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Beware of hidden foreclosure fees

Buyer unknowingly agrees to reimburse seller for taxes, pay condo dues

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POSTED September 2, 2011 12:12 a.m.

DEAR BENNY: I recently was the successful bidder on a condo. The closing was within 15 days of the sale, and a special warranty deed was conveyed for the amount of my bid. The closing agent told me after the closing that I had signed a memorandum of foreclosure agreeing to reimburse the seller for prepaid taxes and all amounts claimed owing by the condominium association.
The deed has been recorded and I paid the amount billed by the substitute trustee, which was my bid amount. Two months later, I have not heard from anyone about reimbursing the seller for prepaid taxes or any other charges. Should I be concerned about being billed for these items? --Tom

DEAR TOM: Have you reviewed that memorandum? Is that what it really says? In any event, if in fact you are legally obligated for those payments under the memorandum, I would not worry about reimbursing the seller for prepaid taxes. Let the seller come back to you if moneys are, in fact, owed.
Also, look at your HUD-1 settlement statement that you should have received when you went to closing (called escrow in the Western part of the country). Typically, all such adjustments -- including prepaid real estate taxes -- should have been adjusted at settlement.
I would, however, be concerned about the unpaid condominium fees. In general, those fees may create a lien against your property, and the condominium association could come after you for payment.
Once again, however, the settlement (escrow) company should have adjusted those fees at closing. I suggest you consult your own lawyer because different states have different procedures about condominium fees.

DEAR BENNY: What if one has a mortgage on a home that is seriously damaged in a tornado, flood, earthquake or some other disaster for which one does not have the appropriate insurance coverage? It would seem the only option the homeowner would have is to “walk away,” even though there may not be anything to walk away from. What happens to the mortgage? --Gail

DEAR GAIL:
Despite the disaster, you remain legally obligated under the terms and conditions of your mortgage. Are you sure that you do not (did not) have adequate insurance coverage? This is surprising, since every mortgage lender I have ever worked with (or against) always requires proof of insurance before the loan is funded.
Walking away, in my opinion, is a “cop-out.” Your lender will track you down, so it’s better to contact them first before they try to reach you. Discuss the situation with the lender and talk to a person at a bureaucratic level where he or she has authority to make decisions. See what assistance the lender can provide you; perhaps there is insurance that you don’t even know about, such as private mortgage insurance that would cover a good part of the outstanding balance.
Also, talk with a local attorney about other options, such as selling the land or filing for bankruptcy relief.

DEAR BENNY: Quite some time ago we began to think about renovating our home and obtained preliminary approval from the village regarding the footprint, setbacks, etc. Due to serious illnesses and other factors, we set it aside until the beginning of 2009, at which time we were ready to go. By then village personnel had changed.
The problem is that there is an underlying lot line shown on an old plat of the subdivision, and one village official is interpreting that as a lot line going through our property. He says you cannot cross a lot line. This old line was just an out lot line, which existed before the second phase was subdivided into the lots. This line goes right through the middle of our dining room, and the house was approved by the village when it was built in 1978. But now we are being told we are a nonconforming structure and we cannot do anything to our home, not even increase the patio size by 1 inch.
We have spent 2 1/2 years in time, money and energy trying to get this rectified, but the director of economic development will not entertain the correct reading of the plat. We cannot understand why. We can find no other person who can even understand the village position let alone agree with it.
We filed a claim with our title company. It was denied because they determined it was a municipal misreading of the plat by the village. The village did not accept the title company’s explanation.
We contacted our original surveyor, who also could not understand the opinion of the village. They had taken it off our survey because it was meaningless. The village said, “Just because it was taken off, that doesn’t mean it is not there.”
Thinking that maybe we did not have the skills to work with municipalities, we hired an attorney. We had a meeting with the director, but eventually he walked out of the room and the meeting was over. We are now out $5,000 and have made no progress.
We were told the only thing we can do is to go to court. Yet after spending so much already on legal fees, we are reluctant to do that, as the director of economic development has unlimited access to village attorneys, which does not come out of his pocket.
We have respectfully requested a meeting, made phone calls, and sent emails to the mayor and the board of trustees. There has been absolutely no response to any of our requests. --Julie

DEAR JULIE: I took the liberty of shortening your question, but it is an interesting one. You clearly have exhausted all of your remedies short of litigation. But now, I believe that you have no alternative but to file suit.
Before doing that, however, I would go back to your title insurance company and ask them to file suit on your behalf. While it is true that they think the village was wrong, the fact remains that you currently have a “cloud on your title,” and in my opinion, that’s why people pay for title insurance.
If the title company denies your request, file suit against both the village and the title company. You would be asking a judge to determine whether that old lot line exists.
And since the village cost you a lot of money, I would also ask for reimbursement in your lawsuit. However, I cannot provide legal advice, and you have to discuss all of this with your own lawyer.

DEAR BENNY: My husband and I have wills leaving our house and a separate lot to our sons upon our deaths. Will these go to our sons without having to go through probate? --O.B.

DEAR O.B.: It is always difficult to answer a question where state laws are involved, as there are a lot of different approaches. However, in general, your sons will have to probate your estates.
I suggest you ask the attorney who drafted your wills this question and also ask him or her if it would make sense for you to put the properties into a trust. If properly drafted, and if all properties are in fact formally deeded into the trust, this should avoid probate.
You should also ask your lawyer what the fee will be for creating a trust. In some cases, going through probate is easier than having to deal with trust documents. Let your sons deal with probate.

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