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bgarivay · Jul 21, 2009, 03:18 PM

I want to buy this house in MInnesota on contract for deed, the woman I am buying it from has been very honest with me but today she tells me that she has a second mortgage, that her bank will change into a loan with no collateral what should I do she is asking for earnest money. But I have not decided what to do in this case, I looked up the taxes and they are curet, and it says the house has 102,00 value and I am buying it for 75,000. Does that sound fishy or how can we legally hold her responsible for the second mortgage. Please Help!

s_cianci · Jul 21, 2009, 03:34 PM

Generally, when you buy a house, all outstanding liens are satisfied with the proceeds from the sale, unless it's a "short" sale, which requires advance approval from the lienholder. From what you've said here I don't know if this is a short sale or not. You're buying the house for $75,000, so the question is how much are the outstanding mortgages? If they're $75,000 or less, total, then there's no problem. But if they're over $75,000 (and they conceivably could be if the house in fact appraises for $102,000), then there could be a problem if the lienholders haven't previously agreed to such an arrangement. And I'm not totally sure how it works when there's more than one lienholder involved when a short sale becomes necessary, whether each lienholder absorbs a proportional amount of the loss, or if the primary lienholder is satisfied and the second lienholder is left "holding the reins", so to speak. Your realtor could probably fill you in a little more where that's concerned.

ScottGem · Jul 21, 2009, 04:15 PM

In a contract for deed you don't "buy" the house until you fulfill the terms of the contract. Therefore, any mortgages that may be on the property is not your concern. The contract should specifiy that the owner will convey clear title to you upon satisfaction of the terms of the contract.

You should get an attorney to draw up the contract to make sure you are protected. If the owner does default on the mortgage(s) you could lose your interest in the house, unless you can get the mortgage holder to assign the mortgage to you. So you really need an attorney to prepare a contract that protects you.

bgarivay · Jul 21, 2009, 04:32 PM

Originally Posted by ScottGem

In a contract for deed you don't "buy" the house until you fulfill the terms of the contract. Therefore, any mortgages that may be on the property is not your concern. The contract should specifiy that the owner will convey clear title to you upon satisfaction of the terms of the contract.

You should get an attorney to draw up the contract to make sure you are protected. If the owner does default on the mortgage(s) you could lose your interest in the house, unless you can get the mortgage holder to assign the mortgage to you. So you really need an attorney to prepare a contract that protects you.

Thank you it has helped a lot.