Real Estate Question About a Village Property

[njgranny]

The price was put down $20,000 and it says this in the listing:

"Listing price may not be sufficient to cover all encumbrances, closing costs, or other seller charges and sale of Property at full listing price may be conditioned upon approval of third parties."

Could someone tell me what this means?

Thanks.

[livsea2]

It means it is in foreclosure. You the buyer needs to do a title check to make sure there are no other leins against the property, like a second mortgage or home equity loan. The seller isn't the martgagee.

[njgranny]

Thanks for the info.

[Villages Kahuna]

An earlier post was correct. The property with that language in the sales listing is very likely either in the middle of foreclosure proceedings or is already owned by the mortgage lender.

As an example, let's say that there was a $200,000 mortgage on the property but market conditions made the property worth only $150,000. Further, let's assume the homeowner/borrower defaulted on the mortgage loan and foreclosure proceedings either commenced or actually were completed. In either case, the mortgage lender has a loan on his books for $200K, but has foreclosed on the property serving as security for his loan that has a current value of only $150K. The bank examiners would have already required the lender to write down the value of the loan on his books ("marking assets to market"), but the lender's original mortgage of $200K has been recorded as a lein against the property in the county recorder of deeds office. There may actually be other leins recorded against the property--second mortgages, mechanics' leins, etc.

So, if a buyer contracts to buy the house for $150K and pays cash for it, he'd better be doggone sure that he is buying property with a clear title. An experienced real estate lawyer will be able to make such a determination. Almost certainly, the lawyer will recommend that a title insurance policy be purchased to have a third-party insurer perform the title research and assume the financial risk if somehow the title is not clear of leins. If the buyer is using a mortgage loan to buy the property, the new mortgage lender will do his own research on pre-existing leins, but will also certainly require that a title insurance policy be ordered as a condition of closing.

Situations like this can provide an opportunity for a new buyer to get what appears to be a good deal. But remember that it's unlikely that the original mortgage lender and title holder will willingly agree to the sale of the property for a whole lot less than the current market value and the current value of the loan on his books. Markets tend to be pretty efficient and the purchase price of this type of property is pretty certain to be very close to the real current market value.

But like I said above, these are situations where you really need a good, experienced real estate attorney. You ought to plan on spending the several thousand dollars that a title insurance policy costs--unless you can get the original owner/lender to foot the bill for the premium, of course. (Everything is negotiable, so maybe the owner/lender/title holder is motivated enough to get the property off his books that he will agree to pay for a title policy as a portion of his closing costs.)

[Sidney Lanier]

Notwithstanding a lot of legalese that is a part of any foreclosure, it doesn't mean that one should necessarily walk away from the possibility of buying one. As was suggested, if the house itself will work for you, it might be well worth having a good real estate lawyer take a look at all the details and see if, after all the liens are satisfied, it still is a good buy. We got a good buy on a foreclosure for one of our sons in New York State that after everything was satisfied, he still got into a house that was ideal for him and his family at about two-thirds of its market value. Good luck!