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Qualla Village Foreclosure Update

Qualla Village Foreclosure Update. Qualla Village Foreclosure. Does it affect title to my home? Does it affect resale value of my home? How does it affect homes listed for sale? What happens next? What are our options?. A Brief History of Qualla Village. “Agreement”. Recorded June, 1996

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Qualla Village Foreclosure Update

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  1. 9/24/10

  2. Qualla Village Foreclosure Update 9/24/10

  3. Qualla Village Foreclosure Does it affect title to my home? Does it affect resale value of my home? How does it affect homes listed for sale? What happens next? What are our options? 9/24/10

  4. A Brief History of Qualla Village 9/24/10

  5. “Agreement” • Recorded June, 1996 • Birth of Qualla Village • Agreement between • Connestee Falls Property Owners Association • Qualla Village, LLC (the Developer) • Developer may consolidate lots, build roads and build no more than 140 homes 9/24/10

  6. 9/24/10

  7. Original Declaration (November, 1997) • Establishes Qualla Village assessments • Establishes Property Owners Association (QVPOA) to collect assessments and provide maintenance 9/24/10

  8. Developer financed building in Qualla Village via several construction loans 9/24/10

  9. Deed of Trust (April 14, 2005) • Between Developer and Macon Bank • Secures Developer’s Line of Credit for building homes in Qualla Village • Collateral: all of Qualla Village, except sold units 9/24/10

  10. Amended Declaration (April 21, 2005) • Restates most provisions of Original Declaration • More detail and a few changes • Expiration of Developer control Jan., 2011 9/24/10

  11. Let’s look at the Deed of Trust • Line of Credit from Macon Bank • Construction of homes in Qualla Village • Secured with a Deed of Trust (mortgage) • Collateral: ALL of Qualla Village except homes previously sold 9/24/10

  12. 9/24/10

  13. Release Deeds • As homes were built and sold, the Developer paid Bank • Bank issued a “Release Deed” releasing each home from the Deed of Trust • (Macon Bank also issued Release Deeds for homes not financed by line of credit) 9/24/10

  14. All homes were released from the deed of trust • Except two Built Units on Setsi Lane • Except Messick, Dodman & Burdette, which should have been released • Bank has agreed to release Messick & Dodman 9/24/10

  15. Does it affect title to my home? • Does it affect resale value of my home? • How does it affect homes listed for sale? • What happens next? • What are our options? 9/24/10

  16. Title to your Qualla Village Home is not in Jeopardy • You had a Closing • You received a Warranty Deed • Macon Bank issued a Release Deed • Your home is no longer subject to the lien of the Developer’s Deed of Trust 9/24/10

  17. Foreclosure • Spring 2010: Developer stopped making mortgage payments to Macon Bank • Now Macon Bank is foreclosing 9/24/10

  18. Legal Representation • Qualla Village POA is represented by Neumann & Associates • The Developer has legal counsel, but apparently, has limited funds 9/24/10

  19. What’s the Collateral? • ALL of Qualla Village • Including the two Built Units • NOT COLLATERAL: • Homes sold prior to the Deed of Trust • Homes sold and released after recording of the Deed of Trust 9/24/10

  20. Does it affect title to my home? • Does it affect resale value of my home? • How does it affect homes listed for sale? • What happens next? • What are our options? 9/24/10

  21. Current Real Estate Market • Home prices declined 28% since 2006 • Bloomberg: may slide three more years • Connestee homes listed for sale: 168 • Connestee homes sold in 2010: 26 • Qualla Village homes listed for sale: 9 • Qualla Village homes sold in 2010: 0 9/24/10

  22. Does it affect resale value of my home? • If you’re trying to sell now • The Market is a big problem • The Foreclosure is a big problem 9/24/10

  23. How does it affect homes listed for sale? • Nothing is selling in Qualla Village • Realtors must advise potential buyers of the Foreclosure • Nothing likely to sell in Qualla Village until the Foreclosure is resolved 9/24/10

  24. Does it affect title to my home? • Does it affect resale value of my home? • How does it affect homes listed for sale? • What happens next? • What are our options? 9/24/10

