My parents are a week away from closing. We called the agent handling the sale to check and make sure everythi

Question

ng was fine. They said that there was a problem. Supposedly the the past owner (this is a bank foreclosure) purchased the home and never lived in it, probably used as rental property. They say that before we can close they need to have a disclaimer filed that says the previous owner did not file a homestead exemption on it. I called the appraisal office and they said that when it was purchased it had a homestead exemption by the last purchaser never put a homestead exemption on it. The title company says that we can't close without this disclaimer. The seller says that for every day past the schedulded closing date, my parents will be charged $100. What happens if the past owner can't be located? Is this comething the seller should have taken care of? My parents are having a fit about this. What are their options?

Answer 1

How could they have filed a homestead exemption if
a.) it is a bank foreclosure - it is now owned by the BANK.
b.) If the previous owner never lived in it, there can be no Homestead exemption.
c.) Title Company should have found any recorded items when they ran the title report.
d.) The purchase agreement (THE CONTRACT) should have had a "subject to" clause stating that the sale could not close without filing such a disclaimer. You parents' agent or the agent representing the bank that now owns the property should pay the $100 per day hold-over fee, if anyone pays it. They should have advised your parents of this possibility and not waited until the eleventh hour to mention it.
Threaten to get a lawyer or walk awy..that usually gets action. Call the agent's brokers of record (or compny owners) to get more action. Homestead exemptions usually protect a person's HOME from creditors, however you indicated that this was a rental, not a primary residence.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has stricter laws. see wikipedia http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act
Limits to the homestead exemption
Under the new law, the homestead exemption, which allows bankruptcy filers in some states to exempt the value of their homes from creditors, is limited in various ways. If a filer acquired their home less than 1,215 days (40 months) before filing, or if they have been convicted of security law violations or been found guilty of certain crimes, they may only exempt up to $125,000 (adjusted periodically), regardless of a state's exemption allowance. Filers must also wait 730 days before they are allowed to use their state's exemptions.

These provisions were largely intended to prevent filers from forum shopping, i.e. moving assets and domiciles to a state with more favorable exemptions and filing. It was alleged that O.J. Simpson did this when he moved to Florida, which has an unlimited homestead exemption, and bought a multi-million-dollar residence and then filed for bankruptcy. Definitions of federal exempt property and the valuation rules for that property are also more precisely defined in a manner favorable to creditors compared to current law.

Answer 2

This is silly. The county assessor or treasurer (whoever holds the tax records in your county) is calculating the taxes and either is applying an exemption or isn't.

This is also silly because there are always exceptions to the title. What is the problem? Is it in the proration of taxes? If that's the case, offer to leave a reasonable amount in escrow until next year's tax bills are calculated. This is a paperwork pain, but it will allow you to close on time.

Don't worry about locating the owner. If you find him, he might not cooperate. Why should he? He just got foreclosed on.

Answer 3

What I would do is involve as many people as possible to try and locate the seller and to attest to the fact that he can't be found and you shouldn't have to pay for his mistake . Especially escrow. Escrow can be very helpful. This is a tricky situation because i'm sure you have money in escrow you do not want to lose. I also would consult a real estate attorney. Good Luck!