When a seller puts his home on the market, he signs a listing agreement with a Realtor.  This agreement spells out what is to be expected of the Realtor and states what the seller will pay for the Realtors services.  The amount paid to the Realtor is usually a percentage of the sale price if, during the time of the listing, a “ready, willing and able buyer” is brought to the table .  A “ready, willing and able” buyer is one who wants to purchase the property after all inspections, signs a contract of sale, and is able to pay cash or obtain financing in order to conclude the purchase.  The seller is obligated to sell the house and the buyer is obligated to purchase the house once the contract has been signed by both parties if all conditions are met within the timelines set in the contract. 

The seller puts up his house as collateral and gives the buyer the right to have it inspected.The buyer puts up an earnest money deposit usually (10% of the agreed upon price) that is held in the Realtors escrow account.  An escrow release form must be signed by both parties if the sale does not go through.   Once in a while either the seller or the buyer has a change of heart and decides they do not wish to go through with the contract. 

If the SELLER does not want to sell and the buyer is “ready, willing and able”,  the buyer may request his earnest money deposit returned or, if the buyer still wants to purchase the house, he can sue for specific performance.  Specific performacne is a legal action to compel a party to carry out the terms of a contract.   The seller will still have to pay the Realtors a commission because they performed as to the listing agreement.

If the BUYER decides he does not want to purchase the house after the deadlines in the contract have expired, the seller has the option of making him purchase the house (specific performance) or keeping part or all of the earnest money deposit (minus the Realtors share) for the time the house has been off the market.  He may then put the house back on the market to try to sell to someone else.

There are certain “outs” and time restrictions built into the contract.  These were mentioned in the previous post.

For this post I would like to define two terms.  Encroachment-when a structure of any kind (a building, fence, or wall) or portion of it extends beyond the land of the owner and illegally intrudes on land of an adjoining owner.  Easement-the right given to use the land of another for a specific purpose.

A closing date was finally set for last Friday.  All three lawyers, the buyers, the sellers, the listing agent, the selling agent, a rep from the title co, and a rep from the bank were all available.  All final bills had been submitted and the HUD statement was sent out.  Thursday afternoon I received an email from the sellers atty that the seller did not want to pay the commission to the real estate agents.  Since the seller became mysteriously unavailable until Friday evening, the closing was called off.

Over the weekend the listing agent had a chat with the seller and it was my understanding that the closing would take place on Monday or possibly Tuesday at the latest depending on everyones schedules. 

On Monday the seller decided that since he still had to pay the commission, he would try to have the buyer pay for the cost of removing the encroachments to the tune of about $12,000.  In the contract it states the seller must give clear and marketable title to the buyer.  This means the property has to be clear of encroachments.  The seller is now claiming that the buyer said they would pay for removal of the encroachments.  I have a few issues with this.

1. The buyer NEVER said they would pay to have the encroachments removed. Why would the buyer offer to pay for something that was not their responsibility? 

2. This language was never written in to the contract for sale, added as an amendment to the contract, and is not in writing from the seller or the sellers atty.

3. The buyer was never given estimates, consulted as to cost, or allowed to interview the company to do the work.  Why would the buyer give the seller carte blanche with their checkbook?

4. One of the encroachments was to be given an easement.  This means that the owner of the property to the north was going to say on paper that it was ok for the rock wall to be on their property and that that part of their property now technically belongs to the owner of the property to the south. 

5. The seller spent unnecessary money he is now trying to charge to the buyer for removing the wall that was to be granted an easement. 

6. The removal of the wall reduces the value of the property.

7. When the closing was scheduled for the week before and the bank requested all final bills to be submitted, there was no mention of the buyer owing the seller $12,000+. 

8. And finally, THE SELLER IS ALREADY SUING HIS TITLE COMPANY FOR THE MONEY SPENT ON CURING THE ENCROACHMENTS!!!   He is claiming his bank allowed him to purchase the land with encroachments without telling him.

You would think the seller and his lawyer would have remembered about a bill as large as $12,000.  It was only after the seller saw the amount of money they were receiveing from the sale of the house and the commission that was to be paid that the attemt to not pay the commission was tried.  After that failed,  the seller and his atty brought this bill up.

The problem for the buyer is that even though seller put his house on the market knowing about the encroachments, and the buyer has been waiting for the encroachments to be cleared for 7  1/2 months (they are still not officially cleared),  and the buyers have kept to everything on their side of the contract, the buyers cannot make the seller sit down and sign the paperwork.  The seller can tie up the buyers earnest money deposit that is held in escrow.  The only recourse the buyer has is to sue the seller.  This means going to court and could take years to settle.

Lucky for me a loan officer from another bank came in to my office.  After I told her the story and showed her the appraisal, she said she didnt understand why my 30yr was not approved.  After speaking with her boss, a 30yr mortgage at a great rate would be mine.  Send in the paperwork.  I told her that the only way I could change lenders at this time is if we could close the first week of September.  This gave her just over a month.  She said no problem.

