Sellers' mistakes cost them their homes

Texas Foreclosure News Articles

Article Abstract:  Homeowners should stick to the basics when selling their homes.  Some learned the hard way like Chuck and Leah Snyder when their lease-option took a turn for the worst.  Another couple lost their home after they let a prospective homebuyer move-in without doing a proper closing.  With Texas foreclosures increasing at a deafening pace, homeowners need to look out for their best interest so they too don’t become one of the statistics.  Please continue reading below for the full Texas foreclosure article. 
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By Andrea Jares Star-Telegram Staff Writer

Carter and Vanessa Bennett were delighted when a buyer signed a contract to buy their west Fort Worth home in late 2005.

The buyer told them that he wanted a house to fix up for his daughter and that he would pay the whole mortgage in a few months, Carter Bennett said. The Bennetts gave the man a key so his daughter could begin moving before closing.

Little did they know, that was the beginning of months of misery that Carter Bennett said left the couple’s bank accounts drained. The simple two-bedroom home off Hulen Street and Interstate 30 is scheduled to be sold Tuesday at a monthly foreclosure auction on the Tarrant County Courthouse steps.

“Here’s somebody looking out for his daughter,” Carter Bennett recalls. “You’ve got to trust that. I was a fool.”

Katheryn Scott, 54, was eager to move into a home of her own after years of renting. She worked out a lease-to-own deal with the owner. She says she paid the $1,403.28 combined mortgage and rent note every month, on time, for two years.

But on Feb. 12, she was horrified to receive a foreclosure notice in the mail. An 11th-hour stay by the mortgage company Friday averted a scheduled foreclosure for Tuesday. The house still faces foreclosure; late this week, Scott was packing up to leave if she gets kicked out.

“All I want to do is live in my house,” she said.

Chuck and Leah Snyder

had bought and sold several

properties, including a 20-unit apartment complex. So when they moved up to a bigger home, they did a sale-lease contract on their old southwest Fort Worth home, hoping to make a nice income on the interest from the deal.

Today, the Snyders own neither the $121,000 home nor the claim to the mortgage payments. Chuck Snyder said the couple have spent more than two years and exhausted the courts trying to reclaim their stake in the house they owned. A judge recently awarded them a judgment, but collecting is another matter.

“We basically got a very expensive real-estate lesson,” Snyder said.

Tuesday morning on the courthouse steps

Most homes that will wind up at Tuesday’s monthly foreclosure auction at the Tarrant County Courthouse are usually the endgame of a divorce, crushing debt, unexpected medical bills, rising payments on adjustable-rate mortgages or skyrocketing energy bills.

But there are also people, like the Bennetts, Scott and the Snyders, who make unusual mistakes that are severe enough to cost them their homes. The number of shaky deals has been on the rise in recent years, along with the real-estate boom. And the slowing home market might also prompt sellers to try and unload quickly, taking deals that land them in trouble.

“Unfortunately, there are a lot of people doing these deals right now,” said Leigh Davis, a Fort Worth criminal attorney who has built a side business helping people who have real-estate problems.

Local attorneys who untangle these kinds of disasters say clients could avoid many headaches by getting lawyers or real-estate professionals involved in the process before signing papers. The Texas Department of Savings and Mortgage Lending even has a hot line that consumers can call to ask questions about shaky terms and practices.

The top complaint to the hot line: excessive fees tacked onto the mortgage, Commissioner Danny Payne said. The second-biggest complaint is from homeowners who thought that they were signing onto one kind of mortgage agreement but wound up with another.

“We do get a fair amount [of complaints] that the loan structure was not as the homeowner understood,” Payne said.

Unfortunately, the call typically comes after the mortgage paperwork is signed, making it virtually impossible to fix, he said. Often, consumers don’t realize the mistake until well after closing.

Those cases, like the Bennetts’, Scott’s and the Snyders’, will require attorneys to try and fix the problem. Lawyers have filed two separate lawsuits in state District Court in Fort Worth in the cases involving Scott and the Snyders.

Big mistake: Letting a buyer move in before closing

Carter and Venessa Bennett had leased their home for years, charging tenants little more than the monthly mortgage payments, Carter Bennett said. They were afraid that the home might eventually need repairs that would cost significantly more than the rental income, so they put the house up for sale in late 2005.

