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Son getting dinged for more money after escrow

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POSTED November 22, 2013 11:03 p.m.

Q:  About a month ago, our son sold his home he had owned for 9 years. Three years ago, he obtained a loan modification to lower his payments. The title attorney that handled the recent closing received a pay-off from the lender in the amount of XXXXX. Our son needed to sell, so he took a loss and had to pay over $5,000 at the closing.

A few days after closing, the mortgage company contacted him and told him he still owes over $8,500 and that this had to do something about the previous loan modification. 

My question: how can they do this after they gave him – and the closing attorney – a pay-out amount?  Also, the checks given at closing have been cashed. Pat, a concerned mom.

A:  Dear Pat:   Typically, at closing (escrow) the buyers (and sometimes the sellers) sign a paper stating that they agree to cooperate with the lender in the event there are any changes after the closing takes place. So, from a procedural point of view, if your son did enter into such an agreement, the lender may be within its rights.

But that does not end the issue. Your son must determine exactly what this extra money is for? Merely to be told it has “something to do” with his previous loan modification, is just not enough.

It may be that when your son did get a loan modification, he agreed that any moneys not paid at that time would be tacked on to the end of the loan –or when the loan was, in fact, paid off.

But you (and your son) must research this very carefully. Ask the title attorney for guidance – even if you will have to pay a legal fee for this additional assistance.

You should also contact the lender and demand an complete explanation, including sending you any and all documents that the lender claims your son may have signed.

In the final analysis, if you are not satisfied with your research and still believe that your son does not owe any more money, you should file a formal complaint with your State Attorney General.

Q:I read your helpful advice about how to deal with your neighbor’s trees, but what if your “neighbor” is the government? My son and daughter-in-law live in a single family home on a residential street. There are three huge old pine trees along the side of the street on what looks like their property, but actually belongs to the city. The roots of the city’s trees have damaged my son’s driveway and could even threaten the concrete slab foundation of their house.  The city has told my son that he may not take the trees down, even if he pays for it.  The city also said that they are not responsible for any damage caused by the trees, something about sovereign immunity.

I thought that we fought the Revolutionary War to be rid of the influence of any sovereign.  Tom.

A: Tom:  And the Pilgrims whom we will celebrate for Thanksgiving did the same years before, but the sovereign still rules. Actually, that’s not always true. While each state law may be different, my research indicates that if you can prove that the government (the city in your case) knew that the tree was dangerous, if it falls the city will be responsible for any damage caused.

In your son’s case, however, the trees have not fallen and thus the city would most likely not be legally liable. That does not mean your son has no remedy. First, I would immediately contact your local elected officials and see if they can put political pressure on the city government. Many times, a city will recognize that it is unfair to city residents when city trees cause damage to property, and will take remediation steps.

Second, I would also notify your insurance carrier. I know none of us want to bring the carrier into these matters for fear that the insurance may be cancelled or the premiums will be increased (or both) but you have insurance. If you do not notify the carrier promptly, and should there be a major problem, you may be out of luck. Most insurance policies specifically require the insured to promptly notify the carrier of any claim or even possible claim.

Third, talk with a local lawyer. Our common law does allow you to trim any overhanging branches and cut any encroaching roots. This may be an option in your state.

Q:I am writing in regards to a question posed to you in my Sunday newspaper  regarding a grandson purchasing his grandmother’s house while she continues to live there.  Direct ownership transferring to him after her death.

I can’t begin to tell you what a BAD IDEA this is.  My husband entered into a similar relationship with his mother 9 years ago.  In those 9 years, the US economy has tanked and everyone’s financial status is drastically different than when the housing relationship was established.  There was no contingency made for the economy going down.  The house is now a financial burden that cannot be shed due to a lifetime lease.  It is a deal for his mother who continues to live in the home with no cost where as her son must continue to make payments - mortgage, taxes, repairs - even if he were to find himself without income/unemployed.  In a perfect world, his mother would chip in for expenses, but since the documents/lease state that she live there expense free, she does not chip in and instead her grandchildren’s college funds go to her upkeep even though she has a generous pension and social security.  When offered to sell the home back to her at a much below market value, and much below what had been paid 9 years ago, the offer was declined.  Why should she buy it back after all? Then she would have to curb her lifestyle. As long as her son pays her housing expenses it’s a pretty nice life for her.  Needless to say, a relationship which was entered where everyone would help each other, has ended with a son feeling taken advantage of.  It is impossible to read what lies in one’s financial future, entering into a financial relationship where the person that makes the payments receives no benefit while the payments are being made and cannot escape from the financial burden if the resources (income/economy) change is just a really bad idea.

I would suggest that you consider what could happen in the years ahead in this less than perfect world we live in today.  If this grandson purchases his grandmother’s house and suddenly can’t make the payments, he will be unable to sell the home. Suzanne.

A: Dear Suzanne: I completely understand you concerns. However, from what you told me, it appears that your husband did not get good advice from whoever prepared the documents that gave  his mother the life-estate. Typically, here is a summary of what your mother-in-law should be paying: real estate taxes if the document creating the life estate spells out this requirement, and  ordinary repairs, upkeep and maintenance. Unless the life-estate document requires the life-tenant to pay homeowner’s insurance, this is the obligation of the remainderman (i.e. the person who gets the property at the end of the life estate.)

So, while this answer will not assist you or your husband, if a reader is interested in providing a life estate for someone, make sure that the legal document creating that estate specifically spells out what financial obligations the life-tenant has. Furthermore, include language that if the life-tenant moves out for any reason, the tenancy ends; this will give the remainderman the opportunity to either rent out the property, move in as a personal residence or sell.

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Q:      I have a home I’m looking to sell. I paid $360,000 for it 15-16 months ago. It is now valued  by Zillow at about $467,000. I’m looking to fix a few things, and add some value, but need money to do it. I have the skills to do the fixes, so I know I’ll get some sweat equity out of it, but I don’t know the best way to get the money to do the upgrades. Only need about $20,000. Can I get a line of credit, because I didn’t declare income from my second job. So it doesn’t look like I can afford it. What to do? Need help. Ty.

A:      Ty: I would be careful in disclosing that you are not declaring income. That’s a federal offense and I do not give criminal law advice.

You are looking for what is known as a “bridge loan”.  If there is equity in your house (i.e. value over and above any outstanding mortgages), some lenders will take a chance and lend you short-term money. You are not asking for a large loan, so I would discuss this with your local bank or credit union.

Alternatively, you may want to find what is known as a “hard money” lender. This is a lender who does not always look at the credit history of the borrower but only wants to make sure there is sufficient equity in the house in the event the borrower cannot repay the loan.

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