My sister bought an investment property with her best friend (1/2 interest each). They put quite a bit of money down as well as in improvements to the house such as new roof, vinyl siding, new carpets, resanded wood floors, etc.
They have been paying on it for a couple of years and my sister can no longer afford it and it won't sell. she may have to walk away as it is ruining her life and burying her in debt. Her best friend cannot afford it by herself and so they may end up walking away from it. I am certain that this unscrupulous owner will sue them.
My question is this: I felt from the very beginning that my sister was going to have a hard time affording this property and I was very surprised that the owner financed it. I find out that he never qualified her . can he do that? can he sue her when she shoudn't have even been given the loan in the first place…if he had bothered to check her out?!!! (The other party would probably have qualified
It is not the owner fault that your sister took on a loan she can not afford. he has absolutely no obligation to qualify a buyer. his only reason for doing so would be to protect himself. he has every right to try and recoup his losses.
In the US, no. the owner would be smart to make sure the borrowers can pay, because they may be stuck with the property in a time when property values are declining (like now.)
That was the owner's risk.
Your sister's risk was to take on a payment that she might not always be able to meet. That's on her.
Whether the seller can sue her for the difference between the value of the house at today's prices and what your sister agreed to pay depends on the contract and on state law where the property is located.
The owner should qualify the buyer for their own protection, but they are under no obligation to do so. the home mortgage loans being offered near the end of the sub-prime mortgage fiasco were being given with no verification of income or ability to pay. the owner is in no way unscrupulous in trying to recoup his money. It was your sister's responsibility to not get herself into a debt she couldn't pay.
If you make someone a private loan – which is what owner financing is – there is no requirement at all that you qualify the person you lend money to. YOU are the one taking the risk that they won't be able to pay you back.
Sure, if she reneges on the loan he may sue her… but if she can't pay now, why would he think she can pay after getting sued?
"my sister can no longer afford it and it won't sell."
There's no such thing as real estate that "won't sell". If worst comes to worst she can put it on the auction block. It may not fetch as much as the loan balance, but whatever it fetches is less that she has to pay back.
Since she's likely to be unable to pay if she walkes away, even if the owner sues her, she should sit down with him and ask if they can negotiate a new payment schedule – he has a lot to lose if she walks away too.
Your sister should have had the common sense not to buy something she could not afford. the owner will lose money and was taken advantage of by your sister. I hope your sister goes to prison.
OK, some states allow the lender to sue for a deficiency on real estate and so do not. a deficiency is the difference between what the property will sell (or sold) for on the open market. the lender has no obligation to wait until someone does or will pay the amount they investors still owe. the house could sell for more that they owe also. again, state law will determine who gets all or part of the money above the debt amount ( aka equity) You didn't say why the investors have not put this house on the market or leased it. that should be the first thing they should try. It is a shame all they effort will go down the drain. They should work to save this investment. even leasing below the payment cost and making up a small discrepancy each month is better than losing all of the investment. or one or both of them should move into the house ( I wasn't clear if they were living in the property since the word investment was used instead of residence) (and failing to be able make payments on real property is not criminal offense; and the lender did not have any obligation to "qualify" a buyer; many "qualified" buyers went into forclosure last month, 45,000 families lost their homes)
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