In a few weeks, they met Jerry Lilly, who Bennett said presented himself as a contractor who could pay $55,000 cash for the house in just months. He wanted to fix it up for his daughter, said Bennett, 47, a computer programmer who is retired because of a disability. When Lilly asked for the key to allow his daughter to move several large pieces of furniture early, Bennett agreed.

Lilly did not return several phone calls from the Star-Telegram seeking comment. Dennis Morrow, a Weatherford attorney who represented him as late as August 2006, said he no longer represented Lilly. Morrow said Monday that he could not remember the details of his interaction with the Bennetts involving the house on Lovell Avenue.

Bennett said he was shocked to see at the beginning of 2006 that the house had been painted inside and out and that it looked like a new air conditioner was being installed. Bennett said he consulted an attorney, who told him he wouldn’t have to pay for the improvements because they were unauthorized, Bennett said.

Bennett said he pursued Lilly for months, trying to close the deal or at least get earnest money. Unsuccessful, the Bennetts started looking for tenants.

But when the Bennetts sent prospective tenants to see the home, Lilly told them that he owned the house and that it wasn’t for rent, Bennett said. Bennett said he drove by the house last summer and saw that Lilly had hired a real-estate agent to sell the home. The agent dropped the listing after Bennett called to say Lilly did not own the home.

“This is to inform you that due to your phone call to my Realtor, I am having to find a new buyer which will and is delaying the closing date,” Lilly wrote in a letter to the Bennetts.

County deed records do not show that Lilly ever owned the house.

Bennett says he never pursued trespassing charges against Lilly because he was afraid of Lilly’s temper. The couple talked to several attorneys, but Bennett said he and his wife couldn’t afford the retainer. They are still looking for a lawyer.

Keeping up with the mortgages on the rental house and their north Fort Worth home was too much without rental income, Bennett said. He said he and his wife stopped making payments on the second home last fall. With fees, they now owe more than $6,100 on the mortgage, which they say they can’t come up with to avert foreclosure.

Desperate to unload the house, the Bennetts tried to sell it to an investment company. At the closing table, they discovered that Lilly — under a company called Lien Maintenance — had put a $22,100 lien on the property connected to the improvements he made, making it impossible to sell, Bennett said. They are waiting to hear whether a second interested investment company will be able to sidestep the lien and buy the home.

“What else could we have done?” Carter Bennett said. “He clearly didn’t want to buy the house; he wanted it given to him.”

Monday, the home at 5004 Lovell Ave. had a “For Sale” sign in the front yard, giving Lilly’s name and number as the contact. The asking price: $79,000. The lock and the doorknob on the front door had been removed, and a front window was broken.

It is common for contractors to put a lien on a house while construction work is being done and the debt is unpaid. The Tarrant County deed record office is responsible for recording liens but does not verify their authenticity, said Teia Peters, assistant supervisor in the office. Anyone can put a lien on anyone’s home, and the homeowner would have to hire an attorney to contest it, she said.

Lease-purchase agreement goes bad

Scott is so worried about the fate of her west Fort Worth home that she said she can’t eat and that she has scratched her hair so much that she had to get it cut short. Her troubles started Feb. 12 when she received a letter that said the lender was foreclosing on the home she rented.

“My heart took off racing, and I haven’t been worth a damn since,” Scott said.

She said she has made payments on her lease-to-buy agreement every month without fail to Dallas investor Richard “Dave” Morgan, who is responsible for paying the mortgage. But she stopped payment on the last bank draft after reading the letter.

Now she fears that she will be kicked out of the house if the foreclosure happens.

Scott, a former hairdresser and janitor who draws royalties from an inherited oil and gas property in Louisiana, is not the only person in this deal who’s losing sleep. Andrew and Trudy Bennett — no relation to Carter and Venessa Bennett — stand to have a foreclosure on their credit record if the house is foreclosed.

The Bennetts bought a new house and wanted to sell their Chapel Creek home in west Fort Worth quickly, their attorney, Leigh Davis, said. They sold it in October 2004 to Morgan, who would hold the home in an entity called Tarrant County Land Trust II.

Morgan bought the house from the Bennetts, subject to the mortgage. That means he made a $7,000 down payment and assumed payments on the remaining mortgage. These types of deals usually mean that in a default, the buyer would lose the equity, but late payments or a foreclosure would be marked on the seller’s credit.

The Bennetts thought that they were selling the house outright, Davis said.