I sent in all the paperwork that was requested.  I mentioned that I would be off island for ten days and anything else they needed had to be submitted before I left since I would return at the end of August and we were supposed to close a few days later.  Upon my return I had a list of ten things the bank needed that were not mentioned before.

After asking many times for a truth in lending statement, I received it Friday September 19, 2008.  Three weeks after we were supposed to close.  Looking over the statement, I noticed the rate stated is one point higher than quoted.  When I asked about the difference I was told that since I was putting it into a trust, they had to charge me a higher rate.  This was not mentioned when I applied for the loan.  

I also wanted to mention that hiring council is recommended here.  There are certain functions that would normally be preformed by a title company or the lending institution in the states that an attorney must preform here.  Inform yourself  as much as possible and stay on top of what is going on.  You are paying these people to work for you.  Make sure they do their job. 

Next…Getting financing from the states 

Let me start by saying, buying a home here is the same process as buying one in the states.  Oh wait, but it is not.  

As far as I can remember, the lending institutions here need all the same information, they just go about collecting and organizing it differently.  There are a few additional requirements (like hurricane insurance) that were not required in other states I have lived in.  My customer and I have been under contract since February 14th, 2008 to purchase a lovely two unit home on St Thomas.  Today is September 21st and we still do not have a closing date.  Now it is not all the banks fault because there have been some changes and the seller has been slow (very slow) about some items, but I do believe if the banks here had more of an interest in doing things in a timely manner, this would not be taking quite so long. 

The first problem was that the property had three encroachments.  This means that a part of a structure (building, fence, driveway, etc) from one property is actually on another property.  Every time a home or lot of land is purchased in the USVI, a surveyor must go to the property and map the boundries.  According to the original builder of this house, everything was built two feet within the properties boundries, however the current surveyor has said that this is not true, so the present owner of the house has to “cure the encroachments” prior to closing.  Normally a lending institution will not lend you money if someone else can lay a claim on part of the land they are funding.  The present owner of this house was fully aware of the encroachments before listing the property.  In the contract it states that the owner has 60 days from notification to cure encroachments or leins against the property.  The encroachments were supposedly cured and resurveyed by August 15, 2008. 

My buyer could have (in retrospect should have )backed out of the contract after the 60 days.  The problem was that there was not a alot of choice in that price range, they really liked the house, and they could see a lot of potential for improving the property.

So, the next issue… the banks take on the appraisal.

For those who do not know - a condo, or condominium unit, is like an apartment building except instead of renting, you can own individual units just like any other piece of real estate.  Condos are similar to townhouses (explanation of townhouse at end of post)

GOOD STUFF… 

For many people who purchase here, the purchase is an investment and they are not on island to keep an eye on the place.  The purchase of a condo may be the best option for them because the outside maintenance is taken care of.  All you would need to do is find people to rent it to and make sure the inside is ready for any arrivals.  There are several property management companies( www.saintthomasvacationrentals.com ) on island who can “keep your calender” and hire maid service for you.

There is a “condo fee” associated with this service of outside maintenance to pay for materials and labor.  The outside maintenance usually consists of landscaping, amenity maintenance (i.e. pool, beach chairs, tennis court, golf course, gym), parking lots, security, and general upkeep of the outside of the buildings (paint, deck or entrance repair, etc).  General upkeep is something you would have to spend money on even if you had a house.  The condo association is just taking care of it for you instead of you needing  separate numbers for the landscaper, pool guy, painter, etc. 

Purchasing a condo is also an affordable way to buy waterfront property.  For a fraction of the price of buying a piece of waterfront property or a house on the water, you can have a lovely 1, 2, or 3 bedroom home on the water or at the very least, a very short walk to the water.

NOT SO GOOD STUFF…

This is not to say that you can assume the association will act in YOUR best interest.  Please keep up to date with any notifications or meetings and feel free to request accounts of how and when your condo fees are spent.  Outside companies are sometimes hired to manage funds.  Keep on top of them and keep them honest.

Condo fees run from about $200/month - $1800/month.  This amount is in addition to your mortgage and taxes although it typically  includes  homeowners  insurance.  Insurance is expensive here because we are in the hurricane belt.  Ask to see the complexes’ blanket policy and reserve fund. 

There is also a term called a ”special assessment” that may be added at any time to address unexpected expenses that come up.  These assessments may be a one time fee per instance, or if it is a substantial sum, the complex may give the option of spreading the fee out over several months.  You can join your condo board to give your input about how the fees and assessments are spent.

Townhouses are similar to condos in that the outside maintenance is taken care of and you have restrictions as to what you can put on the outside.  The main difference is that townhouses typically are tall, skinny structures with two or more floors and one or two walls adjacent to the next town home.  There is not another unit above or below you.   While we do have some structures that would usually be called a townhouse, there is not a separate designation on St Thomas, St Croix, or St John.  All multi unit structures are listed as “condos”.

Stay tuned next time for “Who can take care of my new Caribbean home while I’m not there?”