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Frequently Asked Questions About
Foreclosure and Construction Law

CALIFORNIA – OREGON - ARIZONA

NOTICE:

THE “FREQUENTY ASKED QUESTIONS,” SECTION, BELOW, IS NOT THE RENDERING OF DIRECT LEGAL ADVICE AND IS PROVIDED AS A COURESTY TO THE PUBLIC FOR GENERAL EDUCATIONAL PURPOSES ONLY.  PROPER LEGAL ANSWERS VARY GREATLY FROM CASE TO CASE AND THUS REQUIRE SEPARATE AND DIRECT ANALYSES IN EVERY EVENT.  ALL LEGAL ADVICE SHOULD BE THEREFORE IN EVERY CASE BE SOUGHT DIRCTLY FROM A LICENSED ATTRONEY.  THE QUESTION AND ANSWER FORMAT BELOW IS SELECTED TO TRY TO MAKE THE MATERIAL EASIER FOR THE READER TO UNDERSTAND.

FREQUENTLY ASKED QUESTIONS ABOUT
REAL  PROPERTY FORECLOSURE 

GENERALLY:

 QUESTION:  What happens if I go into foreclosure on my mortgage or trust deed?

 ANSWER:  You can lose your property in a forced sale and in some cases still owe the creditor money.

California permits both judicial (a court lawsuit for foreclosure) and non-judicial (sale by trust deed trustee without a court suit) foreclosure.  Sale by a trustee is only permitted in sales based upon the trust deed type of finance. For pure mortgages, the sale by trustee is not available and the creditor must foreclosure by suit.  In some cases (though these owner-finance instruments are not commonly seen in recent years due to the availability of bank finance, but may be seen more due to recent recession-generated bank finance scarcity) a sale by nominee (without a lawsuit) can be done under a contract for deed or land sale contract.

JUDICIAL FORECLOSURE:

QUESTION:  What is “judicial foreclosure”?

ANSWER:  The creditor sues you and the Superior Court and the Court orders the property sold and can, in some cases, lodge a judgment against you for any shortfall in the sale proceeds to satisfy the remaining debt.  See limits for deficiency judgments, below.

In this foreclosure type, a lawsuit is initiated in the Superior Court which accelerate the entire balance due under the promissory note and requests judgment for that balance (plus interest, attorneys fees and costs) and an execution order permitting the property to be sold to the highest bidder on a given day, commonly by the Sheriff or Constable to resolve the debt.  The proceeds of sale are applied to the judgment and if there is any deficiency (the proceeds of sale are less than what was judged due), in some cases noted below, the balance of the creditor’s judgment for money stands and can be further executed against the debtor’s non-exempt assets by levy, execution or garnishment. The borrower may have up to 1 year to redeem the property (buy it back for what it was sold for).   See the time involved and the challenges of a judicial foreclosure under OREGON FORECLOSURES, below.  California processes are about the same but can in some jurisdictions take even longer to get to a trial due to the backlog of cases.

NON-JUDICIAL FORECLOSURE:

QUESTION:  What is a “non-judicial foreclosure”?

ANSWER:  The creditor does not sue in a Court.  It sets the property for sale by an appointee Trustee.  No “judgment” is assessed against the debtor for any sale shortfall.

In this foreclosure type, the trustee appointed in the trust deed forecloses the property without a lawsuit and merely by giving notice of Default and, ultimately, an Election to Sell the property on a given date and place for the balance due, plus interest and taxable trustees and attorneys fees as set by statute.  There is no deficiency judgment in this type of foreclosure.  That is to say, whatever the creditor receives at the trustee’s auction is all that the creditor will get and the balance of the debt, if any, is absolved.  The debtor has up until five days before the foreclosure sale to cure the default and stop the process. The sale may be held on any business day between the hours of 9:00 am and 5:00 pm and must take place at the location specified in the notice of sale.  The debtor has no rights of redemption after the sale.

DEFICIENCY JUDGMENTS:

QUESTION:  What is a “deficiency judgment”?

ANSWER:  It is a legal judgment against the borrower for any shortfall in a judicial sale of the property to meet the total remaining debt plus taxable interest, fees and costs.  To the extent the judicial foreclosure auction yields less than the judgment, a deficiency judgment could be available for judicial sales of the property, whether under a mortgage or deed of trust.

WASTE:

QUESTION:  What is “waste” and how does a borrower become liable for it?

ANSWER:  “Waste” means he debtor had damaged he property or allowed it to become damaged and the debtor can be held accountable for that even where there is no deficiency available for the foreclosure.

Irrespectively of the laws limiting a deficiency in a foreclosure, the debtor can still be liable to the lender for such things as waste (damaging the property beyond normal wear and tear or permitting it to be vandalized or to radically deteriorate before the sale).  Waste can also be accomplished by failing to keep the property insured for casualty until the time of sale and a casualty event occurs.

PERSONAL GUARANTY'S:

QUESTION:  What if I have signed a “Guaranty” for someone on the debt or they have signed one for my debt?

 ANSWER:  You or they could be liable for the debt or judgment to the extent it falls short of paying off the lender, even on a non-deficiency debt, depending upon how the Guaranty is worded.

Under certain circumstances, it is possible for one who guaranteed a non-recourse debt or judgment to be held liable for the deficiency of the borrower guaranteed, not as a matter of judgment, mortgage or trust deed law, but under the law of guaranty.  Guarantees must be carefully read to determine what they cover and how extensively.

WAIVER OF FORECLOSURE FOR SUIT ON NOTE:

QUESTION:  Is there any other way a creditor could claim against a debtor on a trust deed or mortgage?

ANSWER:  Yes.  In some cases, the creditor can ignore the lien of the debt on the property and sue on the promissory note that was signed with the deed of trust or mortgage in the Court.  This is an “action on the debt” and not a “property foreclosure.”

