No, I think it’s fucking patronizing to assume that someone of such little means and/or understanding of financial transactions is going to know the value of an attorney. His response was patronizing as hell, especially after multiple people in this thread have already politely recommended that she seek legal assistance.
I’m a financial advisor who builds houses on the side. I understand perfectly well how important it is to retain an attorney, but that not the point of my post.
Yes, I should have had attorney look at the papers before I signed them. I agree. I did not, at the time it really did not seem necessary. The whole deal was the agent’s idea. I just agreed, it was a win/win. There were no disagreements between us. I should have been more suspicious. I am going to call an attorney on Monday, when they will be in. If I knew I was going to be needing money for an attorney against these people, the agent and seller, I would never have mailed them money last week.
You said you agreed to a price of $30,000. You had been making monthly payments of $500 and had paid a total of $10,500. That’s 21 payments. You also said that the seller had agreed to a payoff of $24,300. Assuming that the interest charge on your mortgage note was 10%, then a balance of $24,300 after 21 months is about right. A portion of your $500 monthly payment has to go towards interest and then a portion goes towards principal.
Do you know what the interest rate in your contract states?
This does not sound like a scam. The contract may also state that they were giving you so many months to get permanent financing. Typically seller financing is not for the entire term of the loan, but until you can get traditional financing. You should be able to include your good on-time payments to the seller over the last 21 months in your credit history when discussing with a bank, etc. about a more permanent loan.
The house cost was $30,000. The OP paid $4,000. Then she proceeded to pay $6,500 additional in “mortgage payments”. So how much of that $6,500 do you think actually went toward principal? Let’s say $1,000 was for taxes and another $500 in mortgage insurance. That’s $5000 in principal and interest.
It doesn’t seem unreasonable for $4300 to go toward interest and $700 to the principal. And it looks like the owner is willing to just call it $1000 even. Does $4k in interest and $1k in principal sound unreasonable to anyone here?
Surely the OP didn’t think that they could just pay $30,000 total and be free and clear.
It’s surprising to a lot of people how little of a payment goes toward principal in the first few years of a mortage. A lot depends on what the actual written agreement was, in particular what interest rate is being used, the length of time involved and the taxes and insurance.
Back of the envelope + wild assed guessing:
It looks to be like 21 payments have been made at $500 each. This is $50 per payment above asked for $450, so that $50 should be going toward principal for a total of $1050 in additonal principal.
So, $30,000 - $4000 down -$1050 in additonal principal = $24950. If the payoff is $24300 then that means that $650 of the OPs payments payments went to principal. Seems reasonable to me assuming some of the payment went to taxes and insurance.
Using a mortgage calculator, I see that a 5 year mortgage for $24000 at 5% interest gives a monthly payment of $452.91. I’m just guessing at these numbers of course.
At the very least, ask the agent to explain the numbers.
That’s what I did at first, too, but it looks like the “I paid $10,500, total” counts the down payment, so it’s really only 13 months of $500 payments. At $50 per payment, that’s $650 total principal, which is pretty close to what the OP’s agent said.
Does it sound unreasonable to anyone that only a little over a tenth of the payment goes to principal? It doesn’t, to me.
I see your point. Clearly we are doing a lot of guess work here. We don’t even know if the payments included taxes or insurance (surely they must.) The first year of a mortgage, very, very little of the payment goes to principal. But there are too many variables here.
Using your way, the OP paid $6500 over 13 months and $1700 of that was added to the principal. I say that is not unreasonable for the first year but who knows?
You keep talking about the things that the agent told you, but what do the papers that you signed actually say? Have you read them? Do you understand them? What an agent says and what the papers say may not be the same thing. Before you have an attorney review the paperwork (which you should do ASAP), you should read the papers you signed and understand them.
It really depends on the term of the loan. For a 30 year loan, a tenth going toward the principal would likely be right, maybe even more than usual. Payments of $450/month should result in a payoff in a much shorter time though at “normal” interest rates and much more of each payment going toward principal.
