Q-We found a home we want to buy. After some negotiation, our purchase offer was accepted. Thankfully, we included a financing contingency clause, as you often suggest, because the first two lenders to whom we applied for a mortgage rejected our application because the home adjoins an elementary school. These lenders say it is their policy not to approve mortgages on such houses. Is this common? Should we give up on this home?
A-I encountered the same problem several years ago, so I understand your frustration. Some lenders feel it is undesirable for a house to adjoin a noisy school and I agree. However, that drawback is reflected in the market value of the home. If you keep searching, you will find many mortgage lenders who do not reject loans on homes located adjacent to schools.
A boost from financing
Q-My mother, 76, is in declining health. She owns her home free and clear. It is worth at least $150,000. Her income is from Social Security and a small pension from my late father`s employer. I live about 1,200 miles away and can only visit her once or twice a year. A neighbor wrote to tell me my mother should not be living alone because she is very forgetful and is often confused. There is a nice church-operated retirement home nearby, where several of my mom`s friends live, and I`m sure she would be very happy there. The problem is the cost is almost $2,000 per month. But if she sells the house and invests the money, I don`t see how it will produce the income she needs. Do you?
A-Yes. Since your mother qualifies for the ”over 55 rule” $125,000 home sale tax exemption, her sale profits will be tax-free.
Let`s suppose the home sells for $150,000 net with a $25,000 cash down payment. If your mother carries the $125,000 mortgage at 9 percent interest amortized over 25 years, the monthly payment will be $1,049. She could have the loan due in perhaps 10 years if she doesn`t feel comfortable carrying a 25-year mortgage. Adding the $1,049 per month to her Social Security and pension income should come pretty close to providing the $2,000-per-month income your mother needs to enjoy that nice retirement home.
Is broker at fault?
Q-I lost the sale of my home because of a real estate agent and I would like your opinion on whether I should sue. My agent found a buyer for the house, so she would not have to split the sales commission with another agent. My house has four mortgages and I have an income tax lien that also must be paid to deliver clear title to a buyer. One of the mortgages is in foreclosure and the agent knows that. The offer was about $10,000 below the asking price, which is quite reasonable.
I was willing to accept the offer, even though it will give me very little cash, if the agent would take an $18,000 promissory note for most of her commission, secured by a second mortgage. But she refused. I called her broker and he refused to allow his agent to take a second mortgage for the commission. He said it is ”company policy” not to take a note for a commission. I only have about 30 days before the foreclosure sale. What should I do?
A-Shame on that greedy real estate agent and her broker for not accepting a promissory note secured by a second mortgage for the sales commission. She had only her commission to lose, but you could lose your house and whatever equity you have in it because that sale was not completed.
With only 30 days left before the foreclosure sale, unless an all-cash purchase offer materializes, you could lose the house and the agent will receive nothing.
An alternative is to file bankruptcy to gain some time. I do not usually recommend bankruptcy, but your credit rating is already ruined, so you don`t have much more to lose. With the permission of the bankruptcy court, you can either reorganize your finances under Chapter 13 or sell the property under Chapter 7 of the Bankruptcy Code.
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Please note: Real estate laws differ from place to place, and laws of your area should be checked before making decisions on real estate problems. Robert Bruss will answer inquiries addressed to Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