In some cases, a creditor may elect to waive a foreclosure action against the property and simply sue separately on the underlying promissory note by a lawsuit through the Superior Courts.  Mortgage and trust deed holders in subordinate title positions behind larger superior liens (where there is little or no equity left to realize upon) will often elect to do this on those loans where direct action is possible and where there are other assets the creditor might seek to realize from with a judgment.

NEW PRO-CONSUMER CALIFORNIA FORECLOSURE LAW:

QUESTION:  Are there any other rules affecting the creditor or debtor in foreclosure?

ANSWER:  Yes, and more forthcoming all of the time as the state tries to sort out the financial havoc wreaked by the recent recession.  Most favor the consumer.

Under the recent California Foreclosure Prevention Act, lenders foreclosing on certain loans are prohibited from giving a notice of sale until the lapse of at least 3 months plus 90 days after the filing of the notice of default.  A loan servicer can obtain an exemption from this requirement by demonstrating that it has a comprehensive loan modification program.   The purpose of this law is to try to stem the tide of foreclosures and their adverse consequences by providing additional time for lenders to work out loan modifications with borrowers as well as creating an incentive for lenders to establish comprehensive loan modification programs. This bill was enacted into law on February 20, 2009 along with the state budget.  Its provisions took effect March 16, 2009 and  will stay in effect only until January 1, 2011 at which time it will be repealed, unless it is deleted or extended by statute (Cal. Civil Code § 2923.52(d)).

Under preexisting law, a lender who files a notice of default in the foreclosure process must wait at least 3 months before giving a notice of sale (Cal. Civil Code § 2924).  The new law extends that 3-month period by an additional 90 days. Also under preexisting law, the general rule of thumb is that the entire foreclosure process takes a minimum of 4 months from the filing of a notice of default until the final trustee’s sale.  Under the new law, that general rule of thumb is extended by 90 more days for a total of about 7 months, unless the lender is exempt. 

Unless otherwise exempt, the 90-day extension to the foreclosure process applies to loans that meet all of the following requirements: (1) The loan was recorded from January 1, 2003 to January 1, 2008, inclusive; (2) The loan is secured by a first deed of trust for residential real property; (3) The borrower occupied the property as a principal residence at the time the loan became delinquent; and; (4) A notice of default has been recorded on the property. (Cal. Civil Code § 2923.52(a).

A  loan servicer is exempt from the 90-day extension to the foreclosure process if the loan servicer has obtained an order of exemption based on the implementation of a comprehensive loan modification program (Cal. Civil Code § 2923.53(a)) (see Questions 89 to 94).  The order of exemption must be current and valid at the time the notice of sale is given (Cal. Civil Code § 2923.52(b)). Other exceptions to the 90-day extension include the following: (1) Certain state or local public housing agency loans (Cal. Civil Code § 2923.52(c)); (2) when a borrower has surrendered the property as evidenced by a letter confirming the surrender or delivery of the keys to the property to the lender or authorized agent (Cal. Civil Code § 2923.55(a)); (3) when a borrower has contracted with any person or entity whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process and avoid their contractual obligations to the lenders (Cal. Civil Code § 2923.55(b)); (4) when a borrower has filed a bankruptcy case and the court has not entered an order closing or dismissing the case or granting relief from a stay of foreclosure (Cal. Civil Code § 2923.55(c)).

A comprehensive loan modification program that may exempt the loan servicer from the 90-day extension to the foreclosure process includes all of the following features: (1) The loan modification program is intended to keep borrowers whose principal residences are located in California in those homes when the anticipated recovery under loan modification exceeds the anticipated recovery through foreclosure on a net present value basis (Cal. Civil Code § 2923.53(a)); (2) it targets a 38 percent or less ratio of the borrower’s housing-related debt to the borrower’s gross income (Cal. Civil Code § 2923.53(a)).  Housing-related debt is debt that includes loan principal, interest, property taxes, hazard insurance, flood insurance, mortgage insurance and homeowner association fees (Cal. Civil Code § 2923.53(k)(2)); (3) it includes some combination of loan modifications terms as specified (Cal. Civil Code § 2923.53(a)); (4) The loan servicer seeks long-term sustainability for the borrower (Cal. Civil Code § 2923.53(a)).

A comprehensive loan modification program that may qualify for exemption from the new law extending the foreclosure process by 90 days must include some combination of the following features:  (1)  An interest rate reduction, as needed, for a fixed term of at least five years; (2) an extension of the amortization period for the loan term to no more than 40 years from the original date of the loan;  (3) deferral of some portion of the unpaid principal balance until loan maturity;  (4) principal reduction;  (5) compliance with a federally mandated loan modification program; or  (6) other factors that the appropriate commissioner determines. (Cal. Civil Code § 2923.53(a)(3).

A loan servicer is not required to modify a loan for a borrower who is not willing or able to pay under the modification.  Furthermore, a loan servicer is not required to violate any contractor agreement for investor-owned loans.  (Cal. Civil Code § 2923.53(i).)

A loan servicer may apply to the appropriate commissioner (see Question 94) for an order exempting loans that it services from the new law extending the foreclosure process by 90 days (Cal. Civil Code § 2923.53(b)(1)).   The Secretary of Business, Transportation and Housing must maintain a publicly-available Internet website disclosing the final orders granting exemptions, the date of each order, and a link to Internet websites describing the loan modification programs (Cal. Civil Code § 2923.52(f)) (see also Question 96).  The notice of sale must include a declaration from the loan servicer stating whether or not it is exempt and whether the 90-day extension is in effect.

See other consumer defenses to debts under “General Defenses Common to All States”, below. Also see other debtor ramifications of a foreclosure, below.

GENERALLY:

QUESTION:  What happens if I go into foreclosure on my mortgage or trust deed?

