Editor’s note: Robert Bruss passed away on Sept. 26, 2007. This was one of the last real estate columns he wrote. Inman News is publishing Bob’s last work as a final salute to the nation’s most well-known real estate writer.
DEAR BOB: I know you have addressed this topic many times, but I am still confused. Why do you advise against paying 100 percent cash for a home? I understand it is a large amount of cash to tie up. But when the homeowner needs to sell, won’t the buyer have to come up with cash for 100 percent of the sales price? Why would a mortgaged home be easier to sell? –Susan N.
DEAR SUSAN: A mortgaged home is easier to sell because the buyer can usually either (1) purchase “subject to” the existing mortgage or (2) assume its obligation, thus negating the need to shop for a new mortgage.
Purchase Bob Bruss reports online.
All home sales are not for 100 percent cash. For example, suppose I buy your $200,000 house with a $20,000 cash down payment and take over payments on your existing $150,000 mortgage. That leaves a $30,000 finance gap. It can be filled either by your carrying back a $30,000 second mortgage or I could get a new $30,000 home equity loan.
Especially when mortgage financing is tough to obtain, this example shows why a mortgaged home is easier to sell than one where the buyer has to obtain a brand-new mortgage.
CAN HOME BUYER FORCE DEVELOPER TO INSTALL ELECTRICITY?
DEAR BOB: In 2003, we bought one of eight 10-acre parcels in a new development. The purchase agreement promised all utilities, including phone and electricity. Assuming this would not be an issue, in 2005 we started building our dream home by using generators. Construction was finished in July 2007. The county building inspector issued a final inspection report. But we cannot get a permit of occupancy due to lack of electric power. The developer is having trouble with variances and politics getting the power lines installed. Here we have more than $1 million invested in a house we can’t occupy. One of our neighbors is in the same situation. The developer’s attorney doesn’t respond to our e-mails and phone calls. What should we do? –Arlene D.
DEAR ARLENE: I am shocked you would build a fancy house without a reliable power source. You must be very rich to pay for such a house. I don’t know of any mortgage lender who would approve a loan on your house without electricity.
Sorry, but I don’t have an easy answer. Maybe it’s time for you (and the neighbor) to sue the developer for damages (i.e. a worthless house without electricity) or a mandatory injunction to install electricity. Please consult a local real estate attorney for details.
DIVORCE ATTORNEY SHOULDN’T FILE A “LIS PENDENS”
DEAR BOB: My ex-husband is in the process of refinancing our jointly owned house, as stipulated by our divorce settlement. My attorney has recorded a “lis pendens” on the house. But my husband’s mortgage company wants the lis pendens removed so he can get a new first and second mortgage to pay me off. Does that sound fishy? –Rea C.
DEAR REA: No mortgage lender will approve a new loan if there is a lis pendens recorded against the title to the property. As you may know, a lis pendens means there is litigation pending; any buyer or lender deals with the property contingent on the outcome of that litigation.
Because your attorney recorded his lis pendens to cloud the title to the house until he gets paid his legal fees, as a lawyer I question if he had the legal right to do that. A lis pendens is usually allowed to be recorded only when the title to a property is in dispute.
Obviously, the attorney must “expunge” that lis pendens or your husband won’t be able to refinance the mortgage. After the refinancing is recorded, if your attorney re-records his lis pendens, that might be slander of title. For more details, your husband should consult his divorce attorney.
The new Robert Bruss special report, “How to Profit from Lease-Options (Rent to Own) If You are a Property Buyer, Seller, or Realty Agent,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).