The agent represented the seller not you. That’s not unethical. Their agent isn’t bound to look after your concerns.
DON’T SIGN DOCUMENTS THAT YOU DON’T UNDERSTAND!!!
You are basically paying the owner’s mortgage, right? So, in any mortgage, you pay a significant portion to interest, and a small portion to principle. After a year of paying, say, $500/month, you did not pay $6000 towards the principle, you paid maybe $1000 towards the principle and the rest in interest. So now your mortgage is $29,000 (not $24,000).
The amount you were paying the owner is for interest and principle. You can not expect the owner to apply your entire payment to the principle and not to paying the interest. If it were your mortgage, in your name, it would work the same way.
When this was arranged, you should have been told what the interest rate and terms of the mortgage were, so you’d be at least aware of the interest/principle ratio.
Yep we have these pop in Australia every now and then and they really are IMO like pay day lending and pawn shops. Short term fixes that keep people in a debt cycle.
[quote=“LurkerInNJ, post:16, topic:612461”]
It sounds like you were doing rent to own, with 450 going towards rent and 50 towards the purchase price.
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Hard to tell given the sketchy nature of the OP’s understanding of the deal, but it sounds it’s either a rent to own scenario, although the (relatively) huge deposit would argue against this, or the OP simply misunderstands her payoff because she’s thinking the mortgage payment went mainly to principal and almost all of it actually went to interest on the front end of the term.
I don’t know about where you live but in the state I live there is no such thing as a verbal contract related to real estate. No matter what anyone says the only thing that can be enforced is what is in writing. Remember that next time you have to negotiate anything important.
I imagine there might be a new contract drawn up in the near future for this property for you. Have you checked to see if your finances have improved enough to get a loan?
I’m a real estate agent who has seen lots of different loan and purchase scenarios, and I can’t make heads or tails of the OP. The more I read her posts the more confused I become.
It sounds (on one level) like a typical owner held mortgage based on a multi-year term with a bullet for the payoff that was callable at any time, and it’s being called now because the owner wants to cash out. At the same time you don’t bring smoke alarms by (like the OP’s seller did) for someone who has bought a house. That’s something you do for tenants. On the other hand you don’t demand (or give) a 4,000 deposit where the projected rent is around 500 month. I’m also baffled that the OP does not have any paperwork at hand.
If the real estate agent was the OPs only point of contact in crafting this mortage I’m not so sure the agent is without some level of liability. State Real Estate boards frown heavily on agents acting like lawyers and it kinda/sorta sounds that’s exactly was this agent was doing in putting this together.
In Massachusetts, and other states, you can’t sell a home without smoke alarms. My uncle was a real estate agent and he was always on the lookout for sales on smoke alarms, he’d buy them by the case.
I’m gathering from the OP’s description below that the deal was done and the OP was actually engaged in spending her money on fixing the house before the smoke alarms were brought by.
I could be wrong, but I’m getting the impression that this deal was somehow cobbled together by the agent to effect a sale (and get paid) with a buyer of minimal means, and now the seller (for whatever reason) wants out of the deal they constructed, and the shit is hitting the fan. If not for the (relatively) huge deposit I would bet it’s a rent to own scenario, because except for the large deposit that’s pretty much what it sounds like.
That sounds good - I hope you get a good resolution, too. I’ve bought a house three times now, and I’ve used a lawyer each time. One time my lawyer made an error, and he fixed it out of his own pocket; when doing deals worth thousands (and hundreds of thousands) of dollars, using a real estate lawyer covers your ass for the bargain basement price of a couple of hundred dollars. I’d do a real estate deal without a real estate agent before I’d do one without a lawyer.
I don’t mean to harp on you or anything; I think you’ve probably learned your lesson already.
This is like that Cormac McCarthy Yelp reviews thing, right? But as like a pastiche of the housing crisis?
I’ve done them without lawyers, but that was for the normal sale for cash, with a mortgage on the side for finance. That means you can use a standard contract with the blanks filled in – and so a lawyer is not needed to help you understand the contract. This looks like an unusual deal, not using a standard contract, especially since none of us can figure out what the deal was. I agree with others that a lawyer is needed at this point, though it is possible that the OP is still in a reasonably sound position, legally and financially.
I have to admit I am quite curious as to what the document says. If you would post and let us know after talking to the atty I would appreciate it.
I will be sure to do that.
Think of it from the owner’s perspective. He gave you a $30,000 house but still has payments that include principal, interest, taxes, insurance, and perhaps mortgage insurance (though I doubt that last one). He’s not going to give you a house and keep spending money on it. So say his payment is $500/month and that’s what he charges you. That way, he’s neutral on profit/loss.
That $500 gets immediately forwarded to the bank. But does the bank reduce his principal by $500? No, of course not. It goes to pay all those other things, just like it would if you were to be paying the mortgage yourself. So it’s completely unreasonable to assume your own principal was going down by $500 each month that you were paying him. It wouldn’t work that way with your mortgage, it wouldn’t work with his mortgage, and it’s not in any way unfair.