ANSWER:  You can lose your property in a forced sale and in some cases still owe the creditor money.

Real property foreclosures in Oregon are by the same processes as for California, above and for  Arizona, below, i.e.  either through a  non-judicial sale by a trustee’ auction or a sheriff’s or constable’s sale by order of a court in a judicial foreclosure processed as a lawsuit through a court.  The consumer’s notice rights, foreclosure timelines and the creditor’s rights for deficiencies change.  So also does the court for judicial foreclosures as in Oregon the Circuit Court has jurisdiction and there is no court entitled the “Superior Court” as there is in California and Arizona.  As in both California and Arizona, in certain circumstances, a creditor may elect to waive the security against the land and sue the borrower strictly on the promissory note.    A Guarantor (one who stands liable for the loss of the creditor by operation of a written agreement to do so) can have the same liability as in California, above, even where the debt is a non-deficiency debt.  ORS 86.770 (4).

ADDITIONAL NOTES ON JUDICIAL FORECLOSURES:

QUESTION:  What is “judicial foreclosure”?

ANSWER:  The creditor sues you and the Circuit Court and the Court orders the property sold and can, in some cases, lodge a judgment against you for any shortfall in the sale proceeds to satisfy the remaining debt.

Judicial foreclosures in all states often take more time than non-judicial trust deed foreclosures.  In a judicial foreclosure, the creditor must file a lawsuit in the Circuit Court, serve the defendant debtor, the debtor has the right to answer the complaint with any defenses the debtor may have and perhaps the debtor may even counterclaim against the lender and, absent a summary judgment at some point by the judge (a judge’s decision that the case does not merit a jury trial and is so clear that a judgment ought to be allowed as a matter of law) may even result in a trial.  If all of that happens, a trial could be a year after the filing.  If judgment for the creditor is granted, it still tends to take 60-90 days to even go to a sheriff’s or constable’s sale of the property to satisfy the judgment.    A property sold at judicial foreclosure can be redeemed by the borrower or others who have purchased the borrower’s position for up to 180 days after the date of sale for the price of sale plus statutorily-permitted costs

DEFICIENCIES AND LIMITS:

QUESTION:  What is a “deficiency judgment” and what foreclosures generate them?

ANSWER:   A deficiency judgment (for any shortfall between the auctioned price and the amount owed) can only be obtained through a judicial foreclosure.  None is permitted in a trustee’s non-judicial foreclosure by trustee’s sale.

There are other limits to deficiencies, however, as follows: 

Foreclosure On Pure Mortgage:  When real property is sold pursuant to a judgment foreclosing a true mortgage (not a judicial foreclosure of a trust deed) and the proceeds of the sale are not adequate to satisfy the amounts secured by the mortgage, all judgment remedies for collection of the unsatisfied amounts expire when the sale is made if:  (1) The mortgage was given to a seller to secure the unpaid balance of the purchase price of real property (an “owner-carry” has no deficiency judgment); or  (2) The mortgage was given after September 13, 1975, to a person other than a seller to secure not more than $50,000 of the unpaid balance of the purchase price of real property used by the purchaser as the primary or secondary single family residence of the purchaser. [ORS 88.070, Amended by 2003 c.576 §349; 2007 c.166 §15] (the original mortgage was not more than $50,000).

Judicial Foreclosure of Trust Deed:  When the property foreclosed upon was residential property (a single-family, owner-occupied dwelling and appurtenances), there can be no deficiency following the judicial foreclosure of the trust deed.  Om all other types of trust deeds, a deficiency is possible and the judgment will usually so direct.

ADDITIONAL NOTES ON NON-JUDICIAL FORECLOSURES:

Trustee’s non-judicial foreclosure require that the creditor file with the county recorder a notice of the breach and foreclosure and election to sell not less than 120 days prior to the scheduled sale date.  The statute further provides that the notice must be published in the newspaper and served upon the debtor and property occupants in the manner set forth.   Like California and Arizona, there is no right of redemption by the borrower after the trustee’s sale.  Redemption of a trust deed in breach by reason of missing ongoing payment installments can only be redeemed by remitting all of the missed payments plus interest, penalties and statutory fees prior to the date of sale.  As noted, there is no deficiency judgment possible after a non-judicial trustee’s sale.

WASTE, OTHER CLAIMS:

QUESTION:  What is “waste” and how does a borrower become liable for it?

ANSWER:  “Waste” means he debtor had damaged he property or allowed it to become damaged and the debtor can be held accountable for that even where there is no deficiency available for the foreclosure.

As in California and Arizona (see above and below), the debtor can be held liable for damages done by casualty or neglect while he or she was in title to the property which occurred prior to the foreclosure under the common law of “waste” (destruction).  All persons, including the debtor are always accountable for wasting the collateral or property of another.

SPECIAL CONSUMER RIGHTS IN OREGON:

QUESTION:  Are there any other rules affecting the creditor or debtor in foreclosure?

ANSWER:  Yes, and more forthcoming all of the time as Oregon, like California, above, tries to sort out the financial havoc wreaked by the recent recession.  Most favor the consumer.

Some of the consumer protections are above in the form of limits against deficiency judgments.  The legislature is working on more.

Oregonians facing foreclosure often have difficulty contacting their lender to discuss their options, such as a possible loan modification. At the time of this article, bills are pending in the Oregon Legislature which

 substantially softens the harsher remedies of foreclosure upon the residential borrower.  SB 628 requires that the lender or loan servicer notify a homeowner facing foreclosure of the right to a meeting (either face-to-face or by phone) and that the lender/loan servicer assess whether the borrower is eligible for a loan modification.  This is a little like the law in California, see above, except harder for the lenders to “exempt” themselves as in California, see above.

