Disclosure about pending sale?

[wyecoyote]

Okay all here goes will try to explain as well as I can. Been asked to appraise a house for Refinance. However, looked it up currently it is a pending sale on MLS. Looked into the county records. The owner of record on a recorded deed dated 1/17/02 is current borrower. However, another recorded deed dated 5/29/02 is Foreclosure company on original owner prior to 1/17/02. Called LO and discused situation the story that I got was that the borrower was in a rent to own program. In 1/02 the borrower excised the right to purchase had been there for two prior years as occupant put down $26K (included several portions of rental payment) on 1/02 the owner deeded the borrower on the title and recorded loan. However, shortly after the seller decided to quite paying the orginal mortgage. Hence the property went into foreclosure. The borrower upon learning of this hired a lawyer and has forced the foreclosure company to honor the original sale. Hence, now the Foreclosing bank has to go after the original seller to get any differences in refinanced amount and actual money owed. However, as decreed in the suit the borrower must refinance the property into her name. That way they get rid of the dead beat seller who has been just cashing checks.

So my problem as I see it. The MLS shows a pending sale on the property and a larger problem with title (not my problem with title up to title company to fix). So should I just a) comment that although there is a pending sale in the MLS this property is not a sale and state the above in the appraisal report. b) Figure that was a problem with the foreclosure company and not discuss the pending in the MLS.

Thanks all

Ryan

 

[airphoto]

ryan,

Two Pennies:

Methinks your first task is to value the property.

Knowing that a cloud on the title has a cost to cure you'd want to discuss any cloud on the title and it's probable effect on valuation (what will a responsible party have to lay out to clear the title?)

Under the scenario you've presented, this outlay should be born by the original seller, not by the borrower/current occupant and would not (I presume) affect your valuation. It would be appropriate, I believe, to disclose. Apparently the borrower/current owner did not receive marketable title, however, which would be claim by the borrower/current owner against their closing attorney ..

Comments?

 

[Richard Carlsen]

I would simply state that the borrower has exercised their right under an option (I assume that the rent-to-own was in option form and recorded) and is cashing out the deedholder. The problem with the deedholder stopping payment on his mortgage more than likely puts him in violation of the option agreement but it is not a concern of the present sale. I would not get into the underlying problems, as they do not pertain to the appraisal process. Remember that we assume clear title. It is the responsibility of the parties involved to clear any clouds or problems with title. Actually, this is not a cloud because there is a lien of record with the property secured by a mortgage. I would move fast on this one as your clients customer (the buyer) needs to get the financing in place as fast a possible in order to get the underlying mortgage paid off.

If I remember correctly, the person who owns the option (borrower) has the right under the option to bring the deedholders mortgage current in order to protect their interest. The amount can then be subtracted from the net effective balance owing on the property under the lease with option to purchase. That is if they set it up right and executed an option with lease and recorded the whole thing. Otherwise, only the suits will make out in this one.

 

[Ted Martin]

Looks to me like you've already written your comments. Cut and paste your post into your report, clean it up a little and you are done.

 

[Pam]

Tell the truth, the WHOLE truth, and nothing but the truth.

 

[Tim Hicks (Texas)]

Disclosing is the best from of CYA. Not disclosing is performing a misleading appraisal per USPAP. Simple question, simple answer.

 

[Randy Beigh]

Ryan

A basic philosophy is when in doubt , disclose. In this case, disclose what you know and what you don't. Further, disclose whether you feel any of this has anything to do with value. It may not. In fact, I would discuss the past transactions as in depth as possible. Your post, could as mentioned above, be copied and pasted.

Good luck