Extra insurance covers a potential, but unlikely, closing problem

Q. We have completed just about everything needed for our house refinance. We got a note from the title insurance company offering us Closing Protection Coverage. I’d never heard of this before. It is supposed to indemnify the covered parties for the agent’s theft, misappropriation, fraud or any other failure to comply with written closing instructions when agreed to by the agent. It costs $15 for the buyer/borrower. This sounds like a racket to me. Should we buy it?

A. Much of the world has struggled along without that particular protection up till now, so it’s not a necessity. However, at least one state now requires that you be offered it along with your title insurance. It’s not a scam.

Q. My wife is buying a house, but she doesn’t work, so she cannot get a mortgage. I do work, so we are thinking about getting a home loan on my name, but we want her name on the title only. Can I grant the deed to her and remove my name after the closing?

A. Most mortgages these days can be called in when there’s a change in title. Exceptions are usually made in cases of divorce or family inheritance — that’s all I can tell you.

If your wife doesn’t work, how does she plan to make the payments? Is it with anything that might be offered as proof she could qualify after all? Or might you cosign? Will she live there, or is this rental or vacation property? All of that might make a difference.

Mortgage brokers (note: mortgage brokers, not mortgage bankers) have expertise in bringing borrowers and lenders together. Consult a couple of them in the area where the property is located. They’ll have advice on how to accomplish what you want.

Q. I’m in love with a lake property that is priced at $565,000. It’s been on the market for almost four years. It was originally listed for $1 million! This is a true cottage built in 1914 on 1.2 acres. It has tons of romance, but it has been neglected for 60 years. It is owned by three elderly siblings. One recently died and left his share of the cottage to his five grown grandchildren. The property is assessed for $424,000. There have been lowball offers, but they didn’t stick.

How do we go about making an offer that doesn’t offend? Especially now that we have to please seven people instead of three?

A. After four years, it’s clear the property isn’t worth what they’re asking. Your best bet at this point is to hire the most experienced agent in town to act as your broker, someone who will put your interests first and advise you on handling negotiations. You need skilled professional help from someone who knows the local situation well.

Enlist a lawyer also, because there’ll be plenty of legal documents involved before you’re done. And be prepared, if the condition is as you say, for possible complications in placing a mortgage.

Q. I put a bid in for $100,000 on a short sale. My real estate agent said someone offered the full asking price of $140,000, so I guess my offer was refused, but maybe it was never submitted. I then found out the offer fell through, and a builder who works with my real estate agent bought the house for $89,000. Isn’t that unethical? Do I have any recourse?

A. I’m sure some short sales work out well, but those aren’t the ones I hear about. A short sale requires approval from the owner’s lending institution. I get the impression that banks, which aren’t really set up for the real estate business, just don’t have efficient systems for processing their responses in a timely manner. Both agents and would-be buyers often find the process frustrating, though new federal regulations may make the procedure more effective.

I don’t know whether that agent was working for you or for the bank — whose interests the agent was legally required to put first. That would make a difference. And don’t forget there’s more involved than just purchase price. Sometimes an all-cash offer looks better than a higher one that depends on finding mortgage money, and a prompt closing date can be attractive.

Ask the agent why you weren’t notified before the builder stepped in. And if you’re still unsatisfied, you can lodge a complaint with the local realty association if that agent is a member or with the state agency that regulates licenses.

Ÿ 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.