Tenants in foreclosure.  There are bills protecting Oregon renters living in foreclosed homes by requiring advance notice of the foreclosure proceedings and providing protections related to leases and security deposits. The notice will provide information about tenants rights and where they can go for assistance.

Deficiency judgments after foreclosure:   See HB 3004.  Prior to the mortgage lending crisis, many homebuyers financed 80 percent of the purchase price with a mortgage and trust deed and the remaining 20 percent with second mortgage financed from the same lender. The second was commonly called a “HELOC” (“home equity line of credit) but were not in fact truly used as a line of credit for home equity but in fact were used to actually purchase the property.  These consumers did not have the same protections under Oregon’s foreclosure laws as borrowers with a single mortgage loan. HB 3004 closes that loophole by precluding lenders that foreclosure on borrower with an 80/20 loan from collecting from the second loan if the home sells for less than what the borrower owes.

Bills in prohibition against negative loans:  Protects Oregon mortgage borrowers against abusive lending practices by restricting the sale of negative amortization loans and by requiring lenders to provide translated disclosures when loans are marketed and negotiated in languages other than English.

Bills in enforcement of new federal mortgage lending standards.  Protect mortgage borrowers by allowing the department to enforce new federal laws that require additional disclosures to borrowers and restrict loan servicing abuses and misleading advertising. The bill also increases surety bond requirements and enables Oregon to participate in a national licensing system for loan originators, to ensure they have met education requirements, passed background checks, and followed the laws in other states.

Bills to protect consumers at risk of foreclosure from both consultants who offer to help homeowners avoid foreclosure and equity purchasers who acquire a financial interest in the property. The bill requires consultants and equity purchasers to provide a written contract with clear disclosures to the homeowners and other safeguards. It also gives the homeowner rights to cancel the contract. The bill also requires a trustee acting for the lender to send the homeowner facing foreclosure a clearly written notice at least 120 days before the sale, with helpful information about the homeowner’s options.  Much like that in California, see above.

Bills to enhance loan originator enforcement.  Expands enforcement over loan originators, the individual salespeople who work for mortgage lenders and interact directly with borrowers. The Department of Consumer and Business Services can ban or suspend loan originators from the industry for fraudulent practices, negligence or incompetence, or violating industry rules.\

Debt management services HB 2191.  Protects financially vulnerable Oregonians who are increasingly turning to consumer debt management services for assistance, by prohibiting misleading advertising, requiring specific disclosures, and requiring all providers of debt management services to be registered with the state, including debt settlement companies and loan modifiers.

See other consumer defenses to debts under “General Defenses Common to All States”, below.  See also other debtor ramifications of a foreclosure, below.

GENERALLY:

QUESTION:  What happens if I go into foreclosure on my mortgage or trust deed?

ANSWER:  You can lose your property in a forced sale and in some cases still owe the creditor money.

THE REMEDIES GENERALLY, FOR DEFAULT:

QUESTION:   Explain the different remedies for a loan default, please? 

ANSWER:   In general law and just as in the other states, above, the loan secured by real estate may be enforced by the lender or holder of the instrument either suing the debtor directly on the promissory note the debtor signed, or by conducting either a judicial foreclosure (in a court) or a non-judicial trustee sale (the latter on trust deeds loans, only).  Under the law (UNLESS THE DEBT INSTRUMENT WAS A NON-DEFICIENCY INSTRUMENT--SEE BELOW)  the creditor sells the house either for enough to get the entire loan paid off (and the creditor keeps the payoff up to the amount of the remaining loan and expenses to foreclose it) or it sells short of that debt amount (very common, recently, due to adverse market conditions) and if there is a shortfall, the creditor can collect the shortfall from the debtor even after the property has been sold on the foreclosure sale.  

BUT THE CREDITOR CANNOT do this if the instrument is one that falls under the "ANTI-DEFICIENCY" STATUTES, BELOW.  MOST HOME MORTGAGES DO FALL UNDER THE PROTECTION OF THE ANTI-DEFICIENCY STATUTES AND THAT MEANS NO "DEFICIENCY" AGAINST THE DEBTOR IN A FORECLOSURE.  See below for what qualifies.  But even when there is no deficiency, there can be IRS and credit ramifications, of course, as explained below. 

ANTI-DEFICIENCY STATUTES:

QUESTION:  What is a “deficiency judgment”?

ANSWER:  It is a legal judgment against the borrower for any shortfall in a judicial sale of the property to meet the total  remaining debt plus taxable interest, fees and costs.

To the extent the judicial or trustee’s foreclosure auction yields less than the judgment, a deficiency judgment could be available, provided the loan is not a qualifying “purchase money loan” on a residential property (a “non-deficiency” loan), as explained more, below.   If it is not such a loan, in judicial sales of the property, whether under a mortgage or deed of trust, the Court lodges judgment for any loan balance, costs, fees and other expenses set forth by statute not meet by the proceeds from the auction.  In a non-judicial foreclosure of a loan not qualifying for “non-deficiency” treatment, the creditor has 90 days to file for any shortfall after the date of sale .  As noted, In the case of purchase money mortgages and trust deeds on qualifying residential properties and trust deeds, there is NO DEFICIENCY.  See “qualifications” for that non-deficiency treatment, below.

QUALIFYING LOANS FOR NON-DEFICIENCY PROTECTION:

QUESTION:  What loans qualify for non-deficiency treatment?

ANSWER:  Arizona law has two "anti-deficiency" statutes that will often apply to loans secured by single residential real estate and whether or not the home is occupied by the borrower.  Where these statutes apply, a lender's remedy will be ONLY a foreclosure, with NO RIGHT TO SUE FOR MONEY beyond the amount received from the foreclosure sale. These two "safe harbors" are as follows:

One applies to mortgages, which must be foreclosed judicially, or deeds of trust if foreclosed judicially (that means by the creditor suing the debtor in a court).  It is A.R.S. ' 33-729(A).  It limits the claim to the proceeds of a sale of the property.

