DEAR BOB: I recently sold my home. The buyers made it known they needed 100 percent mortgage financing. We agreed to pay $13,000 in closing costs to help the buyers. The lender gave them a so-called “good faith estimate” that showed this amount would pay their closing costs. But on the day of closing, the loan officer showed up and informed the buyers they owed $4,000 more than expected to buy the home. He was very clear the lender had just raised the fees to make more profit. The buyers didn’t have the $4,000. Everyone felt helpless. But the listing agent ended up cutting his fee to allow the sale to close. This seems dishonest, dirty and illegal. What is the possible recourse against the mortgage lender? –Matt C.
DEAR MATT: Welcome to the sometimes-corrupt world of home mortgage lending where bait-and-switch tactics are very much alive, as you and your buyers discovered.
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Most mortgage lenders are honest. Some are not. The “bad guys” know when they have a vulnerable situation, especially when the home buyer has zero cash available.
That mortgage lender knew he could squeeze $4,000 out of somebody, perhaps the listing agent who would lose far more than $4,000 in sales commission if the sale fell apart.
Since the extra $4,000 didn’t come out of your pocket, you have no legal recourse against that lender. Neither does the buyer. The realty agent who volunteered to pay the $4,000 to save the home sale probably also has no legal remedy. That dishonest lender should be reported to the regulating state or federal agency, but don’t expect any action.
IS A LEASE OPTION THE SAME AS A LAND PURCHASE CONTRACT?
DEAR BOB: Is a lease option, which you often recommend, the same as a land purchase contract? –Loretta K.
DEAR LORETTA: No. A land purchase contract is not the same as a lease option. With a land purchase contract–also known as a contract for deed, contract of sale, installment land sale contract, and a zillion other names–the property seller retains title, the buyer pays the seller each month, and the buyer can obtain title after making all or the agreed number of payments to the seller.
But a lease option gives the property buyer a choice to buy or not buy the property by exercising the option to purchase before it expires. For more details, please consult a local real estate attorney.
SUCCESSOR LIVING-TRUST TRUSTEE MUST ACT TO TRANSFER TITLE
DEAR BOB: My late husband and I held title to our home in our living trust. I recently had a new living trust prepared. The attorney who originally prepared our living trust died, so he is not available, but I did not receive a new deed to the home. Other than hiring an expensive attorney, is there some way to straighten out the title? –Marcia M.
DEAR MARCIA: Under the terms of the original living trust, if you were named as the successor trustee, then you can transfer the title into your name or the name of your new living trust.
Just because you had a new living trust prepared doesn’t mean that living trust holds title to your home and you are its trustee. You must act to straighten out the home’s title to be certain it is held in your new living trust and you are its trustee. Please consult your living trust attorney for details.
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