Land we rent sold

AlanB · Feb 12, 2007

I get the impression that no matter what, the bank I was working with will not want to lend on that house, It is not actually a dollar amount thing, I will be walking into the house with 23K in equity according to the appraisal.

The bank got involved with the mold because the appraiser made a big deal about it. Not sure if it is a liablity issue with them, or why, but she has I think 4 pictures of the house, and 8 pictures of mold. I think three pictures of mold around the bathtub on top of the caulking.

It is just one of those deals that makes me go "Oh, GAWD!" They better never come by my house, they could never take a shower

Short version though, it is called out in the appraisal, (with 8 X 10 glossy photographs with circles and arrows to be used as evidence against us) Some people are laughing right now and some are going whaaaatttt????

Anyway, working these last two lending institutions and we will see where it goes.

The quote of the day had to come from the credit place I am working with that normally does older homes etc. "well, you do plan on cleaning it up don't you? Then it is no problem."

See where we come out tomorrow.

Phils · Feb 12, 2007

AlanB said:
Short version though, it is called out in the appraisal, (with 8 X 10 glossy photographs with circles and arrows to be used as evidence against us) Some people are laughing right now and some are going whaaaatttt????

Count me among the laughing. But you didn't elaborate on an important point:

Are you combining all the mold into one place? You do realize that ONE big moldy place is much better than TWO small moldy places don't you?

Phil

AlanB · Feb 12, 2007

The folks that currently hold the note said the note is unassumeable. It was a second type note so I cannot use that one. I would have to start clean with them, and would have the same issues with the values and the comps with them.

They also mentioned why the mold may have become an issue. As I was then looking at a commercial loan, there are EPA disclosure forms that would have had to have been done and that would have had to have been disclosed. Apparently on the residential side those rules do not come into effect. (much like the Hazmat rules I deal with)

One more institution left and then it is time to sit back down with the seller and tell them the deal is not working as is.

Man is this whole deal a nut roll.

EddieWalker · Feb 12, 2007

It sure seems like allot of your problems are because of the apraisal you got and there rush to share your information the with bank and half the county. Did you pay for the apraisal?

I'd have a very dificult time paying for something that was disclosed without my consent or knowledge. You said your realtor is a friend, so ask her what the law is on disclosing confidential reports hired by one party in a transaction.

The mold could have been fixed before the bank and everyone in your state knew about it. Eliminate the problem before it's a problem and everyone is happy.

If this doesn't work out for you, I'd be very tempted to go after the appraisor for misconduct. If nothing else, file against them in small claims for your fees that you're out because of there lack of confidentiality. Then after that, just for spite, I might be inclined to file a complaint against them with whoever lisences them.

Good luck,
Eddie

gemini5362 · Feb 12, 2007

That probably is not mold on the bathroom tub that is probably mildew. What I saw that concerned me looked like mold in the basement. It is a very very big deal. There have been parts of the county where homes have been torn down and rebuilt because they could not get the mold out of the house. As a realtor If I knew that a house had mold in it and did not disclose it I would be fined, maybe made to take a class on disclosre law, and possibly my license suspended for a while. That is how serious a deal it is. The appraisor is probably in the same boat. and the bank has to worry about if they foreclose having to deal with the issue and maybe having to eat the cost of the house. I am not saying that you would not pay your payments but every banker I know looks at every loan as one they might have to foreclose on.

I would suggest you find someone that has a professional mold abatement service and get them to give you a written estimate for removing it. Have them give you a copy of there guarantee concerning if it comes back. Ask your banking institution if they would make the loan based on you paying to have that service done. The funds for that could be put in escrow and the work not be done until after you close. Normally I would tell you to try to negotiate with the seller to take care of that problem since I feel that is their obligation to fix. Unfortuneatly they have an appraisal that says the house is worth over 20,000.00 more than they are selling it to you for. I would assume they are not going to be in a big hurry to fix anything. I know you like your realtor but a good realtor would have already had a written estimate to get this fixed and be talking to your loan officer and seeing if they would accept that. That is easily something a realtor could do as part of the work they do to earn that commision.