The other "anti-deficiency" statute applies only to deeds of trust when foreclosed via a trustee sale (through a suit in the court).  It is A.R.S. ' 33-814(G).  Same rule:  The creditor only gets the amount from the sale of the property and no more.

THE TEST FOR WHETHER THESE EXCEPTIONS APPLY:

For either of the anti-deficiency statutes to apply, the mortgage or deed of trust must be secured by real property that: (1) Consists of 2 1/2 acres or less; (2) and is restricted to and utilized for a single-family or dual-family dwelling.[1] (3) the proceeds of the loan had to be used to pay all or part of the purchase price of the property (better that all of it was). If all three of the foregoing apply, a deficiency on a normal foreclosure is unlikely. 

REFINANCES:

QUESTION:  What about refinances of a loan that was originally a non-deficiency loan?  Do they get the same non-deficiency treatment, though, technically, they were not the actual loan used to “purchase the property?”

ANSWER:  In most cases, yes.

If the loan is not the original one that purchased the house, but a refinance of one that purchased the house?  A "refi" will also often be covered by the same non-deficiency rule. In Bank One v. Beauvais, 188 Ariz. 245, 937 P.2d 809 (App. 1997), in which the court held that an extension, renewal, and/or refinancing of a purchase-money loan retained the character as a purchase-money loan, and therefore was subject to the same general qualification as a purchase money loan.  This also applies to second trust deeds or mortgages if they were "purchase money" and were for residential property as noted above. See Mid-Kansas Federal Savings and Loan Ass'n v. Dynamic Development Corp., 167 Ariz. 122, 804 P.2d 1310 (1991). 

EXCEPTIONS THAT COULD STILL MAKE ONE LIABLE:

This rule will not apply if the debtor has allowed the property to be wasted by such things as his own bad maintenance, by vandalism of him or others or uninsured losses before the foreclosure sale (voluntary waste[2]).  This is A.R.S. ' 33-729(A). Also:  If money was taken out of the loan for other purposes than purchase of the property (lines of credit, home equity loans and even purchase money loans where there was cash-back that was itemized as such), these anti-deficiency rules do not apply and the lender could see that cash directly from the borrower as a result of or in addition to the foreclosure.  Id. Beauvais. The anti-deficiency rules also do not apply to a loan guarantee executed separately.  As to the guarantor, they are liable.

NON-RESIDENTIAL PROPERTIES:

QUESTION:  So unless the loan meets the above qualifications, a deficiency is possible?

ANSWER:  Yes.

Bare land, office buildings, tri-plexes and larger, commercial offices and the like ARE NOT NON-DEFICIENCY instruments. On those the lender can sue for money, go to a sale and collect for a deficiency.  The defenses there are more narrow.  There are defenses in foreclosure law, itself, such as that the property was not sold at a reasonable value or that a claim for deficiency was not instituted in a timely fashion and other defenses.  In some cases there can also be the defense of a wrongful appraisal and underwriting failures that could arise to a regulatory violation in addition to being actionable by the borrower or guarantors as misleading lending practices. 

GUARANTEES AND LINES OF CREDIT:

QUESTION:  What if I have signed a “Guaranty” for someone on the debt or they have signed one for my debt?

ANSWER:  You or they could be liable for the debt or judgment to the extent it falls short of paying off the lender, even on a non-deficiency debt, depending upon how the Guaranty is worded.

Guarantees are enforceable even if for a debt which was purchase money, as the actual is on the separate written Guarantee and not the debt and even where there is no deficiency for the primary borrower.  Pure lines of credit (for any use such as a credit card or for cash or for home improvement but not used as part of the purchase price of the property) all pull out money and so they are not purchase money debt and can be claimed upon independently and are not limited by the anti-deficiency statutes.  A so-called pure "HELOC" is a line of credit-type loan when not used to purchase the home, though some HELOCs have been used for part or the entire purchase price.  It is likely under the Beauvais theory (above) that if the HELOC was actually used to buy the home it is probably “purchase money” in fact and no deficiency on it can be had or, at the very least, as to the amount used to buy the home, it is purchase money if it was spent that way the moment it was generated, but the balance taken out and not used to purchase the home may be collectible in an action on the debt.  There is no clear authority on the effect of a “blended” (purchase and non-purchase in the same note) HELOC instrument. 

See other consumer defenses to debts under “General Defenses Common to All States”, below.  See also other debtor ramifications of a foreclosure, below.

QUESTION:  Are there other ramifications for a failure to pay a debt?

ANSWER:  Yes and they must all be considered.

Most any foreclosure or debt reduction in the form of a loan modification, short sale, deed in lieu or other change of a pre-existing debt will have tax, credit eligibility, insurance, professional, licensure eligibility and other impacting affects.  These must be analyzed in each case by a competent, licensed professional.  In addition, the debtor has a separate liability for “rent-skimming,” which is the taking of rents from a tenant at the secured property while not paying the loans against the property.  A claim for rent recovery is the recourse in most states, and, in some states, this is also a crime. In all states it is a violation of the residential landlord-tenant acts if it is a residential property and most always a landlord violation of the lease agreement, whether residential or commercial.  Real estate agents facilitating such skimming activity by a landlord or owner are in licensure violation in all states.

QUESTION:  Are there more defenses for the debtor in debt-collection actions or is the debtor (residential or commercial loan) strictly limited to what is in the foreclosure statutes?

YES:  No, there are many more debtor defenses.

