Readers encounter complications of ill-advised real estate decisions

Letters have been piling up from people who made bad real estate moves, which are instructive even if I can't solve the problems:

Elderly folks co-sign

mortgage loan

Q: Dear elderly friends of mine are asking for help. I do not know where to turn. They co-signed a mortgage for their daughter and son-in-law to purchase a home. The children are slow to make payments, which hurts the parents' credit. They want to sell their own home and move to a retirement community, but they need to get out of this other loan. Do you know what alternatives they have? -- via e-mail

A: Your friends meant well, but they didn't do their kids any favor by helping them get in over their heads. When the lender thought the loan so risky it required co-signers, that should have been enough to warn the parents.

I hope their own house can be sold for enough to fund the retirement move. Otherwise, they promised to pay that debt, and all I can offer is sympathy.

Lien complicates son's

presence on title deed

Q: My friend has a house that is paid for, but some time ago she fell ill. She added her son's name to the deed so that he could handle her estate if she did not fully recover. However, she did and is just fine now.

She would like to sell and move into a senior citizens facility. The problem is that her son had some business problems and ended up with a big tax bill, so the IRS placed a lien on the property. Are there any options available to resolve this? -- L.A.

A: Your friend has more problems than just that lien. If the house were entirely in her own name, she could use the home seller's tax exclusion on her profit when she sold. As it is, her son would owe capital gains tax on his share of the gain.

Did your friend consult a lawyer about estate planning before she put her son on as co-owner, and was she warned about potential drawbacks? There were better ways to achieve what she wanted. She shouldn't try to solve the problem now without her own attorney. If anything can be done (which I rather doubt), a lawyer will know.

Husband stuck with wife's bad credit after signing house over

Q: I signed our house over to my ex-wife, and the divorce decree said she would refinance in her own name. But because she couldn't get a loan, now she's behind in her payments and it's ruining my credit rating to buy my own house. How can I get my liability off that old mortgage? -- R.P.

A: No way that I know of. Two errors here: She should never have kept a house she couldn't afford, and you shouldn't have agreed.

'Friend' helps buyer with

home, then tries to take it

Q: Three years ago, I applied for a mortgage and was turned down. I asked a friend to put the house in his name. I made all the payments. Now my friend is trying to throw me out of house and sell it. Is there anything I can do? -- L.R.

A: I'm not sure "friend" is the word you're looking for here.

Do what you should have done in the first place. Take all your documents to a lawyer who specializes in real estate to find out whether you have any options. Don't wait.

Grandparents unable to collect may benefit from quick sale

Q: We need to know what we can do or what will happen.

We took a second mortgage on our granddaughter's house and lent them $14,000 12 years ago. They have never paid a cent to us. They have an adjustable loan of $1,600 a month and cannot keep the house, so possibly they will be foreclosed on.

We are deeply concerned. When they are foreclosed on, where will we stand? Will we just lose our money or what? -- B. and V.M.

A: I don't think it's "what," which leaves only "lose our money."

If the holder of the first mortgage forecloses, the house will be sold at public auction and your second mortgage will probably be "extinguished." -- canceled.

I suppose you could foreclose yourselves, but that is unpleasant and may not be worth doing. I don't know the value of the house or how much the kids have borrowed against it.

Depending on how much the place is worth and how much is owed, your grandkids may be best off putting it on the market right away, at a bargain price for a quick sale. That could save their credit and might even pay off your loan.

Once again, your situation illustrates how foolish it is to help people buy something they can't afford. At least, though, a bad debt may be tax-deductible.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.