Our house flooded, the insurance adjuster provided us with a $50,000 check. However, this is the second time in 10 years this has happened and we’re tired and don’t want to fix the house again.
The house is worth 100k if we decide to make the repairs. Instead of spending the 40k on repairs, can we sell the house for 60k AS-IS and pocket the 40k from the insurance company?
The check has our names on it AND the mortgage company’s. When we asked the mortgage company if keeping the money was allowed, they didn’t know, and neither did the insurance company! we have to write a letter and wait for a response to our question. They normally require it be escrowed and draws be made as repairs are completed, but we’re tired!
Has anyone ever had this problem and do you know if will be allowed?
IANA RE agent but you will probably have a hard time selling a flood damaged house especially if it is uninhabitable. Folks that tend to buy such properties are looking to buy dirt cheap and rehab it to turn a hefty profit. A friend of mine does this for a living, and they have to buy pretty low to turn a profit, like you wont get $60K, they will give you like $20-$30K and sell it for $100K after spending 4-6 months and $50K in materials and labor.
IF there is an outstanding mortgage, you will need to pay that off, so if there is $50K on mortgage, and you sold for $50K you walk away with the check, if its less than $50K, pay off the difference from your $50K settlement and go shopping elsewhere with a nice down payment.
Based on the my experience and that of many of my neighbors (Katrina related), you and the mortgage company can do whatever you want with the check. Ask them to cosign the check. Offer to sign the check over to them to pay off the mortgage. Whatever they will agree to works. The only thing to keep in mind is the mortgage has to be fully paid off. They won’t (can’t is what I heard) let you walk away from any of the mortgage. Now, getting the management to make a decision will be tough-often too tough. But what happens is between you and the other name on the check.
We wrote a letter to them today, with the endorsed check included, asking them to apply it to the loan balance. It won’t cover the entire loan balance but it will come close. We should hear back in 5-10 days we’re told.
What if I sold the property and paid off the loan completely, they couldn’t KEEP my repair money, could they?
IANAL and I believe that matters do vary from place to place. So normal disclaimer rules apply.
You have two contracts in place here.
The first is with your insurer in which you pay the premiums and they pay out under certain circumstances. It sounds like all conditions have been met since you have a cheque in your hand. You don’t have a problem with your insurer.
The second is with your lender in which you have raised a debt and agree to pay the terms of the loan.
In this second contract you have a mortgage which means that you sign over certain rights of your home as collateral against the loan. IOW you cannot sell without their involvement. However, if you are meeting your obligations then there is no reason for them to prevent the sale.
If you have a 50k cheque and a 60k cash buyer then you should easily be in the clear. There is such a thing as due process and timing of transactions can become a factor. But you should be fine.
If it was me, I would be making an appointment to see my lender face to face to iron out all the details and get things moving quickly. You don’t want to be waiting for information to come through the mail. A cash buyer has options and will not always wait around.
Or, putting this another way, get off the internet and get down to the bank.
I have paid off a mortgage.
It is more complex than just sending them a check to apply to the balance.
They’ll need to calculate the amount owed by the date you want to pay it off, plus there’s some fees, and costs plus the usual bank jiggery pokery, then they finally have a final amount. At that point they sent me a letter, I sent them a certified check to a special address they used for closeouts. They sent me a letter acknowledging that I had paid it off. This was followed by several more letters including copies of documents they sent to my county recorder, and a final letter and I think there was a deed as well. It’s all in a safety deposit box, or I’d have it down to the details
It took about 2 months.
There was a 2 week minimum to get the letter telling me how much to pay off and where to mail it.
That’s great information and great advice. Unfortunately, we DID go to the bank today and sat there for hours. Their representative got on the phone with corporate and STILL could not figure it out. They’re the ones that gave us the information that a letter is the next step because they don’t have the answer…
Then the next step (at least in my part of the world) would be to go to a solicitor. Round here you need to engage the services of a solicitor for property transactions anyway. They can advise you properly.
If my reading of the situation is correct, you are not in any kind of trouble or at risk of losing your capital. It is mostly a question of what steps you need to take in order to proceed to the next thing (which in your case sounds like a house that is not flood-prone.) If the 60k cash buyer is a good deal (and I have no idea) then you might not want to let that opportunity slip through your fingers. If it is someone who has contacted you directly (rather than through a realtor) then you should communicate with that person on where you are up to. If you have engaged the services of a realtor then you should get some advice from them. Smoothing over the bumps between vendor and buyer and helping to navigate property transactions is their job.