Can You Get A Mortgage On a Condemned House?

| | Comments (6)

The answer is a modified no. The same answer applies to property that is only structurally damaged, but not condemned.

That condemnation is a matter of public record. I've seen any number of them while perusing title records. It shows up kind of prominently on the title commitment, which every regulated lender is going to require.

It is a rule of regulated lenders that they will only lend upon the state of the property right now. If a house is condemned, you can't sell it to anyone as a house. Furthermore, with a condemned house on the property, it really isn't vacant land, either. It's less valuable than bare land, as you have an expense that vacant land does not. You have to pay for demolishing the structure and hauling away the garbage. You'll occasionally hear agents (me included) talking about "land less demolition and haul-away" describing properties like this.

In the case of structurally damaged but repairable property, regulated lenders won't deal with it as a house either, although some may deal with it as if it were vacant land, less the cost of demolition and haul away. It depends upon lender policy.

The only place to get loans upon structurally unsound or condemned property is a hard money lender. They don't have the Securities and Exchange Commission to answer to, and only much smaller responsibility to the Federal Reserve Board. Many of them are individuals holding the loans in their own name. They can do almost anything they want. If one of them can be convinced that the property can be marketed for a given sum, they will typically loan based upon that sum. It's all a matter of what they want to do.

Hard money lenders will loan a maximum of only up to about seventy-five percent of whatever the marketable value of the property is, and the rates are unfriendly, to say the least. However, they may choose to lend in situations where a regulated lender can not. They can be your only option other than no loan at all. Most brokers will have at least a couple hard money lenders available to them, but your average direct lender cannot. As a final note however, before doing business with a hard money lender, you want to think long and hard and consult some experts as to whether you should - whether it's a good idea or not. It's well and good if this is a temporary thing and you can see an exit strategy to selling or more normal financing. But all too often, it's simply a way to delay the inevitable and make it worse at the same time.

Caveat Emptor

Original here

Categories

Delicious Bookmark this on Delicious StumbleUpon Toolbar Stumble It!

6 Comments

Michelle said:

In 2004 my father's house was condemned from a land slide that occurred due to heavy rain in So California. My father just passed away on April 1st, and I am currently attempting to take over the projects that remain as the city is repairing the hill side and the homes involved. Citibank is the mortgage company on the home. I find it very disturbing that although one cannot get a loan or mortgage on a condemned home, but NOTHING can be done to reduce, waive or defer payments on a condemned home. I just got off the phone with the executive customer service and they aren't able to provide any type of relief as the property is vacant and a loan modification is not eligible for a vacant property. Is there anything that can be done to save their home?

Dan Melson Author Profile Page said:

Check the policy of homeowner's insurance, although it's likely you're past the time limit for a claim. Earthquake insurance is separate and extra, but as I remember landslide is part of HO 2 and 3 policy forms. If your father was somehow unable to make a claim, there might be some way of making it retroactively.

Within the realm of normal real estate function, no there isn't anything except hard money loans mentioned above. You would need to discuss it with a lawyer. I'm not a lawyer, and don't know all of the legal issues.

That said, I'll share my understanding of the issues. If it's the city's issue and liability, it strikes me as likely you would have a case against the city. It really isn't the mortgage company's issue - they loaned the money in good faith, certainly did not cause the landslide, and are entitled to repayment. They have done everything they are required to - your family had the exposure to the good (value increase) or bad (natural disasters) that come with owning the property. It is the city and or homeowner's insurance company with potential liability to you. Of course, collecting that money is likely to take time while the lender is entitled to their regular payments now. One hopes your father had life insurance or some form of asset in a form to allow you to make those payments. If not, the heirs are going to have to either come up with the money to make the payments or risk losing the asset.

dan said:

which laws apply to the sale of condemned homes? Can they be sold if disclosure is given, what about without?
---
I want to know because I bought a home that was condemned at a county auction, but the county failed to disclose that it was condemned. I do not think any government should be above the law, rather they should abide by it moreso. So I need some kind of a law that I can use to force them to refund my money.

Dan Melson Author Profile Page said:

If the condemnation were a matter of public record - and they are - then it was disclosed. When you bid on a property at an auction, you're supposed to have done your due diligence beforehand. That's why they publish the list of properties to be auctioned ahead of time. You're always taking additional risk with such properties - which is why you usually get them for what may seem like a cheaper, "below market price" to many people. But that price is reflective of additional risk you are assuming.

Kirby said:

The house we own, but don't live in, has been condemned for structural problems. We want to donate the house, as is, to a charity, but it seems sure we will be incurring some penalties before we are ready to donate. If we refuse to pay the penalties, what can the City do to us?
We live in Abilene, Texas.

Dan Melson Author Profile Page said:

If the city assesses penalties, the city can use the full range of legal options available to collect them. These include attaching pay or other assets, impounding bank accounts, and anything else that may be legal in your area. Talk to a lawyer who practices in Texas.

Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites) All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

Leave a comment

Copyright 2005-2014 Dan Melson All Rights Reserved

Search my sites or the web!
 
Web www.searchlightcrusade.net
www.danmelson.com


Buy My Science Fiction Novels!
Dan Melson Author Page

The Man From Empire
Man From Empire Cover
A Guardian From Earth
Guardian From Earth Cover
Empire and Earth
Empire and Earth Cover
--Blogads--

blog advertising
--Blogads--

blog advertising --Blogads--
**********


C'mon! I need to pay for this website! If you want to buy or sell Real Estate in San Diego County, or get a loan anywhere in California, contact me! I cover San Diego County in person and all of California via internet, phone, fax, and overnight mail. If you want a loan or need a real estate agent
Professional Contact Information

Questions regarding this website:
Contact me!
dm (at) searchlight crusade (dot) net

(Eliminate the spaces and change parentheticals to the symbols, of course)

Essay Requests

Yes, I do topic requests and questions!

If you don't see an answer to your question, please consider asking me via email. I'll bet money you're not the only one who wants to know!

Requests for reprint rights, same email: dm (at) searchlight crusade (dot) net!
-----------------
Learn something that will save you money?
Want to motivate me to write more articles?
Just want to say "Thank You"?

Aggregators

Add this site to Technorati Favorites
Blogroll Me!
Subscribe with Bloglines



Powered by FeedBlitz


Most Recent Posts
Subscribe to Searchlight Crusade
http://www.wikio.com

About this Entry

This page contains a single entry by Dan Melson published on October 12, 2012 7:00 AM.

Lenders Adding A Prepayment Penalty After Funding was the previous entry in this blog.

Differences Between Loans Look Smaller Than They Are is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

-----------------
Advertisement
-----------------

My Links