Beware of Housing Scams
An Erie woman recently discovered new meaning in the old saying "buyer beware."
She responded to a yard sign advertising "completely remodeled" homes for sale. The home she bought in Erie for $50,000 was, in fact, worth about $25,000 and had hidden structural, electrical and plumbing problems.
Even more, the mortgage broker recommended by the seller talked her into a loan with a variable interest rate that caused her monthly payments to increase by about $150 two years after the purchase.
Unable to make payments because of high repair costs and a higher loan, the mortgage company foreclosed on her property. Attorneys in the Pittsburgh office of the Community Justice Project, a statewide non-profit law firm, intervened to stop a scheduled sheriff sale and are trying to help her keep her home.
"Flipping"
Her case shows some common dangers that exist for low-income homebuyers. One pitfall to avoid is "flipping."
Some unscrupulous individuals purchase houses at foreclosure sales, perform minor cosmetic repairs, and then sell the houses as "completely remodeled." These homes often have serious structural problems and can even be dangerous places to live.
A review of the title history of this client's house shows that it was purchased at a sheriff sale just a few months before it was sold to her. This strongly suggests that it was "flipped."
If you are buying a "completely remodeled" house, be sure to personally examine the house and, if possible, have an independent home inspection done. Also, be sure that the seller has given you a "Seller Disclosure." Every home seller is required by law to give the purchaser a list of known defects with the property.
Over-Appraisal
Another pitfall to watch for is an over-appraisal. This client agreed to purchased her house for $50,000. However, an independent appraisal recently revealed that the house is actually worth about $25,000.
One easy way to double-check the appraisal is to look at the county property assessment of the house you want to buy. While the appraised price and the assessed price will probably not be the same, a large difference between the two may be a sign of trouble.
Variable Interest Loans
The client's mortgage had a "variable interest rate" provision that took effect two years after she bought the house. This meant her monthly payments jumped by about $150. She had no idea that her loan contained this provision. Her broker didn't tell her about it, and she didn't read her loan documents independently before she signed them.
While federal law requires that mortgage companies disclose a variable interest rate in your loan paperwork, neither the mortgage company nor your broker is required to actually tell you about it.
When searching for a home, be alert and even a little skeptical. Read your loan documents carefully and get an independent home inspection or appraisal before signing any papers.
Also, shop around when looking for a reputable seller, lender or mortgage broker by asking friends and family for people they recommend.
She responded to a yard sign advertising "completely remodeled" homes for sale. The home she bought in Erie for $50,000 was, in fact, worth about $25,000 and had hidden structural, electrical and plumbing problems.
Even more, the mortgage broker recommended by the seller talked her into a loan with a variable interest rate that caused her monthly payments to increase by about $150 two years after the purchase.
Unable to make payments because of high repair costs and a higher loan, the mortgage company foreclosed on her property. Attorneys in the Pittsburgh office of the Community Justice Project, a statewide non-profit law firm, intervened to stop a scheduled sheriff sale and are trying to help her keep her home.
"Flipping"
Her case shows some common dangers that exist for low-income homebuyers. One pitfall to avoid is "flipping."
Some unscrupulous individuals purchase houses at foreclosure sales, perform minor cosmetic repairs, and then sell the houses as "completely remodeled." These homes often have serious structural problems and can even be dangerous places to live.
A review of the title history of this client's house shows that it was purchased at a sheriff sale just a few months before it was sold to her. This strongly suggests that it was "flipped."
If you are buying a "completely remodeled" house, be sure to personally examine the house and, if possible, have an independent home inspection done. Also, be sure that the seller has given you a "Seller Disclosure." Every home seller is required by law to give the purchaser a list of known defects with the property.
Over-Appraisal
Another pitfall to watch for is an over-appraisal. This client agreed to purchased her house for $50,000. However, an independent appraisal recently revealed that the house is actually worth about $25,000.
One easy way to double-check the appraisal is to look at the county property assessment of the house you want to buy. While the appraised price and the assessed price will probably not be the same, a large difference between the two may be a sign of trouble.
Variable Interest Loans
The client's mortgage had a "variable interest rate" provision that took effect two years after she bought the house. This meant her monthly payments jumped by about $150. She had no idea that her loan contained this provision. Her broker didn't tell her about it, and she didn't read her loan documents independently before she signed them.
While federal law requires that mortgage companies disclose a variable interest rate in your loan paperwork, neither the mortgage company nor your broker is required to actually tell you about it.
When searching for a home, be alert and even a little skeptical. Read your loan documents carefully and get an independent home inspection or appraisal before signing any papers.
Also, shop around when looking for a reputable seller, lender or mortgage broker by asking friends and family for people they recommend.
posted by Access to Justice at 9:55 AM
<< Home