I went out to see a house in Wasilla this week that is owned by a 22 year old young lady. She and her husband purchased it brand new in 2006 with a VA loan. Her husband was killed in Iraq not long after they purchased the house. Since she could no longer afford the $1,800 per month payment on her $2,200 per month income, she moved into less expensive housing and rented the house out.
Unfortunately, the tenants did several thousand dollars damage to the house and she was in the process of making the repairs when I arrived. She needed to sell it quickly and wanted a price that would get it sold very fast. When I discovered that she owed about $229,000 on the house I realized we were likely in short-sale country. The house was probably worth less than $229,000 and would need to be be priced significantly less than that to sell quickly.
She mentioned that there was some issue about the house being too close to the street right-of-way when they purchased it. She remembers signing something about this problem at closing. Unfortunately all her paperwork had been shipped to her mothers home in the states where she planned to move as soon as the house was sold. I was not able to see what she signed but decided to call the Mat-Su Borough to find out what I could.
The borough has certain set back regulations for structures. Any experienced Realtor or builder in the borough is very familiar with these regulations. According to the borough code compliance officer, this house was built only 15 feet from the right-of-way when it was supposed to be 25 feet. Further, the builder was informed of the violation during the construction process. Apparently the real estate licensees also knew about the violation since they had the buyers sign an acknowledgement.
I don’t have any idea how this transaction was allowed to close. I suppose that it is possible that the loan underwriter knew about the violation but didn’t care. Perhaps the title company that closed the transaction felt that as long as the buyers signed an acknowledgement everything was OK. Somehow the appraiser must have seen the as-built survey but let it go. Perhaps the buyer’s real estate licensee who was supposed to represent the buyer’s best interest felt that it wasn’t a big deal and allowed it to close. I guess the builder felt that the house was a perfectly good house even though it was built to close to the right-of-way.
On the other hand, it is possible that at least some of the people involved saddled this young couple with this problem because they wanted to make their piece of the pie. Two real estate licensees made a good commission. The title company made a decent closing fee and insurance fee The loan officer pocketed the loan origination fee and whatever else the lender makes on the hidden side of the transaction. The appraiser made $550 for his work. The builder banked a handsome profit and has not come out to the house even one time since the sale.
In the meantime the 20, (now 22 ), year old widow has been making payments of $1,800 per month for two years on a house that she probably cannot sell. I don’t know anyone in their right mind who would buy a house that is too close to the lot line. It will cost several tens of thousands to move it. The borough is NOT going to waive their regulation for a house that was built contrary to code.
This story is still ongoing. I suggested that the widow get legal counsel. She cannot afford a lawyer so she will see what she can get from legal counsel on base.
There are many, many lessons to be learned from this story. Here are just a few of them:
- 1. Use a Realtor who is very experienced in the area. An Alaska Real Estate license allows me to represent buyers and sellers anywhere in Alaska. I have been working in the Mat-Su Valley for 17 years. I do not represent buyers in Anchorage, or Juneau, or anywhere else in Alaska. I stick with my area of expertise. A buyer should ask how many transactions per year that their Realtor does in the area. Both the buyer’s representative and the seller’s representative in this transaction did most of their work in Anchorage, they likely did not realize the seriousness of this problem in the Mat-Su Borough.
- 2. If someone asks you to sign an acknowledgement of a problem, make sure that you understand the long term consequences. I cannot believe that had these buyer been told that they would not be able to sell their home because of the set back violation that they would have signed the acknowledgement.
- 3. When a builder knowingly builds a house against the boroughs regulations and then tries to sell it to you he probably does not have the character to follow up with warranty work. There are still pieces of blue tape in this house left up from the final walk-through. The builder did not fix the problems then and has not been back.
- 4. Do not allow the pressure of needing to move into a house allow you to take risks you otherwise would not. These buyers were under pressure to get into a house very quickly and were in the mood to sign anything put in front of them as long as it would accomplish that end.
- 5. Just because the appraiser says it’s a go doesn’t mean everything is great. Just because the VA will loan on the home does not mean it’s a good home.
- 6. If there are setback problems on a new home in the Mat-Su Borough DO NOT CLOSE until those problems are resolved. Some set back problems with older homes can be resolved through different procedures at the borough, but new homes get no mercy.
I give a free initial consultation on any property like I did for this young lady. If you would like me to come out to your property give me a call on my cell. 907 232–7900
