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horses627 · Jul 27, 2011, 02:25 PM

I am in a contract for deed ~ the seller has a 2nd mortgage on the house~ we had a loan in place for the first mtg we have the contract on ~ but she couldn't pay off the 2nd Mtg on the house.. is she in default of the contract?

AK lawyer · Jul 27, 2011, 04:04 PM

Can the 2nd be paid off when you close with her, out of the amount payable by you?

horses627 · Jul 27, 2011, 04:21 PM

I will not take out a personal loan for her 2nd mtg.. we had a loan in place 2 times and both times she could not pay it off so we lost both loans.. what amount is payable to us when we close?

ScottGem · Jul 27, 2011, 04:28 PM

Originally Posted by horses627

.. is she in default of the contract?

We can't answer that, it depends on the terms of the contract. If the contract says that when you get a loan to pay the balance owed on the contract she needs to close, then she probably is in default. But the terms of the contract govern.

When you close there should be no amount payable to you. You pay the seller the balance as provided by the contract, and she signs over title.

Getting back to her defaulting, if she is in default, what does the contract say about remedies. The only remedy may be to allow you to walk away from the contract.

P.S. when posting a follow-up question or info, please use the Answer options at the bottom of the page rather than the Comments.

Fr_Chuck · Jul 27, 2011, 06:10 PM

If they can not pay off the home to sign it over to you, they are in default of the contract, and subject to the penalties that the contract has in it.

You may be able to sue them for the money you paid, or sue them for clear title to the home.

If you had filed a copy of the contract for deed with the recorder of deeds, this may have stopped a 2nd from happening.

But basically you may actually lose all you have paid.

horses627 · Aug 1, 2011, 09:52 AM

I also believe she is in default due to she is taking the money for the house in her own account and then paying the Mtg account. I have not received a monthly statement from her in a yr , as for the 2nd Mtg Payoff I am not sure where to look on the contract , the contract is recorded at the court house in our name, the house Insurance should be also in our name but it is not. I have until May of 2012 to get another loan for the house, should I wait till then and walk away? We are qualifide for a ruarul division loan in our area would like to see our down payment back if possiable.

AK lawyer · Aug 1, 2011, 10:14 AM

Originally Posted by horses627

i will not take out a personal loan for her 2nd mtg ...

Of course not. I was not suggesting that you do.

She is obligated to give you clear title at closing. If she cannot, she is in breach of her contract with you.

So what I am suggesting is that if, at closing, the amount payable to her from the first mortgage loan you have in place exceeds the amount she owes on the second, the closing instructions could provide that the second be paid off out of that amount (otherwise payable to her). You would have title only subject to your new mortgage, her second mortgage would be gone, and you wouldn't have to sue her.

horses627 · Aug 1, 2011, 10:28 AM

Asking my loan officer to be the leasion between her and I to ask that question.. thank you ;)

ScottGem · Aug 1, 2011, 11:00 AM

Originally Posted by horses627

I also beleive she is in default due to she is taking the money for the house in her own account and then paying the Mtg account. i have not received a monthly statment from her in a yr , as for the 2nd Mtg Payoff i am not sure where to look on the contract , the contract is recorded at the court house in our name, the house Insurance should be also in our name but it is not. i have until May of 2012 to get another loan for the house, should i wait till then and walk away? we are qualifide for a ruarul divison loan in our area would like to see our down payment back if possiable.

Who do you make out the check to? If the check is made out to the mortgage company then she can't cash them. If the check is made to her, then I doubt if the contract states that she has to forward the payments to the mortgage lender. I see no problem and doubt if the contract does either, that she deposits the money in her account and
Then pays the mortgage. As long as the mortgage is up to date and not subject to foreclosure I doubt that this would be a default on the contract.

As AK said, if has a 2nd mortgage that is not mentioned in the contract, that's her issue. When you are ready to close and you have fulfilled all the terms of the contract, the attorney or agent running the closing should issue checks from what you are paying to anyone with a lien on the property. Any balance left over is then paid to the seller. If the proceeds of your loan are not enough to cover all the liens, then she is in default and you will need to sue her to pay the balance of the liens.