individual. Just a guess, but does the person with whom you spoke have authority to modify the builder's written agreement? Is a verbal assertion worth anything?
You signed a specific addendum, a "separate writing." The builder did not bury this language in the midst of a 30-page sale agreement. It was visible, up-front and you agreed to it.
Here's the test: Would you pay the builder more if the value of your purchase rose? Why then should the builder receive less if the market declines? At the time you signed you thought you made a good deal. It is simply not the builder's fault if the marketplace changes, one way or the other.
Question: I am a Canadian with a real estate interest bordering on obsession. I do not have a real estate license at this point, but am looking at options for professional advancement in this industry.
Is there such a thing as an international real estate ticket or license? In order to facilitate real estate transactions in various countries abroad, what do you advise as the best, most effective approach?
Answer: There are brokers who specialize in international transactions such as a Certified International Property Specialist (CIPS).
In addition, contact the commercial attache at the embassy for any country in which you have an interest. Ask about attorneys who can assist with the legal work associated with a foreign property purchase. Be aware that many countries have radically-different approaches to real estate ownership then either the U.S. or Canada and may prohibit or limit non-citizen ownership.
Question: My husband and I are considering buying property with a friend. We would split the land so that our friend takes 15 acres and the existing house and we take the other vacant 15 acres with plans to build our own house later.
What is the best way to go into this situation? Can we subdivide the land first and make separate offers to the current owner? Or should we pool our money and form some sort of trust to buy it all and split it later?
Answer: You cannot subdivide the land first because it is not your land to subdivide. Moreover, you need to check zoning to see if the land can be divided by any owner.
Most probably you want to make an offer contingent on your ability to subdivide the property, require the owner to subdivide and then you and your friend can each buy a separate parcel. Most likely you will have to pay a large deposit so that if the deal does not go through the property owner will be compensated for his costs.
You want a piece of property owned separately from your friend in case relationships change. Go no further with this until you speak with an experienced broker who deals with raw land.
Question: We recently sold our home subject to inspection. However, in their home inspection, the inspector found some faulty siding. The buyers have since rescinded their offer. My question is, should we take the house off the market while we file a claim against the manufacturer and repair the siding? Or should we leave it listed? My concern is, with the disclosure of this failed contingency the home will be red flagged. The other homes with the same siding have not prevented it from selling.
Answer: Could the inspector have been wrong? If not, you must disclose. Have your broker or attorney, as appropriate, draw up a short addendum which says a prior inspection revealed that the siding was regarded as defective and give the reason. The buyer is then on notice that a possible problem exists. As to a suit against the manufacturer, see if there has been a class-action settlement in which you might participate.
Unfortunately, all of this will likely make your home more difficult to sell -- and more difficult to sell at an expected price.
Question: I own an undeveloped commercial lot and would like to lease it. I know how much the property is valued at per square foot, but do not know how much it should be leased for per square foot. Is there a formula available to make this calculation?
Answer: No. You could certainly have a formula to determine how much your would like to get given the worth of your investment, but in practice you have insufficient information to determine a lease value. For instance, how is the property zoned? How were recent leases for similar properties valued? What's happening with the local economy? Etc. For specifics, speak with a broker who specializes in commercial leasing and has experience in your community.
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