Lender Delays in Releasing Property Lien, Buyer Walks, Any Recourse Against Lender

[magellan1947]

My question involves real estate located in the State of: Michigan. Accepted an offer to purchase my home contingent upon agreement to release of lien by lender on or before October 30th. Request to release lien sent to lender on October 4th. As of October 30th, lender had not agreed to release the lien but the buyer granted an extension to obtain release to November 13th. As of November 13th, lender still had not agreed to release of lien but stated it would come soon. Buyer agreed to delay closing to obtain release until November 19th. As of November 19th, lender still has not agreed to release of lien and the buyer will not extend.

Do lenders have any statutory obligations to make approval decisions within a given time frame so as not to jeopardize the sale of property? Thanks.

[jk]

what is the lien for? Is whatever debt it is being used to secure already paid?
If there is a debt the lien is being used to secure an interest on the property, they are not going to release it until the debt is paid.

[magellan1947]

what is the lien for? Is whatever debt it is being used to secure already paid?
If there is a debt the lien is being used to secure an interest on the property, they are not going to release it until the debt is paid.

Thanks for asking JK. Yes, there is a debt, a blanket mortgage covering two homes, one of which I received and accepted an offer to purchase from the buyer. In order to go to closing and consumate the sale, my real estate broker requested agreement from the lender to release the lien on the property upon receiving the proceeds of the sale. I apologize if my wording led to confusion. It is this agreement that we sought but was not timely given.

[jk]

]Ok, so you just want the lenders agreement they will release part of the security covered by the blanket.

No, there is no time requirement for them to do that. In fact, there is no requirement they do it at all until the entire loan is paid in full. For a bank to release part of the security under a common loan, they will have to have verified that the remaining security is adequate compared to the remaining loan amount.

In other words; you need to talk directly to the creditor to find out what they require in order to release part of the currently obligated security. That might require an appraisal of the remainder of the secured property and likely a contract between you and the bank that they release some specified portion of the security in exchange for a specified amount of money.

You can't just say; I'm selling one of my parcels and I want you to release your lien on it.

They need to know how much money they are going to get and how much the remaining security is worth. If you do not intend on paying them enough to reduce the overall debt to below what the remaining security is or agreed terms in general, they aren't going to release anything.

and you need to whack your r e agent for not telling you a lot more about how to do this.

[magellan1947]

Thanks JK. Your answer spells things out well and I was surprised that the lender didn't require an appraisal of my other home to determine if there was enough value in it to give an 80/20 LTV after accounting for the sale proceeds.

All the same, the lender was specific that they wanted only my financial statement, which I sent them, and has since strung me along with promises that their agreement would come "any day". Why say that if they had no intention of following through?

Without doubt, the proceeds of the sale would have been insufficient but I was fully prepared to pay the difference at closing. Instead, the opportunity to sell the home has been lost and I face substantial costs until another buyer comes along, if ever. Our real estate market is the 6th worst nationally for sellers and I am not optimistic that another buyer will come along any time soon.

[jk]

sorry to hear that. It sounds like there might not have been clear communication with your bank (that holds the loan). If you intend on selling the houses independently like this, I would speak with the bank and do anything you can ahead of time. You should at least, be able to find out any actions they might require you to take such as an appraisal of the remaining parcel. I would start with; "well, I had a chance to sell part of the land but something happened and you couldn't get me the release you said was forthcoming. What do I need to do so this doesn't happen again the next time I am in a similar situation?"

[magellan1947]

Thanks for taking the time to respond to this thread, JK. Your suggestion makes a lot of sense and will be acted upon. Have a nice Thanksgiving!

[curiou]

Thanks JK. The post you wrote helped me out as well