This week I had a chat with an attorney who talked about problems that can come up because not all liens against a house show up on a title report.
Your clients may not have the equity they think they have in their homes.
She mentioned three trouble areas:
- The deferred balance on a Loan Modification
- HERO or PACE loans
- Solar panel leases
Loan Modifications: She explained that every loan modification is unique, so a smart attorney – or real estate agent – should read the agreement before trying to determine how much equity someone might have in their house.
Some agreements have deferred balances that are forgiven if the homeowner faithfully makes the payments for ten years. If they sell in 9 years and 11 months, that balance is due and owing. She had just heard of a case where a couple owed $90,000 more than they realized upon sale of their home.
HERO and PACE loans also don’t show up. Instead of being listed as a debt, these home improvement loans are simply added to a homeowner’s property tax each year until paid in full. This extra payment doesn’t transfer to a new owner, so the balance is due at closing. Since people sometimes “forget” about them, the attorney or agent should check the tax rolls to see if such a debt exists.
Leased solar panels are also a tricky problem. The solar company may or may not be willing to re-write a lease for a new owner. Again, the homeowners and their agent should go back and read the original lease agreement to be certain of the terms.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
