Should I pay for the 2nd loan of a house I am trying to buy?

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We are buying a house in sacramento, california and our realtor told us that the house has a 2nd loan that we should pay out of pocket. We tried adding the 2nd loan to the purchase price of the house (to which our lender has already agreed) but the seller informed us that the 2nd loan should be paid on the side, meaning it cannot be added to the price of the home. Our lender then was a bit hesitant to give us a 2nd loan to cover for what the seller is asking for. Our lender informed us that the 1st loan should dissolve already the 2nd loan and stand as since the house has already foreclosed or is bank owned already. She also advised us that we shouldnt be paying for something that is not ours (the 2nd loan) and let the seller shoulder for the 2nd loan.
I called up my realtor and informed her that we are at a disadvantaged if we were to pay for the 2nd loan. For one, our lender told us, if we decide to make a loan just to pay for the 2nd loan of the seller, the same rules would be applied to my 2nd loan as to my 1st loan, meaning I would also be charged for whatever fees I incur for my 1st loan and applied to my 2nd loan. Second, my monthly mortgage will increase as well, since I would be paying 2 loans, both charged with the same interest rate.
Our realtor insist that we still need to pay the 2nd loan and “think about it as like we are paying for the closing costs ourselves” since we asked the seller to shoulder the closing costs. I was a bit shocked because I was thinking who the realtor is working for, us or the seller? Our realtor is the friend of the seller’s realtor and both work for the same company, which gave us the advantage since they made sure that our offer was the one presented to the bank.
We are 1st time home buyers so we are so confused. We have a lender who thinks and gives us sound advise, and a realtor who showed us a house that we love yet has some issues that we do not like. We do not want to give up the house and we are just waiting for the bank’s response. Is there a way to go around this thing? Need advise.

  1. Reply
    Not I
    February 24, 2011 at 10:12 am

    You pay nothing but the asking price. Your realtor does not give a hoot about you just the commission. Listen to your lender. Either walk away from the house or hire a lawyer

  2. Reply
    February 24, 2011 at 10:49 am

    This is a weird sounding situation. It sounds like the title to this house is not clear yet because the 2nd mortgage hasn’t given up their interest in the house? There are rules and laws of precedence about which loans, or outstanding fees (like association dues for a condo, or back taxes, for example) can stick to the title even after the main mortgage forecloses. It sounds like the title to this house you want is not yet “clean” for you to buy.

    I would be wary of this and definitely make sure you understand what you may be getting into. My wife and I have bought several foreclosures and there can be some potential snags with this kind of stuff. The person who can explain who still has claim to the title of this house is the title company you’re using for the closing. They have to figure all this out to close the house for you. Make sure the title company is reputable and absolutely make sure you buy the title insurance in case later another title claimant appears. Without title insurance, you could be liable for almost anything that comes up later.

    If you really want this house, it may be worth the 2nd loan you need to pay the existing 2nd loan off. But the price you’re paying the 1st loan company to buy the house needs to reflect the total cost you’re paying. So now with this new info, you may want to revisit your offer to the bank that owns it and tell them and reduce what you’re willing to pay. If this unclean title is new to you since you made the offer, your purchase agreement should allow you to back out or renegotiate because of the new info.

    Just be sure you trust your agent. Understand that they’ve put a lot of hours into this by now and they can almost taste their commission check. They kinda want you to go through with the purchase at this point. It may or may not be in your best interest, and that’s for you to figure out. Don’t get pressured into anything. This is a big purchase and you don’t want to make a mistake you’ll have to live with for the next 10 years or whatever.

    Be careful and consider talking to the title company yourself and learn about what’s going on with that place before you decide to go through with it. There’s always another house, if that one doesn’t work out, trust me.

    Good luck!

  3. Reply
    February 24, 2011 at 11:13 am

    I don’t know what is customary in California, but in my area (IL/WI) when you buy property, the seller should provide the buyer with title insurance to guaranty that the the property is free and clear of any liens or encumbrances.

    Was this an actual foreclosure, or is the former owner trying to sell this in preforeclosure? Because if it already foreclosed, any outstanding 2nd should be the responsibility of the previous owner, no longer tied to the property.

    You should not be responsible for the seller’s 2nd loan unless you agreed to that in your contract. If the seller cannot give you the property free and clear at the total price agreed to in your contract, the seller would be breaching the contract. Maybe you could get it for a better price at the foreclosure auction instead.

  4. Reply
    February 24, 2011 at 11:32 am


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