Real Estate Advice

[OilKiller]

Thanks guys. Not really looking for "saving money" advice or "patience" advice. I know my options where that is concerned.

I was simply asking if anyone knew what happens if you sell your property for less than it's worth more so than anything else.

I'll get a hold of the bank and a real estate lawyer to find out more. Just thought I would post here to see if any visit the site. It's not as simple as just biting the bullet and saving money by not going out to the movies guys. There are other factors that I simply didn't want to air here.

[billybob123]

Originally Posted by OilKiller

I was simply asking if anyone knew what happens if you sell your property for less than it's worth more so than anything else.

You'll have to come up with the amount owing on your mortgage. In cash, by closing. It's going to be written into any purchase contract from a buyer. They will pull title on your house, find out what the mortgage cost, put in their offer, and a condition will be for you to put the differential in trust with your lawyer. So the only way you can sell for less than you owe is to find the cash - which makes way less sense than doing the reno.

Finding a developer will probably not work - they're going to offer even LESS than a buyer. They're going to offer you peanuts to buy your place.

ETA - the reason you will have to put up the difference is because the bank holding your mortgage will not sign off on a sale where you are underwater, unless they get the difference from the sale proceeds and your deposit in trust, and thus the sale will fall through and the buyer will be left holding the bag. So you will need to find the money to pay the difference, and that's going to be way harder than doing the reno bit-by-bit. You don't have to do everything at once.

[albertGQ]

Originally Posted by OilKiller

Yes, that's what we would like to do. But...how? That's the point of my thread.

I mean just leave and default on your mortgage

[WilsonFourTwo]

Originally Posted by OilKiller

Thanks guys. Not really looking for "saving money" advice or "patience" advice. I know my options where that is concerned.

I was simply asking if anyone knew what happens if you sell your property for less than it's worth more so than anything else.

I'll get a hold of the bank and a real estate lawyer to find out more. Just thought I would post here to see if any visit the site. It's not as simple as just biting the bullet and saving money by not going out to the movies guys. There are other factors that I simply didn't want to air here.

Like waking up and suddenly realizing that you live in Edmonton?

It's a rough spot to be in - wish you the best, regardless.

[OilKiller]

Originally Posted by albertGQ

I mean just leave and default on your mortgage

Yeah, but then I get sued. Can't just walk away unfortunately. That's most likely the worst thing I can do. Basically would have to declare bankruptcy then.

Originally Posted by WilsonFourTwo

Like waking up and suddenly realizing that you live in Edmonton?

It's a rough spot to be in - wish you the best, regardless.

LOL...I like the city. Can't stand the team, but I don't mind living here. I have a good job here, friends here and met my wife here, so it can't be all that bad.

Thanks. Appreciate it.

[troutman]

Grow-op.

[OilKiller]

Originally Posted by troutman

Grow-op.

Gotcha' now...went right over my head the first time. Yeah, maybe I could have my own TV show too...

[Shazam]

Originally Posted by troutman

Grow-op.

If it's good enough for a lawyer, it's good enough for me!

[algernon]

OK. I've made a LOT of jokes about shi*ville in the past, but, here's what I would do.

1) Do a walk through, and list off the deficiencies.
2) Do a walk through, and list off the necessities. (IE an en suite is not a necessity, but paint and the board & mud beneath is.)
3) Draw up a budget, and work from there.

IE;

-You don't have to finish the en suite, you could just turn it into a walk-in closet. If you have a little extra, you could rough in the plumbing and list as "W/I closet rouged-in for en suite.)
-You don't need tile or hardwood on the floors, laminate would be fine. You can buy lam cheap at auctions (less than a buck/foot).
-You don't need fancy light fixtures/hardware or built-in shelves in the closets, just something working. You can buy used stuff from the Re-Store, or often free off of Kajiji, Craigs List and freecycle.

I could go on, but IMO, you need to get the place 'livable' to sell it properly. Forget about what you WANT, and focus on the minimum work needed to sell. If it's a candidate for the 'dozer, why gussy it up?
Since you're selling, you won't have to be as picky about the trades, either. Keep researching Kij, CL, the bargain finder, etc and find some strung-out drywaller for cheap to come and tape. Just don't pay him until he's done. As for painting...$200 worth of paint and a weekend later, it's done. If you are careful with the prep work, it's a no-brainer.
If you eliminate the pricey/trendy/luxury items on your punch-list you could do the work for maybe a quarter of the cost, and be in good shape to sell. Other things like yard maintenance/landscaping could go a long way as well.

Oh, and maybe getting a professional opinion from a real-estate "stager" would be a good starting point for what's important in terms of selling.

Hope that helps, and may God be with you as you get the hell out of that unfortunate town.

[onetwo_threefour]

Originally Posted by billybob123

You'll have to come up with the amount owing on your mortgage. In cash, by closing. It's going to be written into any purchase contract from a buyer. They will pull title on your house, find out what the mortgage cost, put in their offer, and a condition will be for you to put the differential in trust with your lawyer. So the only way you can sell for less than you owe is to find the cash - which makes way less sense than doing the reno.

