If someone offered you a $330,000 home for $16, you’d be pretty sure there was a catch. But is there? A man in Flower Mound, Texas seems to think he may have a chance at that, and if you needed any further proof that our housing market is wildly dysfunctional, this should be enough to convince you.
The man, who is attempting to take advantage of an obscure Texas law relating to “adverse possession,” has been the subject of some local news reports, and is determined that he may have found just the loopholes he needs to end up the owner of the house.
The $16, by the way, was the fee he paid to file a state form in which he claimed ownership of the house. It had been abandoned by its owner, who simply walked away from it and the sizable mortgage attached to it. And then the lender went out of business, creating enough of a confusing void to allow this man to stroll in and take up residence.
As determined as he may be, we have to believe this man is living on borrowed time, both literally and figuratively. While there may be some delay – due to the failure of the lender – in sorting out who owns the loan, that question will likely be answered in a few months. But as we understand the law, this man would have to squat in the house for two years, without being subject to foreclosure proceedings in the meantime, before his claim would become valid.
It’s certainly a gutsy move on this man’s part, and if he didn’t have a house of his own before this, he’s assured of a roof over his head for at least a while. But we don’t see how the eventual holder of the loan will ever let a $330,000 asset slip out of its hands without a fight. That loan holder will also, by the way, have the squatter’s neighbors on its side, as they aren’t at all happy with this turn of events in the neighborhood.
While the lender’s business failure in this instance was a fluke, there are still a lot of homeowners simply walking away from their loans because they are so seriously underwater, as I wrote about recently. Preventing any of these from turning into similarly freak occurrences is possible, so long as the players are vigilant.
A homeowner falling behind in payments, for example, should look at options such as a loan modification or a short sale as a far better option than sneaking away in the middle of the night. The lender should be vigilant and when they see the homeowner falling behind, take the initiative and encourage a modification or short sale rather than sitting back and just waiting out the clock until it’s time to foreclose.
Finally, the homeowners association should also be on top of what is happening in the neighborhood and be proactive about protecting the interests of neighbors. That includes making sure that if a squatter does sneak in through a legal loophole, that the HOA does all it can to make sure the neighborhood and its home values are the top priority.
Watch the news clips and let me know your thoughts.