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Must-do's when paying off mortgage

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POSTED May 10, 2012 6:04 p.m.

DEAR BENNY: I plan to pay off my home mortgage. After I do so, do I need to do anything on the deed? I received a deed under my name from the county office when I bought the house three years ago. Is this deed good enough for my ownership of the house? Are there any other things I should take care of after paying off the mortgage? --Xia

DEAR XIA: This is the kind of question I like because it gives me an opportunity to explain Homeownership 101. You bought your house and went to settlement (called escrow in the Western part of the country). Your seller gave you a deed to the property that was recorded among the land records where the property is located.

If you paid all cash for the house, the deed is in your name, and that's all that was needed.

However, if you are like most of us, you borrowed money from a mortgage broker or bank. To induce the lender to make the loan, you signed a deed of trust (although a few states still use a mortgage document. While there are differences, for this answer they are the same). The deed of trust is a legal document whereby you deed the property in trust to a trustee selected by the lender, and this document is also recorded in land records. If you pay off the loan, the deed of trust must be released from land records. If you go into default, the trustee can foreclose on the property.

So, in your situation, make sure that your lender either files a release of the deed of trust with land records, or at least gives you a document -- in recordable form -- that you can arrange to file in the same office where your deed of trust was recorded.

Most commercial lenders will arrange for the release. But regardless of who does it, you also want the lender to return the promissory note and original deed of trust, both marked across the face of the document "paid in full."

DEAR BENNY: In the late 1970s I bought lake property in Missouri. I am 72 years old and live in North Carolina, I will never do anything with the property in Missouri, and it has absolutely no value. I can't even give it away to a charity. To add insult to injury, the homeowners association dues keep going up. I currently pay $450 a year to the association. I know I could just stop paying the association dues but have been reluctant to do so because of the hit to my excellent credit rating. I also pay the property taxes each year, but they are only $25 a year so that doesn't bother me.

I have heard of putting title to the property in a corporation and then stopping payments. In that way, the corporation would take the credit hit instead of me, but I have also heard this is not a good idea. I would really like to get this problem cleared up so I am not paying $450 a year on a piece of property that has no value. Any suggestion you have would be greatly appreciated. --Ron

DEAR RON: There really is no easy answer. While state law differs, if the sole purpose of putting the property into a corporation was to avoid creditors, the homeowners association could take the position that you are defrauding the association and a court may "pierce that corporate veil" and hold you personally responsible.

If, as you suggest, the property is worthless, then why is the association continuing to charge you (and other property owners) the annual fee? Are you the only one who is complaining? Have you discussed the situation with other owners, with members of the board of directors, or even management (if there is any)?

Have you considered giving the lot to another owner, especially one whose property is adjacent to yours?

One problem is if you do not pay the association's dues, the association can either foreclose on the property or sue you (or your corporation) on a yearly basis. Since you believe the property is worthless, I doubt that the association would foreclose, since no one would buy it at the auction.

I suggest you discuss your proposal with a local attorney so that you will have the pros and cons of transferring the property into a corporation. It might work, but I have my doubts.

DEAR BENNY: My sister and I inherited our parents' home as co-owners. Soon thereafter someone gained access to the home's crawl space and stole our water pipes. My sister called me and said, "I have to get the pipes replaced or we cannot sell the house."

My sister called a plumber and contractor and got a price quote, and had the pipes replaced without telling me what the cost would be or when the pipes would be replaced. I found out this information later when she had a conversation with a Realtor.

We did sell the house and now she is asking for half the cost of the pipes because I am co-owner, but there was no verbal or written agreement that I would pay half. I did give her a substantial amount for the pipes, but it didn't total half. Am I obligated to pay the total half? On other improvements in the house we did not pay half; whoever wanted to do something in the house had no obligation to the other. --Tia

DEAR TIA: Why do siblings always have such disputes? Is the cost of the pipes that significant to risk fighting with your sister?

The first mistake was that the costs to repair should have been paid out of the sales proceeds, assuming, of course, that there was enough money from that sale.

Perhaps the second mistake was not to have reported the theft to your insurance company, assuming that there was insurance coverage.

Bottom line: Technically and legally, you are not obligated to reimburse your sister, especially since your practice in the past was not to split such costs. Morally, however, that's another issue, and that's your call.

DEAR BENNY: We co-signed a one-year lease for our son who is renting an apartment while attending college. One roommate also signed the lease.

Before Christmas, our son left due to health problems, but we were unable to find anybody to sublet, and have continued to pay his half of the rent. Our obligation for the lease will end on June 30. The roommate has decided to renew the lease for another year, and found another person to share the rent with him at that time.

Our problem is that the management company will not return our half of the damage deposit or do an inspection because our son's old roommate is renewing the lease. Damage deposits are returned only after the apartment is vacated.

The management says that the new roommate should pay our half directly to us, but the roommates are not cooperating, and we do not know how to retrieve our money. As things stand, they will collect it when they decide to vacate, if there is any left after accounting for any damages.

We asked management to do an inspection to show that our son was not responsible for any damage before the new roommate moves in, but they refused. They have the deposit, and that is all they care about. What should we do? --Elaine

DEAR ELAINE: Unfortunately, it appears that the property manager is adhering to customary practice and procedure. He is under no obligation to return half of the deposit or even do an inspection. However, what is also normal is for any new roommate to first inspect the premises and, if satisfied, give to your son what would have been his obligation to pay his share of the security deposit.

How can you get it back? If communication and letter-writing does not work, then in my opinion, a strong letter from your lawyer may scare the guys into resolving the problem.

 

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