They were not aware of this and do not have that kind of cash. Friend accepted a sellers offe and papers were signed. if transaction cannot go through foreclosure is likely. I think this is due to a 2nd mortgage or refinancing when the home was worth more. Friend had to move to accomodate a recently disabled adult.
County would not allow first home to be modified. Any ideas how to settle this issue? They are using a realtor.
2007-11-02 09:39:16 · 5 answers · asked by mrkrmrar 1 in Business & Finance ➔ Renting & Real Estate
There is not enough info to give a perfect answer to this.
It sounds like your friends might be "upside down" in their house.
This means that they owe more than the house is worth. Until the mortgage is paid off the bank controls ownership of the house.
Here is what upside down means.
Let's say they bought the house at 400 000.
They got a 350 000 mortgage.
Then it appreciated to 500 000.
So they took out a second mortgage for 50 000
So they owe 400 000 in mortgages.
Now the house is worth 300,000
When they sell they will pay about 25 000 in commissions and fees. So they would net 275 000
This is $125 000 short of what the bank is owed. So the bank wants the $125 000 plus the $275 000 to satisfy the debt owed them of $400 000.
This is happening all over America now, thanks to lax subprime lending practices.
2007-11-02 09:49:31 · answer #1 · answered by ignoramus 7 · 1⤊ 0⤋
It means your friend owes a lot more money on the house than the house was being sold for.
If they bought it when the prices were up, and are now trying to sell it when the prices are way low, they'll have to pay the difference. Also, if your friend had an interest-only mortgage deal, her monthly payments would never have even put a dent into the original debt.
2007-11-02 09:45:18 · answer #2 · answered by squirrely 6 · 0⤊ 0⤋
In order to sell a piece of property it must transfer free of all liens and a mortgage of any kind is a lien. Since your friend is fully aware that the mortgage(s) will not be able to be paid off at the present sale price it is in your friends best interest to kill the purchase contract and refund the good faith money asap.
The only way to settle the issue is to sell the house for $125,000 more to pay off all existing liens.
2007-11-02 09:49:53 · answer #3 · answered by linkus86 7 · 1⤊ 0⤋
Did your friend somehow think that the mortgage would magically disappear when they agreed to sell the house to the buyer ?
Your friend now has a bigger problem as well. He/she has signed an agreed offer to purchase which they may not be able to honor.
Their realtor was lax as well. I NEVER do offers to purchase without knowing the outstanding liabilities on the property in question.
2007-11-02 09:48:38 · answer #4 · answered by acermill 7 · 1⤊ 0⤋
There is nothing to to settle. The payoff is 125K. If they aren't getting that from the buyer and can't cover it, they are in default of the contract and at the mercy of the buyer as to what relief they are looking for.
WHY would anyone sell a house for less than the payoff without knowing WHAT the payoff was?
2007-11-02 09:43:33 · answer #5 · answered by wizjp 7 · 0⤊ 0⤋