But it didn’t take long before the agreement started to fall apart, Davis said. They started getting calls from the mortgage company because the payments hadn’t been made, he said. By the end of the year, they hired Davis to prod Morgan to make the payments. By February, Scott, who signed her lease-to-buy contract with Morgan, was getting the foreclosure notices in the Bennetts’ name at the house.

Last March, the Bennetts sued Morgan in the 96th state District Court in Fort Worth, and the case is pending.

“It was getting so bad that we didn’t feel like we had a lot of options,” Davis said. He said Morgan was perpetually delinquent on the mortgage, by as many as three or four months. That’s why it’s facing foreclosure now, Davis said.

Morgan said in an interview that he has made all of the mortgage payments on time and that Scott has made her payments on time. He said he is confounded as to why Chase Home Finance, the lender, is not applying the mortgage properly.

Morgan said he is sympathetic to Scott’s concerns about the house. He said the deal he reached with Scott allows her to have a place to live, build up more than $6,000 worth of equity with her monthly payments and one day buy the home.

He said in an interview Feb. 23 that he plans to pay off the rest of the mortgage debt and straighten out the home’s foreclosure status.

“We will have the matter resolved,” Morgan said.

The amount that is in arrears is not certain. Davis said Chase has estimated that $8,800 is past due, although he has estimated it at $4,400.

Davis said late Friday that the bank halted the foreclosure to investigate the case. Morgan has presented Chase with records of his payment history on the account, Davis said.

Chase declined to discuss the case. Thursday, before learning of the foreclosure’s delay, Scott was boxing up her belongings and planning to move to Oklahoma, where her father lives, in case she gets kicked out of the house.

“I’m trying to do the best I can, and I’m scared to death,” she said.

Veteran investors take shortcuts, get burned

Chuck and Leah Snyder skipped vacations, worked 16-hour days and clipped coupons to pay off their $109,000 home in nine years.

By the time they bought their next house in 2003 — a custom-made dream home in a gated neighborhood in southwest Fort Worth — they were ready to sell their old home at 7833 Blossom Drive three miles west to help pay for the new mortgage.

They knew investors, like Chuck Snyder’s brother, who had made money in real estate. The Snyders had owned 20-unit and seven-unit apartment complexes. But their real-estate experience didn’t prepare them for James Brian Cosper of Metro I Buy Houses. They claim he bilked them out of their house.

The Snyders didn’t want to pay a commission for a real-estate agent, so they put the house up for sale themselves. When Cosper presented them with papers to sign, they didn’t close the deal at a title company as they had their other transactions. Instead, they signed the paperwork in the dining room of their new home in May 2003.

They would sell the house to Cosper for $160,000, at a rate of $1,091.48 per month for 30 years. The payment gave the Snyders 7.25 percent interest and the option to discontinue the mortgage after 10 years, Chuck Snyder said.

Over the next 18 months, Cosper made payments with little problem at first. Then the payments became increasingly delinquent, Chuck Snyder said. They stopped in January 2005.

While the payments were trickling in, Chuck Snyder said the couple contacted an attorney to force Cosper to make payments and possibly foreclose.

The attorney told them there were many things wrong with their paperwork.

Probably the most fatal flaw in the transaction, Snyder said, is that he and his wife entrusted Cosper to file the paperwork with the county. Snyder said Cosper filed the warranty deed, which made no mention that a mortgage was attached to the property. Snyder said Cosper did not file the promissory note and the mortgage agreement they signed, which outlined the terms of the debt. So the paperwork filed stated that Cosper owned the home, with nothing indicating that he owed money for it, Charles Snyder said.

“It’s like we gave him this house we paid $109,000 for,” he said.

By the time the Snyders figured this out in July 2004, Cosper had already put the house into a trust. The house was then part of 7833 Blossom Drive Trust, seven months after Cosper purchased it. The house has since changed hands three more times, according to county records. The current owner of the home said in an interview Thursday that she has never heard of Cosper and wasn’t aware of the ownership dispute.

The Snyders sued Cosper in November 2004. Also included in the suit are people the Snyders consider business associates of Cosper. Snyder said none of the parties in the suit showed up for any of the court appearances. This month, the judge awarded the Snyders $174,551, plus interest and attorney fees.

The Snyders say they have run down every avenue for consumer complaints, including the Tarrant County district attorney’s office — resulting in nothing. They even spent hundreds of dollars on a private investigator.

