DEAR BENNY: I won the bid on a house at a public auction. I was required to make a deposit of $20,000 and now an occupant will not allow my mortgage appraiser into the property to do an appraisal. Without the appraisal, no one seems to be able to do the loan without 30 percent down. Is it possible to have a mortgage company do a drive-by appraisal with the purchaser making only a 5 percent deposit on the loan? –Lionel
DEAR LIONEL: I am confused. Did you know before you made your bid that there was an occupant in the house? Have you been inside to make sure that it is in good (or at least decent) condition?
Did the advertisement about the auction indicate that the house was occupied?
You asked if the mortgage company can do a "drive-by" appraisal. In today’s economic condition, when banks and mortgage lenders are being carefully scrutinized, I seriously doubt that any lender will permit such a basic appraisal.
What will happen to your $20,000 if you don’t go to settlement (also called escrow)? I suspect that under the terms of the auction sale, if you cannot close you will forfeit that deposit.
Word of caution to everyone: If you want to buy a house at a foreclosure sale, make sure that you do your homework before you make a bid. Get a title report; inspect the house, inside and out; and find out what the outstanding mortgage is that you will have to pay off. Are there any tax or other governmental liens on the property that will have to be paid off? Are the utilities in place?
These are some of the questions that anyone considering buying at a foreclosure sale must answer. I also suggest that you retain a local real estate attorney to walk you through the process.
DEAR BENNY: I recently read your article about the new law regarding residential loans. The article helps, but can you give me a website that will tell me what is considered to be a reasonable amount for charges for different areas? Knowing the charges helps, but I would not have any idea as to whether the figures stated are reasonable. –Nancy
DEAR NANCY: Thanks for writing. Unfortunately, I really don’t have an answer for your question. I don’t know of any websites that provide this global information.
The best I can suggest is to do some comparison shopping in your area. Talk with lenders, lawyers and real estate brokers, and ask them what you will be charged for such items as (1) title search, (2) appraisal fee, (3) credit report, (4) lender’s underwriting fee, (5) title insurance, (6) settlement (or attorney) fee, and (7) recording and notary fees.
It’s always a good idea to shop around. You may find two lenders offering you the same interest rate, but their upfront charges may differ dramatically.
DEAR BENNY: We have a neighbor that is having difficulty parking in her assigned space without hitting my car on the right and another car on the left. She has hit my car four times and on two occasions I was sitting in my car at the time of impact. When I confronted her she was quick to say she did not hit me, but when I told her I was in my car at the time, she said sorry. At that time I thought I was the only one she was hitting so I stopped parking in the garage. I found out that she has hit the neighbor on the left four times and has caused a lot of damage.
I have addressed this with the president of the condo association and the management company and was told by both that the issue is a personal problem and they will not get involved.
I rent from a lawyer and have written a request to advise me on my legal rights; however, I do not have the answer yet. I have purchased a new car and feel I should be entitled to use my assigned space in the garage without fear of personal or property damage. I have also called this person’s family and was told there is nothing they can do. I feel that to protect her and others, she should not be driving. What advice can you offer? –Patricia
DEAR PATRICIA: If you rent your unit, does it also include a parking space? If so, has your landlord had previous problems with the parking situation? If so, then perhaps he/she should have told you of these problems.
I am not saying that your landlord is responsible for the damage, but clearly if he/she knew that previous tenants also had their cars damaged, disclosure should have been in order.
And if your rent includes parking, you have a strong argument that you are not getting your money’s worth, and your landlord should take a more aggressive position to assist you. After all, unless the problem is resolved, even after you vacate, the landlord will have the same problem with a new tenant.
I am not sure that the board of directors is correct. It is true that this is a problem between you and the neighbor. But if this is a persistent problem, and especially since it involves more than one owner/renter, I believe the board should get involved.
Have you reported the damage to your insurance company? Discuss the situation with that company; they may be willing to reimburse you for your damage, and then go after the neighbor for reimbursement.
And if the neighbor has caused damage to your car and others, perhaps you all should retain an attorney (not your landlord) who can file suit against that person. Presumably she also has insurance.
Finally, perhaps the board can find another parking space for you.
DEAR BENNY: Before the "crash" I bought a second home to try to help my daughter. I put 20 percent down on a $360,000 property. The current mortgage is $292,000 with a 6.25 percent interest-only loan. The home is now worth $210,000.
I am renting it to my daughter for $1,300 a month, which is about $800 a month negative for me. I cannot refinance because of the worth of the home and I do not qualify for any programs because of my income.
Do I have any other options but to keep renting and take the loss on my income tax?
Do you add to the loss by trying to pay down principal to build equity when you are already $90,000 behind on the property’s worth? This sounds like throwing good money after bad. –Steve
DEAR STEVE: First, make sure that you have a written lease arrangement with your daughter and that the rent she is paying is consistent with market rents in your area. You wouldn’t want the Internal Revenue Service to claim that this is really not a bona fide residential lease transaction.
I remain an optimist. Some time in the foreseeable future, property values will start creeping up. So I see no alternative but to keep renting and take the tax loss.
And I agree with you. It probably does not make sense, right now, to add money to your monthly mortgage payment just to build up equity. However, I know that some critics will say: "He is probably getting less than 1 percent on his money if he keeps it in a bank, so why not reduce that mortgage, which carries a 6.25 percent interest rate?" This is something you may want to discuss with your financial adviser, especially if you do have extra money.
You also say that you cannot refinance, and I understand that. But perhaps you can talk with a senior officer at the mortgage company, and explain that if you have to keep losing money on a monthly basis, you may ultimately have to let the property go to foreclosure. Thus, would the bank be willing to give you a lower interest rate, say 5.25 percent? It never hurts to ask.
DEAR BENNY: I am considering purchasing a distressed property that was in the middle of "owner/builder" renovation until the owner ran out of money. What are my legal responsibilities for work done prior to the purchase? How do I protect myself against nonlicensed work? Since the project was never complete, am I obligated to finish the project as proposed? –Mark
DEAR MARK: Everything between you and the current owner is negotiable, so you may be able to buy the property in its unfinished state. But first you have to discuss the situation with a lender, since you really will need what is known as an "acquisition-construction" mortgage. Once the construction is completed, the bank will convert the loan to a permanent mortgage. But make sure that lenders are willing to do this, especially based on today’s market conditions.
As to whether you have to finish the project as proposed, that answer will have to come from your local county zoning department. I suspect that they may be willing to allow you to change the plans, but that’s a local zoning issue.