The closing that probably won't happen

alisonnSeptember 18, 2013

Girl meets married man with three kids. Married man leaves wife and empties 401k to buy house for himself and girlfriend. Ten years later, girl and married man break up and put their house on the market. A year before this happens, girl's name was added to the deed.

So, we bid on this house, it's under contract, everything seems to be going smoothly. Just before closing, title search is done. Seems that the current owner owes his ex-wife in excess of $150,000 in back child support. There is a lien on the house. The man says ex-wife can have his half of the profit from the sale of the house, but that's only $50,000.

The ex-wife says that's not good enough--I want all the money, since you bought the house with our 401k money. The girlfriend says, "No, I'm not giving you a dime" and states she has put $80,000 into the property and has the paper trail to prove it.

I'm wondering this: If you are putting your name on someone else's deed, wouldn't you use a lawyer (NJ) and wouldn't there be a title search? The girlfriend told us that she knew about the lien before she even put the house on the market (but they both checked "no" on the disclosure to the question "Do you know of any liens on the property?"). Wouldn't someone have informed her that adding her name to a property with an existing lien would make her responsible for the debt?

Anyway, we are six weeks past the original closing date and one day past the "Time is of the essence letter" deadline and......nothing. The lawyer is certain that someone will cave, but wouldn't someone have caved by now?

I know we can sue for the fraudulent disclosure and go after all we have invested so far (mortgage fees, inspections, lawyer fees), but it doesn't sound like we would see a penny of it (PS- the girlfriend filed for bankruptcy right before she put the house on the market). Meanwhile, the mortgage company would not hold our interest rate (which has since gone up) without a $630 charge every fourteen days that we don't close. So, we agreed to cancel the mortgage for the time being.

The big problem is that we really love this house--the property is very unique. Any advice besides "It sucks to be you?"

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function_first

Holy cow, what a mess. In light of the complete lack of ethical code/moral compass of the current homeowners, they are probably the last people on the planet that I would want to buy a home from. Turn, run, and don't look back.

    Bookmark   September 18, 2013 at 6:32AM
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egbar

well you really have only two options, don't you? Stick it out to the bitter end, or withdraw and get on with your life. Do you have a real estate lawyer and what is the advice you get from him/her? A lot in my own mind would depend on how badly I wanted the house and how well my budget and life could stand the waiting. Eventually the bank will get that house, perhaps you could have some inquiries made into the status of their mortgage? If you think it could help, you could express interest to the financial institution
holding the mortgage. You may be in for a long wait and only you can determine if it is worth it to you to hang on.
best wishes

    Bookmark   September 18, 2013 at 8:06AM
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kjdnns

You should move on. Aside from the fact that your sellers have been dishonest and unethical, these issues won't be solved soon and it all will need to be resolved before you could close on the house because no title company is going to issue you a policy with the various claims against the seller and his interest in the home.

    Bookmark   September 18, 2013 at 8:09AM
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xamsx

Wow, this is a horrible situation for you. This will be a while to sort out, and it may take years. Unfortunately it doesn't look like you can close due to the lien, and you have no way of knowing who will blink first of the party of three (but don't bet on it being the gf or the ex-wife). Depending on how much money you have tied to this transaction, you could sue and hope to shake the tree that way, but as you said you are unlikely to get anything with only $100K in profit and a $150K lien.

As awful as the decision would be, walking is probably in your best interest, unless you are willing to ride a years-long roller-coaster with these three people.

    Bookmark   September 18, 2013 at 9:03AM
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invisible_hand

A long shot, but I like the advice to contact the financial institution holding the mortgage. The lender might be more willing to foreclose if they knew there was a buyer lined up, though disposition of the existing lien is a question for a lawyer.

This could help in two ways:
1) Increase pressure on sellers & ex-wife to cut a deal to complete a sale before foreclosure
2) Possibility that lender forecloses and you get to buy from the seller at some point in the future.

You may also want to let the sellers know they are now required to disclose the lien and then walk away (but not too far) from the deal. This could increase pressure on the sellers & ex-wife to come to some sort of agreement to complete the sale to you.

Finally, if your lawyer / realtor is up to it, and can get all parties to talk to him or her, they may be able to broker some sort of three way deal with the sellers, the ex-wife and you.

    Bookmark   September 19, 2013 at 1:02PM
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kirkhall

Um...
with the girlfriend having declared bankrupcy prior to placing the home for sale... I wouldn't step into this. It will be on the assets list that the bankruptcy people will go after.
AND, the x-wife should be very, very cautious about not accepting the 50k and moving on to some other collateral. She could lose it all if the girlfriend/owner has this house as an asset for bankruptcy.

Yikes!

This will be very expensive for you to sort out. If you have the time, you can sit back and just wait--for the mortgaging bank to turn it into foreclosure/bank-owned or other.

Good news, I don't think you need to worry yet about mortgage rates rising. The Fed "move" (or lack thereof) yesterday should keep mortgage interest rates low for a while yet.

Or, wait, buy another house, and in 7 years, this one might be freed up again for sale.

    Bookmark   September 19, 2013 at 3:58PM
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