They are approaching the end of the road and aren’t hopeful that Cosper will pay for the house.

Efforts to reach Cosper for comment were unsuccessful. Court records show that Cosper lives in Abilene and has been representing himself in the court case.

“It’s just a big, ugly mess,” said Charles Snyder, who works in the Fort Worth’s traffic services division. “We got ripped off $100,000, and it is very unlikely that we will see a dime of it.”

Shady dealings

The number of complaints to state agencies that track questionable mortgage-lending activity has risen significantly in recent years. The Texas attorney general has cracked down on fraud cases affecting large numbers of people in the last two years, spokesman Paco Felici said. “It underscores the need to be informed,” he said.

In 2005, the attorney general fined Dallas-based City Mortgage Services (a company not related to City Mortgage Group in Plano or CitiMortgage), which offered to refinance mortgages for hundreds of Hispanic homeowners in Dallas.

Instead of refinancing the mortgages, the company charged customers $1,000 to be in a payment plan where they would pay more on the mortgage to erase the debt early — something they could have done on their own for free. The homes went into foreclosure when City Mortgage stopped passing the mortgage payments to the actual lenders. City Mortgage Services no longer operates.

Galindo Trust was accused of putting Austin-area homes in jeopardy of foreclosure by not passing along tax and insurance payments the homeowners gave them. Galindo Trust no longer operates.

Some sellers have been accused of selling the same vacant house to multiple buyers, pocketing the earnest money.

Some sellers have resold foreclosed properties at auction, without revealing the tax liens still stuck to the property.

SOURCE: Texas attorney general How to sidestep a real-estate disaster

Stick with the professionals. Before signing a contract on a transaction as significant as conveying real estate, it is essential to understand everything a person is putting his name behind. An attorney can help keep you out of trouble. Title searches can ensure that the property is not saddled with liens, and you will not be haunted by problems previous owners have had. The title company can also act as an impartial third party at the closing table, making sure papers are filed properly. Also, a real-estate agent can help with representing you in negotiations.

Legally binding documents should be official. Look for form documents sanctioned by the Texas Real Estate Commission. The forms are available for almost any real-estate transaction, said Leigh Davis, an attorney who has represented homeowners in bad deals. “Anytime someone sees home-grown-looking stuff, they should immediately be cautious,” he said.

Make sure you are buying from or selling to an actual human being. Many people these days use a land trust to buy or sell property, to shield themselves from legal liability, Davis said. Unlike business entities such as corporations, limited partnerships and limited-liability corporations, a trust doesn’t have to register the people involved. That makes it nearly impossible to file suit.

Avoid foreclosure “rescue” deals that offer you to sell your home to an investor, lease it back and eventually let you buy it again. The Better Business Bureau notes that the rent and buyback price are often much higher, sometimes causing the person to lose the home anyway. Davis said he has never seen one with a happy ending. In reality, the homeowner ends up paying “horribly expensive” fees — $10,000-$25,000 — to get the house back.

When closing on a mortgage, watch out for fees slapped on just before closing.

Don’t close a deal outside an office. And ask to see the mortgage broker’s license.

Run fast if a prospective lender suggests that you don’t contact other mortgage lenders to try to get a better deal.

Be suspicious if the only number you have for the lender is a cellphone number.

Don’t sign paperwork if you’re suspicious. Call the Texas Department of Savings and Mortgage Lending. Their consumer hot line: 877-276-5550.

SOURCES: Leigh Davis, Texas Department of Savings and Mortgage Lending

Still want to do it yourself?

Structure the loan as an installment sale if the buyer is a risk. Similar to a car loan, the deed to the house is not given until all the payments have been made. This type of sale is also called a contract for deed or an installment land contract.

If you are financing the sale of a house, the seller should be in control, providing standardized forms that outline the terms.

Deed records should be filed immediately at the county courthouse. The contract goes into effect when the papers are signed, and the proof is in the deed records.

Beware of people who act as if they own your property. One day, they might. Real-estate law allows for something called adverse possession, which means that if someone acts like it’s theirs and maintains the property for a lengthy period, a court could award the property to that person. This is probably more likely with large tracts of undeveloped land.

If you have an assumable mortgage and you’re letting a buyer assume it, let your lender know. The seller should also attempt to get a letter from the lender releasing the seller from liability if the mortgage defaults.

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