Thursday, June 19th, 2008 at 12:41 AM
Acceptance, Part 2
When confronted with the fact that they made a mistake, some homebuyers resort to alternative means. Jason’s example could be called an unintentional buy-and-bail, with a delay component. It wasn’t obvious at the time, but after a few months the homeowner realizes that keeping both isn’t prudent.
Here’s a classic example of a B-N-B, delayed, on Highland Drive in Old Carlsbad.
We featured it here before – the owner paid $1,700,000 in September, 2006, using a $40,000 down payment.
Yes, you are reading that correctly, he financed 98% of his purchase of this 4,193 sf house on an ocean view, 1/3-acre lot.
After checking this out, I think this is what might have happened.
The buyer, facing monthly payments around $12,500 counting taxes, got a knock on his door. It was the owner of the adjoining vacant lot.
The lot (#2 in pic) has a 25-foot wide driveway going down the right side – but the house is built 10-12 feet over the property line. If both lots were once owned by the same person, you could see how that could happen. But now owned separately, the lot owner probably needs full access to his 25′ to be able to install his driveway and get going on his new house.
The owner of Property #1, buried in debt and faced with having an encroachment problem that had probably gone undetected, has some decisions to make.
Do you go after the title company, hoping they might do something for you after months or years of battle? Nope.
Do you let Property #1 just go back to the bank? Nope.
Instead, the owner of Property #1 purchases Property #2 for $550,000 in February, 2007 with a 15% down payment. Property #1 is in his name, Property #2 is in her name, and she has since refinanced, getting a loan of $800,000+ presumably for building the new house. What’s left?
Let Property #1 and the $1.66 million in debt go back to the bank, and then torture them or the new owner for full access to the 25′ driveway! Plus wifey probably still has good credit!
Front shot from street looking down driveway towards rear:
Looking towards street – survey stake at 25′ mark
Posted on Thursday, June 19th, 2008 at 12:41 AM in Uncategorized | 10 Comments » | 
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I can see how I might end up the owner of lot #2 without knowing about the encroachment if it already had a knockout ocean view house on it and a driveway that was wide enough for me to drive in and out of, but it seems to me it would be utter foolishness to buy an undeveloped lot without making the sale contingent on my approval of a new survey.
GeneK | June 19th, 2008 at 4:32 amI’ve been glued to all the comments in here. The last thing I want to do is give up and be foreclosed on.
There has been a lot of valuable information in here to help me figure out what to do. I called my bank today to see if there is a way to try and avoid which seems like the inevitable. It sounds like it’s going to be an uphill battle but understandable.
I’d hate to be another one to help drag down the housing market and the economy. I do have a strong sense of ethics and want to do the right thing.
If I do get foreclosed on it will be after I’ve done everything I could to resist it. It seems like the best thing to do after reading all the consequences of foreclosure.
Someone mentioned that if there was a severe penalty for walking out on a mortgage there would be a lot less risk takers. They are right. I would have never bought my first home. So there could be something in that.
Thank you again for all the advice and thoughts.
Personally I’m going to try to push through and see it to the other side. I might still be in denial
Jim thank you for your blog.
jason | June 19th, 2008 at 5:50 amJason,
Nobody hates you for trying to get ahead through purchasing property. If we really did we wouldn’t be here.
The actions you are taking now to handle your responsibilities make the most sense considering your current state of affairs.
My only suggestion is that whenever asked that you make clear foreclosure was never your intention. It’s simply a situation that could not be avoided.
Also, document all the times you call your lender in a journal or notebook that you can backup with phone records. In the journal write down who you spoke with and what they said/promised. If you ever have to go to court. Having a document trail showing how you tried to resolve the issue will look really good to a judge.
shadash | June 19th, 2008 at 1:37 pmI sure wouldnt want to walk into court with the purchase of property #2 showing I knew what the situation was with the encrouchment. I believe that would bring on a fraud case from the lender with possible criminal charges from the lender also .
jeff H | June 19th, 2008 at 2:05 pmJim,
Billy | June 19th, 2008 at 3:15 pmI really enjoy your blog. Very interesting.
There have been a lot of comments about low down payments and people not having the "correct" monthly income to support the payments. Where did we lose our way and start looking at a home as primarily an asset instead of a home to live in and raise a family.
I purchased my home in Carlsbad in 1979 with a no money down VA loan. I worked two jobs to make the payments and interest payments were at 10%. It was hard but I had the American dream of ownership and would have worked three jobs before I’d give it up. I’m not trying to be preachy or give a "walked in snow up to my knees to get to school" speech. I just wonder how did we lose our way about why and how to buy a home. Rarely do we buy a car as an investment, why look at our shelter as anything more than what it is. It should be hard to buy a home, it should be something to dream about and be proud to own. We are not entitled to own our shelter.
Of course, we all are different and have different ideas. I resent the culture that seems to accept that bad planning will be just "absorbed" by the market. That market is our tax base, our schools, our communities and an unacceptable gaming of our laws. It’s very unsettling to watch our country suffer from this massive failure real estate industry and individual values.
Since my wife and I got married we’ve bought and sold four houses. Every time we did, I warned her not to be surprised if the resale values of the houses rose or fell 50k-100k within the first couple of years we were there because we were selling and buying in a boom or a bust period. So far I’m batting three out of four, and we continue to track the current value of the home we bought last year for – believe it or not – entertainment purposes. It’s not unusual for one of us to tell the other, "look honey, our house lost $25k last month," and it doesn’t particularly bother us because our fixed-rate mortgage is on autopay and we’re not planning on going anywhere for a while.
As for taxes, government has an established history of spending every penny that comes in and then some, so it should not be a surprise that programs funded by taxes on bubble-priced houses are no more sustainable than the house prices were. Windfall tax revenues should always be used for one-time expenses, not programs that will require ongoing funding.
GeneK | June 19th, 2008 at 4:47 pmI wonder what the result of trying to "torture the new owner" will be when the person attempting the torture owned the offending property for a period of time and took no action to correct the problem. Could some sort of encroachment easement have been created by this inaction?
GeneK | June 19th, 2008 at 6:39 pmI think Jeff H is right… This is a lawsuit waiting to happen. Courts do look at intent, and in this case, that appears to be somewhere between gaming the system and full on fraud.
This guy had better pray that the new owner of #1 doesn’t know any good lawyers!
sb | June 19th, 2008 at 8:32 pmAs stated above, if the two properties were originally owned by the same person before Jason. And that person built the house, clearly they are liable for the encroachment onto property #2 that was sold unredefined. They, having owned both properties could have simply delineated the property lines and sold them without a problem. However, they did not. There is recourse obviously with them and the title insurance. However, since Jason now bought lot #2 as well, he could still delineate the property lines to reflect a correction to the encumbrance. The bank may not go along with this but clearly this has been done countless times in California history to clear up property line disputes. Besides, it beats fraud and conspiracy to commit fraud.
FUNTHEA | June 20th, 2008 at 8:11 pmAlso, from above, if owner of lot #2 knocks on Jason’s door (lot #1) and informs him of the encumbrance, clearly he is not the original owner of both lots who built the house,but rather a subsequent owner of lot #2, making Jason now owner #3 of lot #2. This then bates the question, how long did subsequent owner of lot #2 know of this encumbrance? Statute of limitations on encumbrances is 1 year from discovery. Did he buy lot #2 from builder of home on lot #1? How long since house was built? How much of the story that I’m going off of even remotely in line with reality?
FUNTHEA | June 20th, 2008 at 8:27 pm