  25. What’s next? • What’s at stake • Recent Events 9/24/10

  26. Qualla Village Lots • Qualla Village lots are unusual • Small Rectangles three feet beyond the drip line of our roofs • The Balance of Qualla Village is considered Common Area 9/24/10

  27. Qualla Village Lots 9/24/10

  28. Swiss Cheese • After the sold lots are removed from the Lots 1 and 1A, you have Swiss Cheese. • The Board considers the Balance of QV to be the Common Area. • The Bank says there’s no Common Area because the Developer has not deeded the land to the POA. 9/24/10

  29. The Common Areas • Land surrounding each of our lots • The roads and culverts • The ponds, bridge & docks • Common landscaping • Balance of Qualla Village 9/24/10

  30. Recap • Macon Bank is foreclosing • Collateral is the Balance of QV • There are two Built Units on that land • Value about equal to the unpaid balance 9/24/10

  31. More Recap • Bank and Developer dispute value of units • Bank: Can’t sell them for what’s owed • How to satisfy this deficiency? • Sell the rest of the land • Sell some lots • Someone pays the deficiency 9/24/10

  32. Recent Events 9/24/10

  33. Macon Bank’s Verbal Offer (August 25,2010) • QVPOA to pay the Deficiency ($215,000) • Bank to take the two Built Units • Bank to cancel the Deed of Trust 9/24/10

  34. Board Rejected Verbal Offer • The Board rejected the deficiency figure as excessive • The Board asked for a reasonable figure and detailed justification 9/24/10

  35. Bank has missed two deadlines • Original deadline: Friday, September 10 • Board Meeting of September 15 9/24/10

  36. Does it affect title to my home? • Does it affect resale value of my home? • How does it affect homes listed for sale? • What happens next? • What are our options? 9/24/10

  37. What are our options? 9/24/10

  38. Without an offer from Macon Bank • We only have two options: • Litigation • Let the foreclosure proceed 9/24/10

  39. Litigation Developer argues • Loan balance paid off in 2006 • Bank should have released the Balance of QV • Only the two Built Units should be mortgaged • May Sue for “Reformation” 9/24/10

  40. What is Reformation? • Reformation of the Deed of Trust • Convince the Court to remove the Common Areas as Collateral • Collateral would be reduced to the two Built Units 9/24/10

  41. The Down Side • Our Attorney advises • The case is not a sure thing • The Developer is in a stronger position to make the case than the POA • The Developer • Has very limited funds • Suggests the POA cover his legal fees 9/24/10

  42. The Cost • The Developer says $3,000 to $4,000 • A local attorney said it would be $10,000 or more • Our attorney estimates $15,000 to $40,000 in legal fees to pursue the reformation argument 9/24/10

  43. No Guarantee We’d Win • The case for Reformation should be made by the Developer • It is not a sure thing • If we lose, we’ve spent a lot of your money and not resolved the issue of the Common Area 9/24/10

  44. Let the Foreclosure Proceed • Macon Bank will set a minimum bid • If someone bids higher, they could • Sell the Built Units • Build on the Remaining Land 9/24/10

  45. If No Bid Exceeds the Bank’s Minimum Bid • Bank buys out the Deed of Trust • Bank owns the Balance of Qualla Village • The Bank seeks buyer(s) for • Built Units • Balance of Qualla Village 9/24/10

  46. The Developer or a Qualla Village Owner may Sue • Foreclosure can’t proceed until suit resolved • We face additional attorney’s fees • Reserves • Special assessment 9/24/10

  47. What if the Balance of QV is sold at Foreclosure Sale? 9/24/10

  48. Constraints on Successor Developer • Builder must be approved by Connestee Falls A&E • New home must follow the Connestee Falls A&E Application/Approval process • In the past, Connestee Falls A&E has required Qualla Village A&E approval 9/24/10

  49. Constraints on a Successor Developer • 20 pages of A&E rules • Setbacks: 25 feet front, 7.5 feet from side lot line • No Qualla Village A&E rules in place (yet) 9/24/10

  50. The Down Side of Foreclosure Sale • Can we get along with a new developer or possibly several builders? • Can we limit what can be built? • Can we enforce Architectural Standards? • Can we restrict to existing models? • Can we control the locations of new homes? • The Board and Qualla A&E would need to be very involved in approval process 9/24/10

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