Note holder not allowing sellers to sell

6 Replies

Hey all!

Happy Saturday! We are under contract on an investment property with a closing in two weeks. However, we were informed today that our closing has to be pushed off to a far-off future date (rate will no longer be locked and basically will have to do the financing process again) due to an issue we haven't run into before, but seems simply not legal to us, so we hope we can get some assistance.

We only know as much as we have been told, so here we go... the home we are under contract for was sold to the current owners via an owner carry, so the note is held by a private individual (the owner before the current owners). The individual is currently traveling across Alaska with no set date on when he will return and does not have the note on him. It was proposed that he obtain a bond in lieu of the note so that we could move ahead with our current closing date. However, the individual is refusing to do so because he would have to provide his ss number to the bond company and is not willing to have a family member get the note from his home.

Both agents have basically told us that we are S.O.L. and are at his discretion for when he chooses to return and we can then close. However, from our research, it seems that we do not need him to even close and most of all this seems illegal on his end. Theoretically, the current owners are being forced to pay the individual interest, because he is not allowing them to close on the sale of the property.

None of this was disclosed to us prior to going under contract.  Has anyone encountered this before or have any advice?

Total crap.....the lender/original seller doesn’t need to “find the note”, it has nothing to do with closing. Without him providing a pay off, even though one could be calculated, and more importantly executing a satisfaction/release of the mtg once it is paid off, you can’t get clear title.
The current seller would have grounds for damages but will he actually sue?
If you know, is the loan being serviced by a real services, doesn’t sound like it.
If I were paying cash, I’d likely go thru with it, expecting some further dealings. But with a lender, I don’t see you getting this done unless the lender cooperates.
With a pay off though, he could execute the release from anywhere.

@Leah Hill as noted this is total crap.
Have the borrower in writing Request a payoff letter and I believe he has 7 days to provide. If not file a complaint with the state finance office

Also if it is a state he is to be licensed to service in the borrower can also be in deeper hot water

Start with the state financial bureau that will light a fire under someone

You can find the contact information here

https://nationwidelicensingsystem.org/Pages/default.aspx

What are the terms of the note? If good possibily do a subject to and hold sellers money in escrow. 

Hello again, 

Thank you for the input. Unfortunately, we are purchasing a property in a new area with a new agent who does not seem to care whether we close this month on this property or in the future on another property, so we are not getting a lot of information from her. After we pushed back on the issue, she said that they actually have confirmed that the sellers have a recorded mortgage, instead of a deed of trust, so all we would actually need is the private individual to notarize a release. We have never encountered anything like this scenario. 

That being said, she said that he is now MIA in Alaska, but they are hoping to get him to go to a town to notarize the release prior to closing on 7/20. This still sounds sketchy at best to us. Is a private individual who carries the recorded mortgage legally obligated to provide any information? Or can he just hold us in limbo until he decides to notarize this document? Does 7 days notice apply here as well? I am not sure what the technicality difference in him holding a recorded mortgage leaves us with. We are out the cost for inspections and technically still under contract. We are past all objection deadlines on this property. As buyer's, we feel completely unprotected here. 

Thanks all!