Posted by ray@lcorn on October 28, 2002 at 10:25:23:
Paul,
This is a new one on me. I haven’t dealt with the situation so my comments are purely hypothetical.
I can understand the lender’s concern. The special assessment would attach to the property if not paid, and the sellers may or may not pay as agreed. The lender is making a loan based on a clear title, and this has the potential of clouding that title. I think their concern is warranted.
One possible solution that comes to mind would be to escrow a portion of the seller’s proceeds to cover the assessment. A little digging should turn up an annuity that could be purchased at a discount to the total assessment that would pay out over the 10 years. That would reduce the sting somewhat to the seller, protect the lender’s position, pay the assessment and leave everyone happy.
Lenders Requiring Paid Special Assessments - Posted by Paul Zankowski
Posted by Paul Zankowski on October 28, 2002 at 08:32:14:
I am selling a residential property which has a special tax assessment levied against it in the amount of $12,000 for a new sanitary sewer system installed by the local municipality. This assessment is payable in 10 equal installments over 10 years, and no assessment is yet due and payable (the first payment becomes due in September of 2003). All homes in the neighborhood have a similar assessment. My purchase agreement with the buyers makes them solely responsible to pay this assessment, which they presumably will make over the next 10 years.
I understand that another person in the neighborhood recently sold their home, and that their buyers’ lender required the same special assessment on that home to be paid in full before closing. I suspect that such a lender must be concerned that its mortgage could be trumped by the lien of the special assessment if it isn’t timely paid. Granted, I don’t see the need for such concern since the lender runs this same risk with respect to general real estate taxes each year, and simply collects tax escrows each month to insure that the taxes are always paid, but lenders will be lenders.
Has anyone dealt with this issue with a lender before? Did they come to their senses? Is there any potential solution if they do not come to their senses?