I met with a man a few days ago who found us by reading our article on “What to Expect When Offering to Buy a Foreclosure in Murphy NC” and “Foreclosure Houses and Tips to Buying Them in Murphy NC“. It was one of the most discouraging attempted real estate purchases I’ve heard of in a long time.
The moral to his story is buy smart – go through a typical real estate transaction that have safeguards built in for your purchase. Read on and you’ll understand better what I mean.
Jim, as I’ll call him, bought a house with several acres adjoining the US Forest Service and absolutely loved it. He bought it from a wealthy friend of his who was a developer in Florida and life treated him well. They agreed to exchange it in a sale for $170,000. His buddy said he didn’t have to do a straight purchase, that he would be happy to finance it for him like a bank would. They did what’s called a Land Contract.
Jim put $40,000 in cash down on the house and has been making payments for several years. He’s put in a new well, done several major renovations, and by this time, he has invested about $120,000 total of cash in the property. Then he came home and found foreclosure documents on the door to his home.
Turns out the seller has a first mortgage and an equity line that’s been over extended on the property and hasn’t paid in months. The bank is foreclosing – simple as that. Since he has no legal ownership, his name is not on the deed, and the mortgage liens far superseed any right he has to the property, he cannot get anywhere. No bank will tell him what is owed on the property or anything else for that matter.
Jim has lost $120,000 in his own cash and now has nothing to show for it. His only option, if he wants to keep the house, is to wait for it to come out the other end of the foreclosure process and buy it. That means he will likely have $200,000 in a home that should be his that worth substantially less than that.
What could or should he have done in this instance? A traditional closing with owner financing in place. The closing attorney would have made sure there were no liens on the property (and if there were, they would have to be paid) and issued title insurance at closing.
Moral of the story again – Be smart about closings and buying real estate. Use a Realtor (namely The POLTROCK TEAM! 😉 and/or an attorney that specializes in real estate closings (you can find real estate attorneys in Murphy NC on our Gotta Guy List). That will give you true professional advice that can ultimately save you thousands, or in this case, over $100,000.