In every state there are valid defenses to debt claims and these must be raised in any debt analyses or debt dispute by a competent, licensed attorney.  Defenses common to bare land, residential and commercial debts incurred within the last 5-7 years are violations of the myriad of Federal and state law related to consumer protection, wrong or false appraisals, national or international subdivision application or subdivision sales defects, defective underwriting and reselling, holder-in-due-course failures by the lenders and their assignees and their collection arms, bait-and-switch loan-slamming, 100% loans lender-disguised and booked as “equity transactions” through 80/20 and 70/30 dual loans in violation of both warehousing and secondary market underwriting rules, contractual and tortuous bad faith, violation of a lender’s own internal or Regulator-required standards, process and rules, dealings with the primary borrowers that void guarantees, and, especially in commercial settings, the debt being secured by a defective property or proforma for the property, inappropriate or negligent proprietarily involvement by the lender or its agents in the property, waste by the lender in possession, failure to follow mitigation duties or laws and other defenses among the multiple other contract and tort defenses such as outright statutory or consumer fraud, common law fraud, unlawful collection practices, racketeering and others.  The parties need to consult their attorneys for these as they vary with each fact and transaction pattern.

FREQUENTLY ASKED QUESTIONS ABOUT NEW CONSTRUCTION DEFECT CLAIMS

QUESTION: Is it a fact that the builder owes warranties to me against construction defects or failure even if these are NOT stated in the contract I have with him?

ANSWER: Yes. The builder owes you a lot more than is stated in the contract.

DISCUSSION: In Arizona, the builder is both "seller" and "builder" in the sale of a new home. As such, his exposure to liability must be measured from both perspectives.

SELLER'S LIABILITY: Arizona law requires sellers of homes to tell potential purchasers about any material defects they are aware of. Hill v. Jones, 151 Ariz. 81, 85, 725 P.2d 1119 (Ct. App. 1986).

Even if there was a mistake as to the defects, a case where neither buyer nor seller knew of the defects, the buyer may seek a rescission of the entire agreement and a return to the status quo ante. Renner v. Kehl, 150 Ariz. 94, 722 P.2d 262 (1996).

BUILDER'S LIABILITY GENERALLY: It is also well settled in Arizona that the builder owes an implied warranty of workmanship and materials and habitability with respect to the home. Kubby v. Crescent Steel, 105 Ariz. 459, 466 P.2d 753 (1970), (habitability) Nastri v. Wood Brothers Homes, Inc. 142 Ariz. 439, 690 P.2d 158 (1984), and cannot even be disclaimed by the builder even in writing, Hembree v. Broadway Realty & Trust Co., 151 Ariz. 418, 729 P.2d 288 (1986) and applies even if the builder was not building the house originally for resale, such as a model or for himself, Dilling v. Fisher, 142 Ariz. 47, 688 P.2d 693 (1984), as the purpose of the warranty is strictly to protect ALL home purchasers by holding home builders accountable for their work, Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984). Even a disclaimer against the very item that is defective contained in the original builder's agreement with the first buyer will not affect a successor buyer's rights against the builder, Nastri, id.

Such warranties run with the property such that direct contractual privity is not required to maintain an action against a builder vendor of a home for a breach of implied warranty of workmanship and habitability in a claim for a defective, latent conditions Richards, id. Accord: Donnelly Construction Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 677 P.2d 1292 (1984). Richards held that homeowners, whether or not they were in privity with the builder were entitled to recover damages for breach of implied warranty that the home was habitable and constructed in a workmanlike manner, in that there was no indication that the original owner substantially changed the structure of the home where the defective workmanship could not have been determined from reasonable inspection prior to purchase.  The implied  warranties were assured for residential properties in the recent Arizona Supreme Court case The Lofts at Fillmore v. Reliance Commercial Construction, CV-07-0416-PR, (Ariz. S. Ct., 2009).  Implied workmanship warranties are also owed in commercial construction, but in all safety they should be expressly stated in the contract and expressly assigned when sold.  As most Arizona claims involve residential properties, the balance of the information, below, applies mostly to residential property (any designed for personal habitation, whether single-family or congregate such as apartments or condos).

QUESTION: Is it true that the builder who builds a new home or remodels or repairs a home only has to stand behind his or her work for only two years in Arizona?

ANSWER: No. The builder in Arizona must sand behind his or her product for a minimum of 6 years, but no more than 8 years if first discovered after the 6th year, or else he or she is in breach of the implied warranties in contract set forth, above. He or she is also liable in a joint claim of negligence for 2 years AFTER DISCOVERY.

DISCUSSION: There are three relevant statutes of limitations. The first, torts, like negligence, is governed by ARS 12-542, and is a two year statute.

The second, contract, is six years pursuant to ARS 12-548, but subject to discovery and the ultimate repose statutes above, which has yet to be totally tested.

The third is ARS 12-552, which provides a limitation of eight years after substantial completion of improvement to real property. However, if the injury occurs in the eighth year (or was not discovered until then), an action may be brought within one year after the date of the injury or discovery of the latent defect. The cases above seem to extend that to be from the time the cause of action accrued by the failure of the component, though this is still not entirely clear in Arizona. This section covers implied warranties in contract.

QUESTION: Can a Builder, after entering into a sale contract by which he agrees to build and deliver a specific home to a Buyer (for which the Buyer is bound by the contract to pay) bar a registered Home Inspector engaged by the Buyer to inspect the property from coming upon the property unless the Home Inspector provides financial assurances to the Builder in excess in amount of coverage of that required of the Inspector by state law under the BOTR or can the Homebuilder bar the Home Inspector by the use of the threat to void warranties otherwise protecting the Buyer or a threat to suspend performance upon or terminate the construction contract or any warranty on it, implied by law or express, owed to the Buyer?

ANSWER: No.