Finding a developer will probably not work - they're going to offer even LESS than a buyer. They're going to offer you peanuts to buy your place.

ETA - the reason you will have to put up the difference is because the bank holding your mortgage will not sign off on a sale where you are underwater, unless they get the difference from the sale proceeds and your deposit in trust, and thus the sale will fall through and the buyer will be left holding the bag. So you will need to find the money to pay the difference, and that's going to be way harder than doing the reno bit-by-bit. You don't have to do everything at once.

I would thank this post but there's a little too much misinformation here...

Yes you would be responsible to pay any shortfall to the bank in order to complete the sale, but it is unusual for a buyer to put a condition in a contract regarding the seller paying funds in trust (although a good realtor might do this if they're sure the Seller is upside down - see below). The contract has a built-in requirement for the seller to provide a clear title. If they can't, the buyer gets to walk away from the deal and recovers their deposit and can potentially sue the seller. The buyer won't be left "holding the bag" because the buyer will walk away from the deal and the seller will be in the same position, except that an angry buyer may sue them.

I agree that you would probably have to pay the difference to your bank in order to make this happen, but it's misleading to suggest that it's some sort of special condition put in by a buyer who knows you're upside down, it's a part of every contract I've ever seen. By the way, you can't really tell by looking at title whether a property is upside down. In many cases now, people are getting homeline plans, STEP mortgages, and similar products where the registered amount of the mortgage is the entire value of the property, but in almost every case there will be much less actually owing on the property than the registered amount of the mortgage.

Secondly, there are occasions where you may not have to pay the entire shortfall if you can convince the bank that they are better off to allow a sale at fair market value offer where they get most of their money back rather than chasing the money through a foreclosure where the bank is going to have legal fees in addition to realtor's expenses to sell and may realize less money through a forced sale of the property. However, that is certainly the exception rather than the rule, but it's something that you can at least explore. If your mortgage was CMHC, GEMI or Genworth insured than this is probably no go as I believe that CMHC would require the bank to obtain a judgment against you to pay out on the mortgage insurance.

With respect to the redevelopment idea, I do agree that it is unlikely that you're going to find a white knight who's willing to finance the redevelopment of the property for you based on your just putting up the land. That might be possible if you owned the property outright with no mortgage, but not where you owe money on the property. There is almost certainly a clause in your mortgage that says you may not demolish the property without the bank's approval, because the last thing the bank wants is for you to tear down the building and devalue the property while they are owed a bunch of money. As such in order to redevelop the property somebody would have to pay out your mortgage fairly early in the project, and if you had money to do that you wouldn't be in this predicament.

Sorry to be a downer, but waiting it out probably is best and do what you can to fix'er up.

[pepper24]

I don't know the whole situation and the poster only really wanted to know about the mortgage ramifications of being underwater (which have been answered) but here's my 2 cents anyways.....

I know people that have been in similar situations recently (minus the renovations) and all have taken their losses and moved on. The key is that the poster likes his job which needs to be stressed. If you enjoy what you do the money and stability usually follow which will help you get back on your feet quicker. Also, helps having close family around and enjoying the city you live in.

I personally wouldn't sit and hope for the market to recover. Not worthwhile adding more emotional stress than needed. All signs point to a flat market at best and a healthy drop at worst. It could take years to recover. Don't make a bad situation worse.

Get out, move on and stay happy. Good luck!

[OilKiller]

Originally Posted by algernon

Hope that helps, and may God be with you as you get the hell out of that unfortunate town.

I really wish people would just give this s*** a rest. I hate the Oilers, I'm a Flames fan, but I have no issue living in Edmonton. Just stop already. There is nothing "unfortunate" about this city. My wife and I very much enjoy living here thank you very much.

[algernon]

Originally Posted by OilKiller

I really wish people would just give this s*** a rest. I hate the Oilers, I'm a Flames fan, but I have no issue living in Edmonton. Just stop already. There is nothing "unfortunate" about this city. My wife and I very much enjoy living here thank you very much.

Oh.
Sorry.






About Edmonton, I mean.

[Table 5]

For a guy asking for help, you're acting a little hostile no, Oilkiller? 12_34 gave you a pretty solid opinion and you focus on a jab at Edmonton? You've been around here long enough, you gotta know that getting made fun of about anything sort of comes with the CP territory.

[OilKiller]

Originally Posted by Table 5

For a guy asking for help, you're acting a little hostile no, Oilkiller? 12_34 gave you a pretty solid opinion and you focus on a jab at Edmonton? You've been around here long enough, you gotta know that getting made fun of about anything sort of comes with the CP territory.

Just sick of it. Sorry, but the rest of the post means nothing with that crap at the end. If help comes along with that stuff, then don't bother. That's the way I feel.

