Expert: Dick Dennis - 11/10/2006

Question
Hi Mr.Dennis,
thank you in advance for taking your time to answer my question. I am buying a home in the Albany NY area and the owner owns a line of credit against it, if the seller still cannot cover the debt of the lien at the closing, what happens? does that mean that the bank still owns the house and we are not the legal owners of it? Can we hold sellers responsible for the fees we loose to lawyers and our mortgage bank if it does occur?

thank you so much,
Katie

Answer
Well, Katie, the seller MUST have the funds to pay off any and all liens on the property's title or there is no sale, to put it in a few words.

The funds the seller must have can be derived from you as the buyer or anyone else who is willing to lend him the money secured by something else. Not this house.

There is one way to overcome this stalemate. You can go to the mortgage lender and ask for a "short pay." This process is not so easy. A short pay means the lender agrees to accept a lesser amount to satisfy the liens. But the lender usually requires all kinds of accounting to make sure that the seller is not getting a dime in this process.

I strongly recommend you engaging a REAL ESTATE attorney to make sure everything goes right from your side of the fence. If you had a very knowledgeable Realtor, that person might be able to handle the whole affair, too.

I do wish you well.

Dick Dennis             dixiedee13@aol.com