Before you go to the seller find an attorney that gives the first consultation free and explain this to them I think you might have some issues with whomever gave that appraisal to the seller.

rox · Feb 12, 2007

Alan, I don't have any issues with the appaisers report. The hosue is what it is, they are supposed to show you the defects. IMHO the appraiser jsut did his/her job. Although you paid for he appraisal, the banker ordered it (and I never do it that way myself, I ask the bank for a list of appaisers they work with then I call the appraisers myself and make the appointment and pay them) I get the appraisel delivered to me, then I take it to the bank after i have read it and absorbed it. Eddie is right, you should get your money back form the appraisal, the bank should eat that becasue without your permission they disclosed your purchased appraisal. The way to do this is very simple, you send a paper letter to the president of the bank.

Just to side track a little bit, I got such poor service and wrote such a detailed letter that I got all my applicatin fee + $500 in a check signed to me from the Bank president. The key is to write a simple letter, without threats. Here is the key wording that i have used, "based on the lack of service I feel that i deserve to have my application fee returned because you have not earned it"

I had a very strong intiuition that the first bank was going to turn you down, they do not want to lend on this risky property because of the mold. everything else was jsut a dodge, they did not want to lend against that property point period. Thankfully you have other eggs in oyur basket and I have a good feeling that the Farm Credit lender will come through for you. if I was a betting woman, i would bet on that loan. Oh Alan, unlike you I have pretty good real estate Karma, so hopefully my hunch will rub of on you.

The credit union who has the current mortgage will not want to touch it either, they are hoping you buy it and they get paid off.

You have one final option left which has not been discussed, the seller finances it. There is nothing wrong with a private mortgage, you can probably even get a better interest rate as they know that this house is going to be very difficult to get financing on. You sign a Note and secuity agreement with the seller, give him the minimum down, say $5,000 no more than that, he gives you a 24 month loan at XX per month (amortize the payments over say 20 years) and at the end of 24 months you owe him the balance in full. You then have 2 years to cleant he place up, sell your other place etc. and get new financing. There is no risk at all on your side from having the seller finance it. in that 2 year time frame you get the land subdivided into 2 parcels, then you go for financing and you will get it. But all this is going to cost you so you make the sellor come down yet another $5,000. time to play a little chicken, eyeball to eyeball. As you can tell i am comfortable doing any type of financing even it it seems unconventional. it really isn't scary or dangerous on your part to do it this way. Have your realtor draw up an amendment to the offer to purchase. it is not a counter offer becasue at this point there has been an offer and acceptance by both you and the sellor. Have her draw up an Amendment to the Offer to purchase and put in your seller you finance for 2 years terms and conditions, togther with a $5,000 redution in price. if I was the sellor I would take it.

I have the feeling you will get it throught he farm credit banker and all will work out. See if you can find out who wrote the title insurance for the new property when the original owners bought and see if you can get a copy of the title existing insurance policy. The title isurance is going to show all liens on the property, right of ways for utility companies (is there one going smack dab in the middle of oyur property for example) and any easments. I myself like to read that BEFORE i am sitting at the closing table. Typically title insurance is not orderd until jsut befroe closing as why waste the $$$ if deals fall through. Just make sure that you get to see it at least a few days before closing, you will see all debts against the property, rights of way and easements.

What about a survey? Do you have a stake survey, can you locate the stakes? for our last 2 suburban purchases I always orderd a staked survey, and you are going to need one anyway to do building, suggest you get the staked survey (where you see the stakes int he ground and they put up the little flags) now as part of this process and have it. What if the stakes come in not where you were expecting them? before i purchse anything i always want to know exactly my lot lines and the only way to do this is nto with a piece of paper, but with the stakes in the ground. It should cost you less to get one done in the winter in a wooded area. the bank will ahve a list of surveyors they work with, ask for the lsit then call them up yourself and make your own deal with them. The bank is for sure going to want a survey anyway.

I am suspecious of the title Insurance, i would not be surprised if it had surprises in there you were not expecting. With the way these people let their house go if there are open judgements agaist them,delinquent student loans, back child support etc. this may delay your sale. No title insurance company will issue Insure the Title until those judgements are satisfied. Without title insurance the banks won't lend. If it were me i would do my own title search, i would get that tax key number, from there you can get the legal description and go to the county court hosue and look at the plat books. every lien against the property is recorded at the court house. it costs you nothing but a little bit of time to go down there and look for yourself. Since Title Insurance doesn't come until the very end when you are gettig ready to close, I woudl want to go and look myself right away. Plus it is absolutly ideal if you can see their old title insurance policy. now the electric company might have come in and taken a new right away after the last title isnurance has been issued, so it would not show on the old policy, that you will ahve to wait until new title is researched, nothing you can do about it.