The fact is, you did borrow money. You borrowed it in the form of a house. Now you can consider yourself paying the owner to pay for the interest or consider yourself paying the interest yourself or paying some “rent” or whatever, but the fact of the matter is, you can’t just pay $30,000 over time for a $30,000 item. Money doesn’t work that way. And it sounds to me like you think you were getting a free mortgage, free taxes, and free insurance.
But that doesn’t sound like the deal OldnCrinkly signed; it sounds like she did agree to pay $30,000 for a $30,000 item, regardless of how it affected the owner. It sounds like the owner is reneging on that agreement, but of course we don’t have the original agreement in front of us.
I agree that it sounds like that, but that would be a strange deal that would incredibly screw the owner, and when I crunch the numbers, they come out looking exactly like a more plausible deal that would be fair and equitable to both parties. In fact, since the owner is spotting the OP another $300 for no other reason than to make the numbers look round, I feel it behooves her to hear me out, lest she ruffle the wrong feathers and end up worse than where she started.
This could all be settled if we could just get the hard numbers. What’s the tax on the property, what’s the interest rate and term of the mortgage, and how much was paid to whom and when.
Jeez, we haven’t even touched closing costs yet. I’m sure the OP will be disappointed to hear she’ll have to pay $3k or so just to buy the place.
I agree - it does sound like a helluva deal. I wish MY house cost only the list price!
I agree with everyone else that since we don’t know what’s in the paperwork, we don’t know whether you’re getting scammed. Just looking at the numbers you mention above, however: 30,000 house minus the 4,000 down payment leaves a balance of 26,000 on the “mortgage”.
You’ve been paying 450 a month (plus an extra 50 to pay down the principal.
It sounds like the seller owned the place free and clear, and agreed to finance it for you. What interest rate is cited on the paperwork? Does a 450 a month payment on a 26,000 loan make sense with that rate? Note that if you borrowed from, say, Wells Fargo, you’d be paying principal, interest, AND taxes and homeowner’s insurance as part of your monthly payment (the tax and insurance go into an escrow account).
Using a mortgage calculator at bankrate.com, a 26,000 mortgage at 10% interest (which is quite high by today’s standards), on a 30 year loan, would yield a payment of 228.17. Add in taxes and homeowner’s insurance, and a figure of 450 a month isn’t out of line. It might be a bit high (that’s 200 a month - our insurance and taxes are 600 a month on a much pricier house).
Paying an extra 50 dollars a month would shave the loan term down by half, for what that’s worth - and after a year of doing that you’d owe 25,159.25 (versus 25842.77). Figures are from here: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx.
I am assuming the seller still has title to the house, versus transferring it to your names. If he did transfer, then his only option if, say, you were to quit making payments, would be to foreclose on you.
Your paperwork is crucial in showing what kind of agreement you truly have.
If the seller did NOT transfer title to the house - that sounds like more of a lease-to-own agreement. In which case, your 450 is treated as rent (maybe with some of it reducing your final purchase amount).
It’s conceivable that the paperwork says he only agrees to carry that mortgage for x months/years, after which you must refinance or risk losing everything. That’s basically a balloon payment, and is not unheard-of. If so, any chance your credit has improved enough to actually do a refinance through a real bank?
Any chance you could scan the paperwork and upload it somewhere for folks to take a look at it? Obviously nobody here would be able to offer any binding advice, but it’s conceivable we might be able to spot gotchas in the paperwork, or explain what we think is going on. That’s no substitute for a consult with a real, meatspace lawyer. of course.
Not that is has any bearing on the deal that was made, but okay, lets look at it from the seller’s perspective. She has a house in a bad area that no one lives in and she wants to sell. Well, there are of course, still taxes and insurance, in fact, better leave the electric on also. That way you can run lights on a timer, maybe no one will notice the place is empty. If they do, goodbye plumbing! Hopefully the junkies won’t start hanging around and burn the place down accidentally, of course. These are real concerns. If you are paying attention to the news just a little bit, you should know that banks are not exactly jumping to write mortgages of late. Especially the subprime type for people whose credit and/or income is going to limit their choices to 30,000 houses in the inner city. They own more than enough as it is and can’t find enough slumlords to pawn them off on now.
So, the seller finds someone with a decent down payment, who will agree to continue making payments. If the buyer (me) stops paying, alright, keep the money, throw me out, and tell me to go to the devil. It may not be the greatest deal for the seller, but sometimes life works like that. I’m not sure why anyone thinks there must always be an advantage in the sellers favor. That’s just not the way its working right now.
I could not care less if I “ruffle someones feathers” and I’ll tell you why. My husband works hard and makes a decent living. I’m not about to end up homeless in any event. That doesn’t mean that I should bow and scrape and beg someone who is trying to get one over on me. That is completely ridiculous.
The fact is, I did not borrow anything, I made a deal, one that was a good deal for me, maybe better for me than the seller. How all of these people want to make that into I borrowed money, I don’t know. There is not one single word in my paperwork about interest. I did check. Nor should there be, as that was not the deal we made. Anyways, I will see what the lawyer says on Friday and take it from there.
Again, I thank everyone who has commented and offered advice, even those who seem to think I am an idiot who has no idea what so ever what is going on. It will be good practice. So, again, thank you all.
Effectively you are being loaned $30,000 by the owner to purchase the house and agreeing to pay them back X amount/month for X months.