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Neighbor helping neighbor avoid foreclosure?

August 24th, 2008 7:14 PM by Ron Mastrodonato

Neighbor helping neighbor avoid foreclosure?
Distressed owner takes big risk in quitclaiming rights to home

August 22, 2008

By Ilyce Glink
Co-written by Samuel J. Tamkin
Inman News

Q: My neighbors are on the verge of losing their home because they can't keep up with the payments. They are not behind yet in their payments yet, but it's going to happen.

I would like to buy the house, but need time to clear up some credit issues. Can he "quitclaim deed" the house to us? We would make the mortgage payments so that his credit won't be compromised until we can buy it. Or is there another way to do this?

A: Your neighbor certainly has the right to quitclaim his interest in his home to you and have you pay the payments on the mortgage. But the real question is why he would want to lose control over his house and lose any equity he may have in the home when you have your own credit problems to deal with.

Let's go back to your neighbor's issues. Your neighbor is in financial difficulties and is having problems paying his debts, including what he owes on his home. You want to buy his home but have your own credit problems and can't buy it right now. If your neighbor has equity in his home -- that is to say the value of the home exceeds the amount he owes to his lender -- he would want you to pay him at least that before he would be willing to transfer the keys to his home to you.

Many people sell their homes to strangers when strangers say to the owners that they will keep up the payments on their old mortgage. The buyer would buy the home subject to the old loan on the property.

But if the new buyer stops making the payments to the lender, the only thing that new buyer loses is the home. That new buyer's credit does not get hurt. If the lender found out about the sale, the lender could exercise its rights under just about all mortgages that are in the market to accelerate the debt. That would mean the lender is calling the loan in and would need to be repaid.

Frankly, this is one of the biggest scams going on right now, and savvy homeowners would do well to steer clear of strangers promising to make all of their financial problems go away if they would simply sign over title to their home.

Your neighbor would be taking a huge risk if you failed to make the mortgage payments. If that happened, his credit would be shot, the home would be lost and he might be worse off than if he just let the lender foreclose.

Q: We have an easement on our property and our neighbor is putting in a pool, which will encroach onto the easement. We are planning to sell our home within a year and would not like this to be an issue. Can we get the easement canceled so that there will not be any problems with the easement for future homeowners?

A: The real issue is determining what the easement is for. If the easement is between you and your neighbor and is no longer needed, you can both agree to terminate the easement. You would draft a document to terminate the easement and would need to have that document recorded in the office in which land records are recorded in your county.

Since you indicated that your neighbor's pool will encroach on your easement, I have to assume that the pool will be on your neighbor's property and that the easement you are referring to is on your neighbor's property. That makes it seem as if the easement is for your benefit and not your neighbor's.

If the easement is required for your use of your property and their encroachment into the easement area is a problem for you, then you have to work with your neighbor to redesign his pool to avoid the easement area. The easement may be for your sewer or water lines or even electrical and phone connections. The easement could even be for you to drive to get to your property. You better be certain that their pool won't affect you in any way.

While you may not mind now that they build the pool and encroach on the easement area, if it narrows the area available to you and you need that area in the future, you might be out of luck.

If the easement is a third-party easement for the electric company, local municipality or an easement that was created with the subdivision for all of the lots in your area, you need to investigate further whether your neighbor's use of the easement area could cause them a problem as well.

Before you rush out to terminate the easement, research the easement and understand what it is for and then you can terminate it if you can or even modify the easement area to exclude the pool area.

If you've done your homework and work with a real estate attorney in your area, you shouldn't have problems when it comes to selling your home later on.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

Posted in:General
Posted by Ron Mastrodonato on August 24th, 2008 7:14 PM

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