Foreclosure Isn't a Foregone Conclusion

If you don't understand, keep asking questions until you do.

My husband and I are divorcing. He is refinancing our property and buying me out. He says I will get the check two or three days after signing the quitclaim deed.

My local bank says normally there is just an exchange of signing and money at the same time. He is financing at a Federal Bank. Does this make a difference, or is there something else going on?

Whether you're working with a local bank or national mortgage lender, when you refinance your primary residence, there is a three-day right of rescission. That means you have three business days to cancel the transaction. So it's possible that your husband won't receive the funds until three business days after the transaction closes.

But you have to protect yourself. I wouldn't hand over the quitclaim deed and then trust that your soon-to-be ex-husband will come through with the cash. What you might do is deliver the quitclaim deed in trust and give the escrow company specific instructions not to hand over the deed until your check has been received. That should protect you.

The problem is that many escrow or title companies won't do this. If they won't, then you should refuse to sign over the quitclaim deed until you have a check in hand.

A man proposed to my sister. They planned to marry and purchased a home together. But the way things worked out, they never got married. In fact, they never even lived together.

My sister never took steps to remove this man's name from the papers on the house. She paid every penny for the house and he paid nothing, not one red cent.

The house is completely paid for. He now wants her to sell the house and give half the money to him.

What can she do at this point to keep from having to give him half the profit of the house if she should sell it? My sister is now 73 years old with minimal income.

Your sister is in an unfortunate situation. Did they purchase the house recently? Or did your sister buy the home some time ago? Did the man pay any expenses towards the maintenance or real estate taxes for the home?

If the man paid nothing to buy the home, never paid any of the expenses and never lived in the home, then the question is determining what your sister's intent was when she purchased the home and allowed this man's name to be put on the deed.

Did she intend at that time to give him a gift of half of the home? Was the gift predicated on them becoming married?

It might be fair to say that, morally, the man should not claim any interest in the home if he did not contribute to purchasing it and never paid anything to maintain it. But legally this might not be so simple. If your sister intended to give him the gift, then he might have a claim for his share. Certainly the circumstances surrounding the purchase are important.

People who buy property together and plan to marry should make sure that their intentions are clearly known. It's even better to state those intentions in writing and document what each party's expectations are and what their financial and other contributions to the property will be.

One important issue you did not discuss is whether the home is owned by your sister and this man as joint tenants or tenants in common. If they own the home as joint tenants and the man dies, he and his estate would lose any interest in the home upon his death. But the same is true if your sister dies -- he would become the sole owner of the home.

If they own it as tenants in common, she would always keep her share and he would always have his share. Upon either one of their deaths, his or her estate would receive whatever interest that person owned.

You're wise to try to resolve this issue now, but it's not an easy one to fix. Your sister might have to sue the man to void his interest in the home and claim the entire home as her own. Another option would be to give the man some money to transfer his interest back to your sister. While it may seem like blackmail, it might be cheaper and easier than suing him to get the title in your sister's name alone.

Finally, a skeptical and inquisitive person might try to determine whether this man has done this before to other women. If he has, you may be able to call the authorities and have them assist you in getting him out of the picture.

I am at my wit's end. My adjustable rate mortgage (ARM) has reset and my mortgage payment has increased by $400. I also have a second mortgage and am unable to pay what I owe on my student loans each month.

I know I need to sell my home, but I also need to put floors down before I sell. I had the carpet removed shortly after buying the house and want to place laminate floors on top of the plywood. The problem is that after I put in the floors, I don't think I can get what I paid for the house.

Right now, I am current on my first and second mortgages, but I am running low on money.

What exactly is a short sale? Do they work? How about a deed in lieu of foreclosure? How hard will that hit my credit and for how long? Can I ask the lenders to readjust the loan?

You're in a difficult situation, and I'm not sure how much help is out there for you.

You may have heard about the interest reset relief program lenders are participating in with the blessing of the federal government. You must be current on your mortgage (as you are), and you must have less than 3 percent equity in your property (it sounds as if that is the case). However, your loan must be scheduled to reset between 2008 and 2010, and because your loan already has reset, it's possible you won't qualify.

Still, it's worth a shot. Call the program's toll-free mortgage crisis help line at 888-995-HOPE to see if you qualify.

If not, then you have to figure out next steps. Can you find a way either to bring in more cash (can you rent out a bedroom in your house?) or reduce expenses until you get through this crisis?

I would hate to see you do a short sale, whereby you sell the home for less than the loan amount, or a foreclosure, which will stay on your credit history for up to seven years, or even a deed in lieu of foreclosure, whereby the bank accepts the deed instead of you paying off the loan. You would be better off trying to trim your expenses or bring in extra income to put down the flooring you need and wait out the current mortgage crisis. Staying in your home will be the least costly choice, both in terms of cash and your credit. I hope you can find a way to make it happen.

No matter what, please talk to someone at the Federal Housing Administration. You may qualify to refinance your mortgage at a lower rate through the new FHASecure plan. Go online to http://www.fha.gov/about/fhasfact.cfm to get contact information or call 800-CALL-FHA for more information.

I am looking at a fairly major renovation of a home I have lived in since 1981. I paid $60,000 for the house, and there is no mortgage. If I put the house on the market with some inexpensive curb-appeal-type spiffing up, I think it would be listed for around $325,000.

I'm guessing that the renovation costs would run about $300,000, and the house would then sell for $450,000. I plan on continuing to live there for at least another 10 years.

Should I sell the house, or should I stay and finance the renovation? Should I get a construction loan followed by a 15-year mortgage? What about a home-equity loan or line of credit? Does my age or income matter?

Your numbers are interesting, if they're accurate. For simplicity's sake, let's assume they are.

If you sold your house today for $325,000, you would have a rough profit of $250,000, which you could keep tax-free. If you improved the property, it would be worth $450,000, for a net profit of around $90,000.

Why would you do all of this work for a much smaller profit? Wouldn't you be better off selling your property, pocketing the cash and buying something else? If you sold your home, do you know how much you would have to pay for another home? Could you sell the home and buy another for less money? If you bought another home for $350,000 to $400,000, you could have some price appreciation over the next few years, and you would start the clock ticking on the next $250,000 in profit that you could keep tax-free.

Ideally, at the end of 10 years, you would have sheltered at least $500,000 in profit tax-free. That's a lot of cash.

Now let's assume that despite the numbers, you still want to improve your property and then stay there for 10 years. How should you pay for your renovation?

The cheapest thing to do is pay cash. Barring that, the next cheapest thing would be to do a cash-out refinance and get a new mortgage at today's reasonable interest rates. You can do a home-equity loan, but for as much money as you're talking about, you will have an easier time with a cash-out refinance and will be able to lock in the lower interest rate. As for a construction-to-permanent loan, you could do that, but the fees may be higher and you will have more paperwork.

Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write to Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites,http://www.thinkglink.comandhttp://www.expertrealestatetips.net.

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Copyright 2008 Ilyce R. Glink and Samuel J. Tamkin