Here's the problem:

Builders are telling Homebuyers and Home Inspectors: (1) that neither the Homebuyer nor his Inspector may examine a home already sold to the Buyer and at that time under construction for that Buyer; or, (2) that the inspection may only be done if the Home Inspector provides extensive financial guarantees and relationships directly to the Builder that exceed those required by state law for Home Inspectors; and/or, (3) that the Builder's warranties of workmanship owed to the Homebuyer are void or avoidable as to any component the Home Inspector might access inspect; and/or (4) the Builder will refuse to perform his warranties or terminate the contract or construction progress if the Homebuyer or Home Inspector contests any of the foregoing.  Part or all of these contentions and acts are wrong in whole or part. I will address that here only as a mater of licensure law.

The Builder, in addition to the authority set forth, below owes the Homebuyer certain performances as set forth under the licensure laws and rules of the Registrar of Contractors. The Builder owes the Buyer a workmanshiplike product under R4-9-108, owes the implied warranty of workmanship and habitability under the caselaw interpreting "sound workmanship" as set forth in Kubby v. Crescent Steel, 105 Ariz. 459, 466 P.2d 753 (1970), Nastri v. Wood Brothers Homes, Inc. 142 Ariz. 439, 690 P.2d 158 (1984), Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984), and the implied covenant of good faith and fair dealing (the consumer's unharassed right to assure receipt of comporting product and to receive lawful treatment) as set forth in Wagonseller v. Scottsdale Mem. Hosp., 147 Ariz. 370, 383, 710 P.2d 1025 (1985). In addition, the law and rules of the Arizona Board of Technical Registration ("BOTR") regulating home inspection have the status of law and are "codes of the state." The BOTR rules regulate what a Home Inspector is required to have for proof of financial responsibility to inspect in the state of Arizona, mandates loyalty to the customer and prohibits financial or business connections with the party whose work is to be inspected (the Builder) which would impair the impartiality of the Home Inspector inspecting him. Lombardo v. Albu 199 Ariz. 97, 14 P.3d 288 (2000) provides that licensure rules are standards of care and that violations of rules are "failures per se." Arizona State Real Estate Department v. American Standard Gas & Oil Leasing Service, 580 P.2d 15, 119 Ariz. 183 (Ariz.App., 1978) holds the same for violations of licensure statutes.

The long and short of it is that there is a good argument that the Builder cannot make the above demands under his own licensure and to do so is a licensure violation. The Builder is bound to obey his contract, the licensure law and regulations and cannot threaten to breach his contract with the Buyer through contract suspension, performance suspension, warranty termination or avoidance that is prohibited. I will briefly discuss this:

ARS 32-1154 (the licensing statute for builders) states that a construction licensee "shall not commit" any of an enumerated series of acts or omissions. One enumerated "act or omissions" is at "1. Abandonment of a contract or refusal to perform after submitting a bid without legal excuse for the abandonment or refusal (see the only legal excuses set forth by statute below). Others of relevance are "7. The doing of a wrongful or fraudulent act...resulting in another person [Buyer, Home Inspector] being substantially injured.."; "12. Failure to comply with any...codes [the statutory and regulatory law of the ROC and BOTR, et al.] of the federal government, state or political subdivisions of the state; "13. Failure...to comply with this Chapter"[see below statutes form this Chapter]; "16. False, misleading or deceptive advertising whereby any member of the public may be misled or injured"; "17.  Knowingly contracting beyond the scope of the license..of the licensee."  In addition and as will be shown as relevant later, there is "3.Violation of any rule adopted by the registrar." [See relevant rules, below.]

 ARS 32-1159 A. provides that a "covenant, clause or understanding in, collateral to or affecting a construction contract ...that purports to indemnify, to hold harmless or to defend the promisee from or against liability of loss or damage resulting from the sole negligence of the promisee or the promisee's agents, employees or indemnitees is against public policy of this state and is void. [Thus, any clause of a construction agreement or a side agreement which tries to excuse the Builder from his lawful duties is void.]

ARS 32-1129.03 A. provides those circumstances under which a Builder can interrupt his performance [fail to give warranties, discontinue with the job, the project or fulfillment of his obligations under the contract] without penalty or liability of breach of contract and it permits interruption only because of encountering hazardous material or substances. ARS 32-1129.04 allows suspension only for non-payment by the Buyer or a refusal to approve a billing or job estimate. Nowhere does either statute provide for "ceasing performance of any obligation--a warranty for workmanship or obligation or progress on the job--because the other party in contract (the Buyer) wants to inspect, himself or through a Registered Inspector in full compliance with the BOTR and working for him, what he is buying." If the contractor refuses warranties or to continue with the whole or any part of the job under contract for ANY OTHER REASON, he is in violation of licensure and liable for breach, damages, attorneys fees and costs both to the Buyer and the Inspector ("any person", see the regulation, below). There is no exception allowing suspension or termination of the Builder's duties "because the other contract party wants and will pay for a home inspection by a lawfully registered and insured Inspector" or because the "other contract party wants the warranties required by law." To do so is itself a breach of licensure regulations.

R4-9-131 especially prohibits as having special "gravity" the following acts or omissions: The Builder "2. Failed to perform work for which money was received" [terminates performance because of a home inspection or terminates a warranty he unconditionally owes by law]; "3. Executed or used any false or misleading documents for the purpose of inducing a person to enter into a contract or pay money for work to be performed" [threatening to suspend performance or void warranties that cannot lawfully suspect or void after the purchase contract is signed]; "4. Made false or misleading statements for the purpose of inducing a person to enter into a contract or to pay money for work to be performed" [ditto as to section 3., immediately foregoing]; "11. Performed work that has caused loss or damage to the structure, its appurtenances or property being worked upon or which has caused loss or injury to any person" [unlawful voiding of warranties or termination or slow down of performance--here there would be damages and liability to the Buyer and the Home Inspector].

