When Co-signing a Mortgage Goes Wrong

DEAR KAREN: As far as I am aware, the law of every state allows a partition lawsuit to obtain a court order to force the sale of property held in joint tenancy with right of survivorship.

If for some reason the law of the state where the land is located does not allow a partition sale of joint-tenancy property, you and the brother who wants to sell can break up the joint tenancy by deeding your shares to yourselves as tenants in common. Consult a lawyer for details.

DEAR BOB: Some time ago you explained that a "short sale" means the mortgage lender agrees to accept as payment in full a sale for a home's market value even if it is below the mortgage balance. That's what we did in late 2006 to sell our house in Ohio. It was worth less than our mortgage balance and we had to move to obtain a job. The lender agreed to accept a short sale for $183,785 although our mortgage balance was about $210,000. However, we received an IRS Form 1099 from the lender showing we had taxable "debt relief" income of $26,215. Is this right? How can we be taxed on money we didn't receive? -- Ron D.

DEAR RON: As an alternative to foreclosure when a mortgage borrower stops making payments, some lenders will accept a short sale of the property for less than the mortgage balance. They realize it is better for the lender to accept a short sale than to go through a foreclosure sale and lose even more money.

However, the IRS says debt relief is taxable. That's why your mortgage lender had to send you that 1099 form showing the exact amount of your taxable debt relief.

DEAR BOB: In February I closed on the "as is" purchase of a condo, which was a foreclosure sale by Fannie Mae. At the closing, I was surprised by a $600 debt due to the condo homeowners association. I thought Fannie Mae should have paid this. The lawyer who handled the closing agreed with me, but it had to be paid or I wouldn't receive title. I reluctantly paid. When I protested to the condo association, I was told to hire a lawyer because it is my responsibility to pay. What is your opinion? -- Ken M.

DEAR KEN: When buying an "as is" foreclosure property from the foreclosing lender, it is customary to deliver marketable and insurable title. Frankly, I am surprised Fannie Mae refused to pay that $600 condo association lien. The sale term "as is" refers to physical condition, meaning the seller will not pay to make any repairs. It does not mean the seller will surprise the buyer with undisclosed liens that the seller refuses to pay.

Thankfully, the amount is small. I suggest you write a polite demand letter insisting Fannie Mae reimburse you $600 for the unexpected cost you had to pay at the closing. Ask for payment to be received within 10 business days. Send it by registered mail.

If you don't receive payment, bring a local small claims court action. Chances are a Fannie Mae representative will not show up and you will win a default judgment.

DEAR BOB: We bought a rental house "as is" but with the understanding it had no water leaks. That is what the written disclosure said. However, since purchase we have been fixing roof leaks for months now. My tenants told me the past landlord knew of the leaks but would not fix them. What can I do to make him pay for the repairs? -- Kevin C.

DEAR KEVIN: Your "understanding" doesn't matter. Did the seller's written disclosure statement say there were no material defects in the house, or no leaks? If so, you might have recourse for misrepresentation if you can prove the roof leaked at the time of the sale.

Depending on your cost of the roof repairs or replacement to stop the leaks, you might want to take the seller to the local small claims court. If you can get your tenant to testify as a witness that the landlord knew the roof leaked before the sale but he refused to repair it, that is excellent evidence for you.