In 1988, THE SELLER who was single purchased a home with 10 acres in Lincoln County. The next year, she added an adjoining 50 acres. She married a year later. The marriage had been on shaky grounds from the start but reached a breaking point in 1995, when her husband forged her name on credit cards and loan papers. She divorced him soon afterwards. In 2005, she refinanced the home and 10 acres with U.S. Bank. (So she thought)
When THE SELLER called me, she was unemployed. The monthly payments had become difficult to make. In addition, she had not been able to maintain the home and its value had declined. She was ready to allow the bank to foreclose on the home and ten acres. She thought that she would still have 50 acres free and clear. The only problem with this plan was that she would not have a home or the ability to buy a home. I suggested a better solution. She would sell the land, keep the home with the ten acres, pay off the U.S. Bank loan, make needed repairs to her home, and set aside the remainder of the proceeds for her retirement. She agreed and we listed the 50 acres.
Within a few weeks, a buyer called. THE BUYER had seen the property showcased on the www.leonmillerco.com website. Within a few days THE BUYER and THE SELLER signed a sale contract. THE BUYER would have 30 days to obtain financing. Then the property would be surveyed. Seldom are sales simple and this one wasn’t either… for THE BUYER OR THE SELLER.
THE BUYER’S lender, Mortgage Solutions LLC, typically did not make land loans but agreed to make this one. They needed an appraisal. Instead of contracting a local appraiser, the lender hired an appraisal consultant from California. In turn, this consultant was to hire an appraiser in the area of the property. When THE BUYER & I asked for the name of the appraiser, Mortgage Solutions LLC stated that their policy did not allow any contact with an appraiser. The California consultant assured Mortgage Solutions LLC that the appraisal d be completed in 10 days.
Well, ten days later the appraisal was not completed. For a week, Mortgage Solutions LLC would not return our telephone calls. Finally, 10 days after the appraisal was supposed to be completed, Mortgage Solutions LLC called. The news wasn’t good!
The lender said the appraiser hired by the California appraisal consultant had not done the work. So the consultant had hired another appraiser and the appraisal would be completed within a week. This time, THE BUYER & I demanded and got the name of
the appraiser. THE BUYER called the appraiser and was assured the appraisal would be done on Friday, three days before the end of the 30 day financing contingency.
On that Friday, Mortgage Solutions LLC called to tell THE BUYER that the property had appraised for the selling price; however, the appraisal had to be sent to and approved by the California consultant firm. They assured him that the California consultant would respond by Monday, which was the final day THE BUYER had to obtain financing. THE BUYER went home for the weekend, satisfied that all was going well until Sunday afternoon.
Sunday afternoon, THE BUYER decided to do a search on the internet for the California appraisal consulting firm. What he found stunned him! A notice on the website stated that the company had gone out of business the previous Friday. THE BUYER called me.
Monday morning we called the appraiser. By this time the appraiser also knew the California consulting company was no longer in business. The only solution was to send the appraisal to the lender and hope they would accept it. They did and by mid afternoon, Mortgage Solutions LLC approved the loan, just a few hours before the deadline. While THE BUYER & I were dealing with lender issues, the title company was uncovering problems for THE SELLER. And these problems also involved lenders.
THE SELLER had obtained a $45,000 loan from U.S Bank in 2005 that she understood was to finance the house and ten acres. It is possible that the U.S. Bank loan officer (who typically makes home loans)did not understand land legal descriptions; thus he included all of her property instead of the 10 acres. This mistake would have been terrible if THE SELLER had allowed U.S. Bank to foreclose. Her entire 60 acres would have been auctioned on the court house steps. This error would not have hindered this sale, but the second issue could have.
The title company found a second recorded deed of trust dated 1991 to the Bank of Old Monroe. The unpaid balance was $6,600 plus 20 years of accrued interest. This could have totaled to more $30,000. Since this deed of trust preceded U.S. Bank’s deed of trust, U.S. Bank’s note was not in a first position as they had intended. Instead, their loan was in a secondary position behind the Bank of Old Monroe. More than likely, they would not have made the loan if they had known that fact. Either the title company in 2005 had
found it and U.S. Bank officials didn’t read the title commitment. In any event, THE SELLER had stated in her loan application that no other loans existed. She had committed fraud if this were not true. THE SELLER maintained that the loan at the Bank of Old Monroe was not valid. Here’s why.
In 1995 she received a notice of foreclosure from the Bank of Old Monroe. She was unaware that a loan was on her property. When the banker showed her a 1991 note and deed of trust with the signature of she and her husband, she saw that her signature had been forged. Her husband (who was now her ex) had forged her name on the loan papers. The documents had been notarized by the secretary of the husband’s attorney. The bank brought suit against the husband and notary and THE SELLER agreed to testify for the bank. Then a day before the court date, a bank officer called. Her testimony would not be necessary because the notary’s bonding company made a settlement and the loan had been satisfied. Now it appeared the bank had failed to record a deed of release in 1995, THE SELLER was sure that once she got in touch with the Bank of Old Monroe, the matter would be solved, but it wasn’t that simple.
When THE SELLER called the bank, she learned all of the 1995 bank officers were gone. Furthermore, since the matter was settled outside of court, there were no court records to support her version. And the bank had not sent any documentation to THE SELLER that showed the matter had been resolved. A simple solution was beginning to become thorny. Now, THE SELLER could only trust that a bank official would be willing to search for the documents to support her claim and hope the documents still existed.
At first the young man at Old Monroe Bank who received THE SELLER’S call was skeptical, but he agreed to search the old files. The next day he called THE SELLER. He had located the file with the documents that supported her claim and would record the deed of release at the Lincoln County Recorder of deeds immediately. The sale closed.
THE SELLER believed that people would do the right thing, but mistakes happen. THE SELLER was lucky. Lucky that U.S. Bank didn’t foreclose and lucky that a young man at the Bank of Old Monroe took her claim serious and acted immediately to correct the matter. Perhaps a larger bank with a less knowledgeable employee would not been so cooperative.
Hindsight is always 20-20, but if THE SELLER had hired an attorney these issues would never have occurred. An attorney would have found the legal description error in the U. S. Bank loan documents. An attorney would have insisted that the Bank of Old Monroe file a deed of release at the time of their out of court settlement.
By the way THE BUYER learned a valuable lesson. The next time he needs a land loan, he’ll call the local bank or a land lender.