[OilKiller]

Anyway, if we could just move on from all the 'Edmonton' stuff...

I want to thank the numerous members who wrote me privately and offered some great insight and advice.

Also, am I wrong in assuming all mortgages in Alberta are assumable? My stepson loves the neighborhood and asked me today about assuming the mortgage and him and his friends moving in. They would fix the place up themselves and take it from there. He's a very mature 22 year old with a very good job. So I'm not sure this would be a bad idea at all.

So a question to the Real Estate lawyers out there; Is that true, are all mortgages in Alberta assumable and if so, how difficult is it to process something like this?

Thanks for an help from those in the know...

[Mike Oxlong]

Originally Posted by OilKiller

Anyway, if we could just move on from all the 'Edmonton' stuff...

I want to thank the numerous members who wrote me privately and offered some great insight and advice.

Also, am I wrong in assuming all mortgages in Alberta are assumable? My stepson loves the neighborhood and asked me today about assuming the mortgage and him and his friends moving in. They would fix the place up themselves and take it from there. He's a very mature 22 year old with a very good job. So I'm not sure this would be a bad idea at all.

So a question to the Real Estate lawyers out there; Is that true, are all mortgages in Alberta assumable and if so, how difficult is it to process something like this?

Thanks for an help from those in the know...

Most mortgages in Alberta are assumable so that could potentially be an option for you. The thing is the lender will want the person assuming the mortgage to qualify for it before they allow them to assume it.

So really your nephew would have to qualify for it first but assuming he can that might be a legitimate options out for you.

However why would your nephew want to assume a mortgage of $310,000 on a house that is currently worth $270,000? Makes no finacial sense for him.

I know living in a construction zone sucks, but really your best option right now is to be patient and wait for the market to come back. Like others have said if you can do the repairs bit by bit and just chip away at them hopefully you can get out of the construction zone lifestyle sooner than later.

The real estate market will come back. It's just a matter of time, patience is the key.

Sorry: Stepson not Nephew

[OilKiller]

I thought you didn't have to qualify to assume mortgages in Alberta? I know I've heard that several times. Is this only some mortgages or is this something that's been changed?

My stepson loves the house and the neighborhood, as mentioned. He doesn't care what the house is worth or what is owing. He wants it. It's not about financial sense to him it's about the house and the neighborhood.

[Mike Oxlong]

Originally Posted by OilKiller

I thought you didn't have to qualify to assume mortgages in Alberta? I know I've heard that several times. Is this only some mortgages or is this something that's been changed?

My stepson loves the house and the neighborhood, as mentioned. He doesn't care what the house is worth or what is owing. He wants it. It's not about financial sense to him it's about the house and the neighborhood.

As far as I know pretty much every lender know requires the person assuming the mortgage to qualify for it. It has been that way for a few years in Alberta.

Do you feel comfortable letting us know who the mortgage holder is?
Otherwise give them a call Tuesday and ask them their rules on having somene assume the mortgage. I am fairly certain they will make him qualify for the mortgage.

As long as he has decent credit, income, job stability and low monthly debts then chaces are he can qualify.

[onetwo_threefour]

Originally Posted by OilKiller

I thought you didn't have to qualify to assume mortgages in Alberta? I know I've heard that several times. Is this only some mortgages or is this something that's been changed?

My stepson loves the house and the neighborhood, as mentioned. He doesn't care what the house is worth or what is owing. He wants it. It's not about financial sense to him it's about the house and the neighborhood.

The case law has changed with respect to the whole 'assume without qualifying" situation drastically over the past few years. Up to about 2004, you could assume pretty much any mortgage without qualifying because if a bank objected and tried to foreclose the Courts would not allow them to do so unless the person assuming actually defaulted or the banks security was at risk. My understanding is that this arose because, in the 80's when the interest rates went through the roof, people would sell their houses as assumable mortgages because if they had a mortgage from before the rates increased it would be highly attractive to a buyer to be able to assume that interest rate. Banks, being banks, tried to insist that mortgages weren't assumable without their consent and foreclosed on people who hadn't even missed a payment simply because they had taken over someone else's mortgage. The Courts held that to be unfair and slapped the banks down pretty hard using a piece of legislation called the Judicature Act to protect buyers and sellers from banks trying to take this position. It was only in the early 2000's that banks came up with another strategy that started to work again for them. They started to say that if people were allowed to assume without the bank's approval, the bank could be put at risk if the property were used for purposes like grow-ops or terrorist-financing, or if there was a fraud where the individual who originally qualified for the mortgage only did so so they could flip the property to someone who couldn't, or other similar things that would put the banks money at risk. The Courts started to agree with this position and started to allow the banks to enforce what is known as the 'due on sale' clause. The clause was always in the mortgage, but the 80's court decisions had really taken the teeth out of it. Now if you try to do an assumption without getting the bank's approval there is much more risk than there used to be. Some banks say they will no longer allow any assumptions at all, but most require that the person or persons assuming qualify for the mortgage.