A clearer way to look at it would be to figure out what the effective interest rate might be. If we went worst case and said that the $450/month was interest only, that would amount to an interest rate of around 21% for a $26,000 loan. Not payday loan levels, but pretty steep for a secured loan. More realistically, if we figure $1000 went towards principal (hard to tell if this is the case or not from the OP), $1000 towards taxes, and $500 for insurance, the interest rate would be roughly 11%. Still pretty steep for a mortgage, even with bad credit, but I don’t think I would call it a scam.
It’s clear to me that the OP doesn’t really have a clue what she contracted to do, much less what the details are, so it will be really difficult for this forum to provide a definitive answer to her questions.
This situation also gives creedence to the thousands of families that got mortgages and then defaulted on them claiming that they didn’t understand the terms. They expected the banks to know what was best…much like the OP is expecting the real estate agent to know what’s best. DON’T SIGN DOCUMENTS THAT YOU DON’T UNDERSTAND!!!
Before you go to the lawyer read the papers for yourself or have someone read them to you so you can think clearly when you’re with the lawyer instead of having to filter new information while you’re there. Make a list of questions that you have. You want to make the most of your initial consultation. If you lost the papers call the office of the agent and talk to the broker and have the papers sent to you or pick them up, they have to keep them on file for a certain number of years.
In the future have your own agent ALWAYS, it’s usually at no cost to the buyer. Even if you’re buying your own grandmother’s home you need your own agent. Never sign anything until you read it or have it read to you by someone outside of the deal.
Yes - and take pen and paper with you to write down everything the lawyer says. Also write down everything the real estate agent or the owner says to you. Get them to check and sign it under ‘this is a true representation of our conversation dated [whenever]’ would also help, but just having notes for your own peace of mind would help a lot.
I have an appointment to speak with an attorney who specializes in real estate on Friday. Hopefully there is a good resolution for this.
I would just like to say though, I think this has been made a lot more complicated than it should be. The owner wanted to sell the house. It was up for sale for well over a year. I wanted to buy the house. I had a reasonable down payment, and agreed to make regular payments, which I have done. The house is not yet in my name, so no, I have not paid the taxes. I am willing to negotiate regarding that. While the owner may have preferred to have payment in full at the time of sale, it seems the agent was unable to find someone who could do that (why else would she suggest that the owner take payments?). We made an agreement that was reasonable and we both accepted. This agreement did not include interest, or mortgage insurance. The deal was, I will pay 30,000 for this house, yes, total. That is the full asking price. Taxes on this property are >1000 yearly. This is not the Taj Mahal. If someone’s credit is good enough to get a bank loan, they would not buy this house. That is true. Why would I pay interest when I have not borrowed any money? I made an agreement to pay over time, which again, I have done without incident.
I have all of the paperwork and receipts for all the money I have paid. I will take them to the attorney on Friday and see what happens.
I will concede that I should have had an attorney look over the papers before I signed them, however, that does not mean that I did not understand the agreement. That means that the paperwork may not accurately reflect our agreement, to my detriment. Honestly, that reflects less on my being foolish and more on the agent being unethical, if that is the case. I’m not in the wrong here.
But you’re living in the house, correct? Or is the original owner still living there and you’re elsewhere?
Because if you’re living in the house, you did essentially ‘borrow’ the $30K from the current owner - you’re living in their house without having paid (everything) for it. It’s perfectly reasonable that you would be charged interest in order to do that - it’s a basic mortgage.
Now, if you’re not living in the house…well, then I have no idea.
Regardless, good luck with the lawyer on Friday - hopefull they will be able to get this sorted out to everyone’s mutual satisfaction.
Interest is the cost of money over time. I highly doubt that your contract does not include some provision for interest. You are paying for the house over time, as you said. That’s why you owe interest.