Better quit now, i thik ihave given oyu enought to think about at the moment, I don't want to give you a headache...

AlanB · Feb 12, 2007

OK, lets see if I can hit these.
1. I knew of the mold, it is obvious, I believe it can be remediated in a quick and straight forward manner. The contract at my direction, stated I would accept the house in an as is condition, they were not going to clean this house up to make it marketable. If I want this house, I am going to have to deal with it.

2. For the bank (any bank using Fannie Mae and Freddie Mac) I think I have those names right, to use that money and standards THEY have to order the appraisal, the (I think it was) Freddie Mac rules specifically state that the appraisal must be ordered by the bank, and delivered to the bank. This is not my banks rules, etc. BUT, my bank did require me to Pay for the appraisal as a loan application fee. So, if I had went out, hired my own appraiser, that appraisal would have been worthless as the bank COULD NOT use it. (It specifically adresses that in the Freddie Mac rules) As far as the appraisal going out to others. That was the bank. And that is their "standard" or customary way of operating. I do not agree with it, nor am I sure of the legality of it, and depending on how it all washes out, I will see about the charges I have been paid and a refund. BUT, at this moment, if I must back out on this house, I will have to have some documentation from the bank declining that loan. I do not want to piss in my wheaties too much at this point to find that I am on the wrong end of going to court, as I do have a binding agreement to buy this house, the contingency being that it has to finance. However, when it is all said and done, I expect the VP of mortgages and myself will have a quiet discussion where I explain my views on what happened, and hopefully at the end of it, he will want to work with me to make me a happy customer of his bank.

3. Did the appraiser overstate the problem. In my opinion absolutely, but, she was in a CYA mode I am sure. There were several problems with this property for it to go into standard financing. Ratio of house to land, gross adjustments and condition of the house. I am relatively sure she did not want to find herself slammed for writing a bad, or incomplete appraisal. As was said in the other posts about mold in the basement, or as gemini points out here, it really depends on who you listen too as to what a problem it is. My realtor is in the OMG it will cost 90K to remediate, call in the EPA and level 1 suits. I am in the ****, that is a problem I need to take care of, kill the mold, fix the moisture, clean the surfaces, treat and seal walls, keep it dry to prevent further growth camp. I have a bit of a feeling that the appraiser is in the OMG tear down the house and build new camp.

4. Had I had the opportunity to go in and work on this house for 3 days, I think I could have remedied several of the problems (at least the mold part) however, at this point, with this type of contract, that was not done. My realtor and I discussed it a bit, and I may not have pushed enough, but normally you do not work on a house that is really not yours. I still would not have been able to have the comps work right, and the ratio of the value of the house to the value of the land would still not work out correctly either. There is no reasonable "fix" to those problems that I can readilly accomplish.

So where am I at now.

I actually think the Farm Credit may come through. I should have an answer tomorrow, and lord knows I am waiting with baited breath. The seller, and their agent are well aware of the problems at this point, and my agent said that if needed or desired they would work with us on extending timelines etc. If I do not get this, they are going to have a VERY difficult time finding a buyer I believe as that buyer will not be able to use the home as the collateral, they will have the same problems.

If the farm credit falls through, it will be time for Hanna, myself, my agent, the sellers agent and the seller to sit around the dinner table and see what we can work out. If my agent or the sellers agent balk, I will probably just walk, let the contracts expire, then directly work with the owner.

My agent has done the search on the title and the only lien is from the Credit union that I spoke with today.

The owner of this house built it with her husband in 66 (a fine year by the way) and they raised their family there. The son now lives two houses down in his house. The husband passed on and the owner continued living in the house by herself for several years. At some point I expect last year, she decided that it was more then she could handle (I believe she is 67) and decided to move into a new condo in the center of town, across the street from the hospital. I don't think I will find Title suprises etc. but with my Karma, you just never know.

So they all moved away from me on the bench there.......................

And I said Creating a nusiance, and they all came back and we had a great time talking about...........................

I do appreciate all the input I gain from here. Sometimes I don't type it all out, sometime things in other posts get missed or overlooked, but all in all, I sincerly appreciate the sound advice given here.

Al B

Oh, and I forgot, it has just been surveyed, and the stakes are all up and fresh.

