THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, November 19, 1994 TAG: 9411170378
SECTION: REAL ESTATE WEEKLY PAGE: 10 EDITION: FINAL
COLUMN: Landlords & Tenants
SOURCE: William Mazel and Albert Teich Jr.
LENGTH: Medium: 70 lines
My husband and I bought a townhouse in Florida in 1988. My husband is in the military and was transferred out of state in 1991. We are renting the house out but our problem is that the amount of rent the tenants pay does not cover the mortgage payment.
We cannot raise the rent because the price we ask is the same as other, similar townhouses in the area. We are paying quite a bit of money each month on a house we no longer need and it is putting us in a financial bond.
We have contacted real estate agents to try to sell it but since we went VA, we put no money down and we do not have enough equity to cover all the costs and fees at closing, which we were told would be $2,000 to $5,000.
We were also told that our loan in non-assumable. We cannot sell the house as owners because we are living out of state.
Can you tell us if there is any way out of this and what our options are? Could you please explain the consequences of foreclosure?
While this, strictly speaking, is not a landlord and tenant question, we have had quite a few people write and ask us about similar situations in Virginia. Although we would not advise anyone on laws in Florida, we find there are many military and non-military people who find themselves in the same situation as our reader.
It is very nice to buy a house with little or no money down but we have found, unfortunately, that people shouldn't do this unless they are absolutely positive they will keep the house for at least five years.
That way, they might build up enough equity to at least pay the expenses of selling the house. Property is not rapidly escalating in value as it did several years ago and, in fact, is often decreasing in value.
The problem of being an absentee landlord is another burden. It can be very difficult and expensive to supervise the rental property from out of state. We suggest that you contact your mortgage company to see whether a buyer could assume your mortgage.
They may very well say that your mortgage is not assumable, but, generally speaking, it means it is not assumable without permission of the holder of the mortgage. Your mortgage company allow you to do it.
It is possible that you could lease the house with an option to buy whereby the buyer would come in, lease the house and, at the end of a specified period, would have the option to purchase the dwelling.
This might allow the equity to build to a greater amount and the purchaser would not have to borrow as much money in order to pay off your loan if he could not assume the existing indebtedness.
We are sorry to say that if the property goes into foreclosure and it sells for less than the amount due and owing on the loan plus the costs of the sale, this would create a deficiency and you would be liable for the deficiency.
This means that the holder of the mortgage could then proceed against you for the deficiency and, if you do not pay, could file suit against you. Also, the foreclosure would be a blot on your credit rating for a long period of time and make it difficult to obtain a loan for the purchase of another home.
You should certainly examine the house as soon as you can to determine the condition if is in. Put it in good condition, if necessary, and then contact your mortgage company and present your situation. The holder may be willing to take title to the house in lieu of foreclosure.
If you did this, you would not then have the expenses of foreclosure and your credit rating would not be adversely affected. MEMO: Albert Teich Jr. and William Mazel are real estate lawyers based in
Norfolk. Send comments and questions to them at Real Estate Weekly, 150
W. Brambleton Ave., Norfolk, Va. 23510. by CNB