Fittest loser
Article posted: 10/6/2012 5:30 AM

Home equity line of credit is basically a second mortgage

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By Edith Lank

Q. I paid off my house, but I have a home equity line of credit for $40,000. The balance I owe is about $3,000. The county clerk won't give me the deed because the $40,000 shows up in the records as a lien against the house. Why is this listed as a lien, and what can I do? I want to keep the line of credit in case of emergency, like a new roof.

A. There are several misunderstandings here. First of all, the county clerk doesn't give people new deeds. The county's public records can only give you copies of whatever documents have already been filed there.

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Your house isn't really paid off. That home equity line of credit is a form of second mortgage. Now that you've paid off your first mortgage, in fact, it has moved up and has first claim (after taxes) against your property. It has always been a lien, because the real estate serves as security for that $3,000 or however much you choose to borrow.

And finally, you may live in a state where the document showing that a mortgage has been paid off takes the form of a reconveyance deed. In most states, though, one receives a certificate of satisfaction. And the document comes from the lender, not the county clerk.

Q. When is a better time to sell property in the present atmosphere -- before or after the election?

A. I don't think it makes any difference. The start of the school year is a more important factor.

Q. I am interested in purchasing a vacant lot adjacent to my property. I talk to the owner every couple of years to see if he's willing to lower the price, but he refuses to sell it for less than the assessed value. The taxes on it are low, so he doesn't really care if he sells or not. He's also said he doesn't want to pay for the survey or any other expenses involved in selling the property.

What type of expenses for closing costs would be required? There's no real estate agent involved -- just a 'For Sale' sign on the property. I'd pay for it with a down payment of half cash and signing a promissory note for the balance, so no banks would be involved. Is a survey mandatory? I've looked at the property on the tax map in town so I could measure it off. Would I have to pay for a title search/title insurance? Would I need to hire a lawyer to do something, and if so, what?

A. Given the owner's lukewarm motivation, I wonder if you'll get him to agree to anything less than all cash. At any rate: You won't have the expenses that go with getting a bank loan, but you need to make sure you don't buy problems like tax liens, unexpected easements or conflicting claims about ownership. Use a lawyer, and get a title search. Once you're paying for that anyway, title insurance would probably be pretty cheap and would protect you.

I doubt if the owner will take your personal note without the land as security, so I'll bet you also sign a mortgage. You'd want your attorney to draw it up or to look over one that the seller's lawyer draws up. Your lawyer will also double-check the wording on your deed and final dollar amounts like prorated property taxes or mortgage interest.

Don't forget to discuss liability coverage with your insurance agent.

Q. My fiance is a widower. He wants to remove his deceased wife's name from the deed to his house before he sells it. He has a death certificate. What does he need to do in order to get her name off the deed?

A. Lawyers tell me that isn't always necessary, but he can certainly consult the attorney who settled the estate.

Q. A young relative of mine put an offer on a house in Florida, where she lives. I heard it's a short sale. How long is that process? She is waiting for a closing date, and I'll be visiting there this winter. Can you tell me anything?

A. A short sale often takes a long time. The lender must agree to lift the mortgage lien so the property can be sold, even if the proceeds aren't enough to pay off the whole loan. It can be necessary to get approval along the way from various officials or even committees, and nobody is concentrating on the one transaction the way an individual home seller would. Short sales require a lot of patience.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

2012, Creators Syndicate Inc.

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