And added on Edit, from the Freddie Mac website

Freddie Mac: Steps in the Process

There is a lot of info on The Learning Center: your online resource for training in underwriting, selling, loan delivery and servicing.

Not sure exactly what Freddie Mac and Fannie May have going on

but in the world of home finance, they are the bomb...... And it seems to me that all the "good" rates that you see going on, have them at the hub.

AlanB · Feb 13, 2007

Well, looks like pins and needles for another day. The loan package is on the loan officers desk, but they are very backed up.... I asked why they were backed up, seems they shut the bank down last Friday to do some meeting or mandatory training or something (which explains why I could not reach anyone last Friday) Not the way I would have done it, but somehow they did not ask me how to run their bank

Anyway, pins and needles for another day.

gemini5362 · Feb 13, 2007

AlanB said:
OK, lets see if I can hit these.

If the farm credit falls through, it will be time for Hanna, myself, my agent, the sellers agent and the seller to sit around the dinner table and see what we can work out. If my agent or the sellers agent balk, I will probably just walk, let the contracts expire, then directly work with the owner.

My agent has done the search on the title and the only lien is from the Credit union that I spoke with today.

Not sure exactly what Freddie Mac and Fannie May have going on but in the world of home finance, they are the bomb...... And it seems to me that all the "good" rates that you see going on, have them at the hub.

Lets see what I can add. Freddie Mac and Fannie Mae are not only the bomb they are the plane, the pilot, the fuel, the landing strip, Oh and yeah they are the United States Government do I need to say more. It sounds like you have been doing a lot of research. You have done well. Some more advice. Waiting till the contracts expire is not a bad idea. More than likely in your sales contract it says that if the agent shows the property to anyone. Withing a period of time. ( Usually 6 months or a year) If the client that the agent has shown it to purchases it the agency is due their commision. ( We like to get paid ) Have you tried my other suggestion in seeing if you can get someone to get an estimate for getting rid of the mold. It would have to be an professional abatement company that does it but if you can do that it would probably clear up one of your problems with the loan. I am not suggesting you pay for the work up front I am just suggesting that you get a price. You can then talk about having it paid at closeing and the work done after that. I have done that several times on deals. The title company does not like it because then they have to make sure the work is done satisfactorily before they issue checks. But they do that all the time. I was not aware that it was a fannie mae requirement that the bank sends the appraisor out but it does not suprise me. Also in my area banks are starting to require appraisors to have error and ommision insurance. Some appraisors dont want to do that so the banks will not accept appraisals from them. What rox said about title insurance is good advice. I dont think it is worth the effort though. The title insurance will either protect against those things or will exempt them. If you read the policy at closeing you can find out what is going on. If there are exemptions then you dont close. It might make some folks upset if you dont but they cannot put a gun to your head and say sign here. If they sue it is going to be hard to find a judge to find against you if the title insurance shows that an heir still has a half interest in the property. I dont believe a title company will close on a property that has a lien against it if they are aware of it. One of the biggest issues is mechanic and material liens those are the hardest to find. It does not sound like your house has that issue and those liens have a pretty short statute of limitations. What rox has proposed is called a balloon note. I do balloon notes with a bank and I just roll them over into another one. I would be really reluctant to advise someone to do that with a private individual. At the end of two years. or one year or 5 years whatever the time period is. You are going to have to pay that entire note off or the previous owner can foreclose on the house. What are the odds that the owner would not foreclose if you buy the house, fix the mold upgrade the house and land and then could not get it refinanced. Not getting finances can be for a lot of reasons other than bad credit. What if the interest rate should take a jump and you cannot qualify for the amount of house payment that the note will require, What if you get sick and your income goes down to a point where your cannot meet the ratios to qualify for a loan. Those are just some of the things that can happen. If you are going to talk about anything like a balloon note then just talk about owner financing period. She can sell the house and not have to pay capital gains because she has a tax exemption on her property. She would just have to pay income tax on the income every year. You can point out to her that it would be retirement income for her. You can give her the down payment that you were going to use for the bank loan and she can use that on her new place. Neither one of you will have to worry about the condition of the house since there are no loan companies to deal with. You can point out that the interest on the self financing is probably going to be a lot higher than a money market account, CD, etc. Alan if you have any questions please feel free to email me. The laws in each state are different but the federal items will be the same. If I dont know the answer I can ask my wife, she is the inhouse attorney for the largest title company in Western Arkansas.