Q: I have a ranch in Colorado that I sold and carried the loan for the purchase of the property. The buyers have been living in my home now for more than a year and have not paid me any money. I have a lawyer but it doesn’t seem right that they can continue to live off of others. This is putting us in debt, big time, because we can’t sell the ranch, and we’ve been told that’s the law. Is there anything we can do? –Brenda, Colorado
A: Contrary to (increasingly) popular belief, it’s not legitimate or legal to get something for nothing. The buyers have breached their obligations under the mortgage note, which I’m assuming you had secured with a deed of trust against the property.
When you extend seller financing, you become the buyer’s mortgage bank. And you know what happens when you stop paying the mortgage payments to a bank? Yep, they foreclose on the home and, eventually, evict you from the property.
And that is your right as well — if you’ve been paid nothing in more than a year on a mortgage note that obligates the buyer to make monthly payments, it sounds like you are well within your rights to initiate and carry out foreclosure proceedings, foreclose on the home, regain title in your name, and evict the buyers in accordance with state law. Then, you’ll be able to sell the ranch to someone else.
What puzzles me is why your attorney has not given you this advice. Often, attorneys wisely recommend that wannabe litigants just let certain things go, because the emotional and financial costs of a lawsuit far outweigh any upside that could possibly be gained.
In this situation, however, it is beyond clear that something’s got to give. Either these people need to pay the mortgage they agreed to pay, or they need to get out. I’m perplexed at why your attorney is not advising you to move forward on one of these two fronts.
One possibility is that something in your paperwork, or the facts of your situation, are amiss. For example, perhaps you held a mortgage with a due-on-sale clause and sold the place anyway, carrying back a seller-financed loan, without notifying your lender.
This happens frequently in situations where the home is underwater and the seller prefers to avoid a short sale, or where the only interested buyer is unwilling or unable to qualify for a mortgage on their own.
Maybe your attorney knows this and is concerned that you’d be charged with having "unclean hands" in the situation. Even so, though, that would still not cause a court to prevent you from foreclosing and evicting the buyer/squatters.
This situation is apparently posing a major hazard to your family’s financial health, as it sounds like you are either (a) still making mortgage payments on the property, or (b) making payments on your current home, which you expected would be offset by the income from the buyers’ payments on the ranch.
If you were being faced with a major concern to your physical health, and your doctor advised you to do nothing, what would you do? You’d get a second opinion.
So, my advice is to get a second legal opinion from a local real estate attorney — not a tax attorney or a criminal defense attorney or a general practitioner. Ask around — especially asking the real estate brokers, agents and mortgage brokers you know — and get a referral to a real estate attorney who has experience with seller-financed mortgage notes.
It will cost you, but it behooves you to take the necessary legal steps to get these folks out of your home.