Encroachment = no financing? :(

[songsofexperience]

I found a great house on 3 acres with a pond, out in the country (USDA area). It's a foreclosure that came on at $199k in late December and has dropped consistently to $125k as of yesterday. It's within my range now and would have built in equity.

Alas, the agent says it has to be a cash purchase because there's a small house that's encroaching  by 11 feet. It's on the other side of the pond and really, not a big deal, but he says no lender will touch it. He had a client trying to buy it who called around a bunch of lenders and they all said no way.

I'm assuming there's a way to fix this with a lifetime easement agreement or something, but since it can't be financed and I don't have $100k it's for me.

Has anyone run into this?

[ShanetheMortgageMan]

I think the owner of the other home would need to move their home back 5 yards.  All jokes aside, I've heard of some encroachments being solved by getting a survey.  Encroachments are issues when lending though, whether something about your home is encroaching on another property or vice versa... as it creates a cloud on title, which needs to be handled before lenders are willing to close.  If you look up your state's adverse posession law you may find it an interesting read.  Here is an interesting read from a bank "closer" (works in the closing department to make sure the loan funds) with an interesting story about an encroachment: http://boards.answers.findlaw.com/index.php/topic/228722-encroachment-issue-and-delayed-closing/

[songsofexperience]

Thanks Shane. I did so some reading and I'm wondering why the bank that owns the house wouldn't try to sort this out. They first listed the house at $231K, dropped it to $199 3 weeks later, then every 1-2 weeks since the until yesterday it hit $124,900. Wouldn't it be cheaper for them to get the other guy to agree to redraw the property line? Maybe there's some other issue I don't know about, but it's a fairly new house so I can't imagine anything major in terms of structure. would a bank rather lose $100K than get a surveyor out and file papers to move the property line? From what I've read it's quite common so unless the other guy is refusing to cooperate . . . Oh well. If only I had $100k on hand!

[ShanetheMortgageMan]

The bank may be being unreasonable (like trying to make the guy move his house) or perhaps the other guy just doesn't want to be bothered.  You probably should go to the neighbors home and ask if the bank has even been in contact with them regardng the encroachment.  You may be able to do a lot of the leg work, find an investor who would want to go in with you to purchase it with cash, purchase it and flip it for the market value.  Sounds like there isn't a big rush on this property.