Question: Our situation is not unlike many others out there today. We're suffering in a local slumping housing market. We own a house in Florida and last year I lost my job. I was able to find work in North Carolina and we were able to get a mortgage on a new house, based on the potential sale of our Florida home. We put our Florida home on the market, packed up and moved to North Carolina. The Florida house has been on the market for a total of nine months now without an offer and things don't look to be improving (it's an extremely cute house, and it's priced VERY competitively).
Though we've been able to maintain both of our mortgage payments (and we always make them on time) we're not sure how much longer we can keep it up. We got a forbearance on our student loans until January to help lighten the load, but we're afraid the house won't be sold by then, and at that point we will not be able to afford all our bills in addition to the two mortgages.
All of that being said, I'm just wondering if there are any options available to us to help get out from under this house? I've read about short sales and a deed in lieu of foreclosure, but those don't seem to really apply to us since we have still been making our payments on time up to this point. We are really trying to identify some alternatives so that things don't get to the point where a short sale becomes an option. We've worked for many years now to get our credit back to a respectable place, and I'm fearful that all our hard work is going to go down the real estate drain.
Answer: You deserve considerable credit for dealing well with a complex and difficult problem.
The central problem you face is that there are so many cute and well-priced homes for sale that your home -- as nice as it is -- does not stand out.
This is an awful situation and, as you say, you are not alone. There are several steps to consider:
First, change your deal. Instead of lowering the price to, say, $250,000 from $269,000, offer to pay all closing costs with a 6 percent "seller contribution" -- in effect, someone can buy with no money down.
Second, see if you can find a tenant, maybe a seasonal tenant who wants to go to Florida for the winter. Even a below-market rental can bring in income that you need, plus you'll gain some time for the market to hopefully right itself. If the home is now listed this is something that will have to be worked out with your broker.
Third, see if it makes any sense to refinance the Florida home. The problem now is that it's no longer an owner-occuppied residency, meaning it will be tougher to get a new loan.
Fourth, get additional jobs in North Carolina where the economy is generally strong. Do this now before those student loans come back.
Fifth, cut your expenses. For instance, is it possible to have one car instead of two? Maybe a less expensive car with lower payments or no payments?
Question: A few years ago a prospective buyers put 10 percent down as earnest money toward the purchase of our property. And at the request of our broker, the buyers provided signed documentation stating that the contract was not contingent on the sale of their other property. One day before closing they backed out because they could not get their property sold. Now they will not release the earnest money.
I was contacted by the title company that handled the transaction by letter stating they had money held in escrow that may be ours. This was no more than a cursory contact wanting to know if I would release these monies to the other party. What should I say?
Answer: The purpose of a contract deposit is to assure performance by the purchaser. By accepting an offer you may have lost an opportunity to sell the property to another buyer, perhaps one who would pay more or who would at least complete the contract. By depending on the buyers to complete the purchase you may have entered into an agreement to buy a replacement property or actually moved.
If it was me, I would do two things. First, I would not release the money -- once the money is released you have no leverage. Second, I would have an attorney or legal clinic review the sale agreement to see what damages and remedies might be available. I would look for damages in addition to the deposit, if possible. Third, I would check to see if the listing broker has any claim to the deposit, in whole or in part, because of the services he provided.
Your broker was smart to get a specific confirmation from the purchasers that they understood their obligation to perform regardless of whether or not they were able to sell their property.
Question: I own a Florida condo in a small, 10-unit, ocean-front, gated luxury complex. The units are currently worth $900,000 to $3 million.
For the first six years post-construction, all units were owned by individuals who were either retired or nearing retirement. One lived at the complex full-time, and others came for weekends and vacations.
Two years ago, investors bought two units and began renting them out and there has been nothing but trouble since. It seems that when the original bylaws were written, renting was not addressed because nobody ever dreamed that it would be done. We now have new bunches of renters coming in every week and/or weekend in both places, especially all summer. They cram 10 to 15 people in each unit so that our small pool is overrun constantly. They are also destroying things right and left, for which the association has to pay.
We had a meeting last week, and the investors' representative gave a long song-and-dance about how our property values would actually decline if we ban rentals! She said that by doing so, we cut out a huge pool of buyers who would buy for rental investment. My unit has been up for sale and prospective buyers have told my agent that they will not pay $1.5 million to put up with renters. Who is right?
Answer: The question is not who is right, the question is where do you go from here.
For example, could the owner-occupants institute a rental ban? If yes, would it be necessary to grandfather in the two units now used as rentals?
Could the condo association require a minimum rental period, say one month or six months? Again, what about grandfathering? Or, what about a grace period, say a year or two of renting after which the practice is restricted or banned for all units?
You and the other non-renting owners will not get anywhere with your concerns unless you come up with a plan which deals with the reality that you want to change the rules after some units have been used for purposes which are perfectly allowable -- at least until now. For specifics you will need a local real estate attorney to review your documents and advise the condo board.
Question: I signed a listing contract to sell my house with a 90-day kick-out clause, meaning I can end the agreement with 90 days' notice. Recently I sent a letter to the broker to give notice Unfortunately for me, he had included a $350 fee for reimbursable expenses. It was my impression that this $350 would be payable only if the house sold and would be part of the summary transaction. During this period only one person he brought was interested in my four-year-old house and I was dissatisfied with the broker. Am I obligated to pay this amount?
Answer: I don't have access to the listing agreement, but if it says you will pay up to $350 for the broker's cash costs if the listing is terminated early then that's the deal.
The fact that you're dissatisfied with the broker does not mean the broker did not place ads, enter the property into the MLS, print flyers, post the property online, etc. Moreover, the fact that a home is only four-years old does not mean it is instantly or assuredly marketable.
Question: I have a contract to purchase a property. Turns out the seller's cousin has a one-third interest in the property and doesn't want to sell. The seller on the contract is very distressed and wants to sell the property immediately. Is there a way to force the minority owner to sell or will they have to simply wait it out?
Answer: What you have is a written agreement under which the seller is obligated to deliver the property to you by a particular date. It is the seller's problem to work out matters with the cousin, otherwise you may be entitled to damaged and remedies from the seller.
One of the most basic issues in real estate has to be the ability of a "seller" to actually sell a property. That means a seller must have good, marketable and insurable title. Your seller, by definition, does not have marketable title because a co-owner is not interested in selling.
Explain to the seller that you will be at closing with a check and that you expect to purchase the property at that time. The seller, for his part, will need to work out things with the cousin -- this may require a suit for "partition" between the seller and his cousin but, again, this is not your problem.
Please speak with an attorney to determine your rights and remedies in this matter.
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