In sum, a contractor owes the warranties and contract performance as agreed to and as required by law to the consumer, whether or not expressly set forth by the contractor and even if the contract contains a disclaimer against it. To threaten to void warranties (or voiding them) or to threaten to suspend or terminate performance (or to do so) for any reason OTHER than encountering dangerous substances or materials at the site or by reason of non-payment by the Buyer is a violation of regulation and law. An agreement even contending it can be done is a violation of regulation and law and a regulatory misrepresentation.

Not discussed here but certainly an issue are the Builder's liabilities for intentional or negligent interference with the Inspector/client contract; regulatory and common law trade liability for restraint of the Inspector's registered trade; anti-trust; liability for fraudulent schemes under ARS 13-2310, et. seq., and 44-1522(A), et. seq., all of which have applicability. No Builder can attempt on a broad spectrum to actively restrict or interfere with the Home Inspection trade and void a consumer's right in violation of its own licensure without violating other public and common laws regarding unlawful schemes or restraints of trade.

Notably, all Builder contracts state in them "this is the final agreement and supersedes all others and the only terms between Builder and Homebuyer are those contained in this agreement" and none of them contain any clauses in which the consumer has agreed to void warranties or inhibit the home inspector as in the above. The Builder drafted his own contract and omitted any such terms. It therefore cannot be argued that the Homebuyer somehow agreed to this (assuming any buyer can be asked to agree to anything that violates the Builder's licensure in the first place).

There is more. If the Inspector has to provide all of these huge financial assurances to the Builder (some even asking that the Inspector co-insure the Builder for $1 million on his AUTO INSURANCE!), why is the Realtor, appraiser, bank-loan construction progress inspector, city inspectors and owner not also asked to do so? Why just the private home inspector? In addition, through thousands of litigations, this office has leaned that the Builder is NOT ASKING FOR THESE FROM HIS SUBS, either! Thus, this is targeted strictly at Home Inspectors and for very obvious reasons. Last year they did thousands more inspections than any other vendor, including city and county, and found thousands more defects than all of the foregoing other inspectors put together! It's all about the Builder wanting to hide his sins. It's all about getting his hands on the money.

QUESTION: What are "expansive soils"?

GENERAL ANSWER: Expansive soils are composed of clays that are usually generated over centuries as settlement to the bottom of bodies of water. They are usually high in salt and calcium contents. This was nature's way of “sealing” the earthen bottom of a body of water to prevent it from leaking. Clay, in nature, is a sort of “grout”.

QUESTION: What damages do "expansive soils" cause when not properly accommodated or remedied before building?

ANSWER: Microscopically, these clays are made up of plate-like particles that absorb moisture and can expand to more than 100 percent of the original size. This "swell pressure" between particles can push up and crack concrete slabs, driveways and walls that have less weight than the soil pressure. When these soils dry out, the reverse process occurs and shrinkage results. Damage to the improvements can be done as readily by the lifting as the collapsing.

QUESTION: How can I tell when this is happening?

ANSWER: A moving slab or foundation usually manifests itself as cracks in the floor and/or walls and/or ceiling, delamination or cracking of floor tiles; rising, settling of floor surfaces; doors and windows that "stick" or do not open, close or fit, water or soil emitting from the floor or expansion joints in the floor, differential elevations between floor plates; creaking and cracking noises in the home.

QUESTION: How severe can the damages be?

ANSWER: A moving lab can cause structural damage as well as flatwork damage. It can cause plumbing leaks (generating bacterial issues when it is a black water leak) and allow environmental water interdictions leading to mold colonizations and termite infestations.

Building and floor slabs are most often affected by soil expansion from the outside. As soils around the edge of the structure become wet, they heave relative to the middle of the structure.

QUESTON: Will a post-tensioned slab prevent this?

ANSWER: No. This process is called "edge curling" and you will hear this term both with post-tensioned and conventional slabs. With post-tension slabs (“PTS”) it refers to the tendency of PTS to curl on the edges due to the over-compression of the over-torqued tendons. Though not due to tendon stressing, curling due to subslab moisture also cause movement for conventional (non-PST) slabs, as well, though with them it is usually because moisture tends to migrate from the perimeter of the slab (thus raising it earlier) to the center (then affecting it, too). . With time, the underside of floor slabs draw in water from the soil, like blotting paper, and cause a heaving effect in the middle of the slab called "doming." This can take years to develop depending upon moisture level added by irrigation, rains and other environmental factors. In some cases, concrete mixed too wet can cause the same effect through shrinkage. PTS slabs are no better protection against expansion or collapsing of under-engineered sub-soils and poor drainage than the 3-pour, floating or so-called “conventional” ground-level slabs. The PTS –even when properly laid, is still no “fix” when used over moderate/high expansive or collapsible soils left under the pad and when neither are properly buffered from the soils by generous (up to 1 foot) overlain barriers of aggregate base coarse gravels (“ABC”). Local MAG 1 is not a true ABC, the latter being a carefully metered mix of .50 inch, .75 inch and 1.25-inch gavel for maximum compressive support and integrated capillary voids for water percolation and soils expansion and contraction). Whap passes as the local “MAG 1” is often little more than half or 1-minus and if often lain in thin and thus almost completely ineffective wafers.

QUESTION: What are some of the building solutions with expansive soil?

ANSWER: The first solution is not to have any expansive or collapsible soils under the slab footprint in the first place! This means pre-pour soil testing and geotechnical assistance to amend or abate the soil, subsoil, site grading and drainage issues, with above-level structural engineering to accommodate the subsoil remediations. If the challenged soils are already there (a defect, but in trying to cope with them) a provisional solution is to keep soils at constant, stable, optimum moisture content, but this is for most applications too precarious of balance to avoid failure or miscalculation over the long term. Intervening weather and casualty incidents have to be assumed on the 30 to 40 year integrity basis. Sudden increases in rainfall and landscape irrigation can be harmful, as can drying due to lack of rainfall or irrigation. Water casualties such as subslab plumbing leaks or other water dispensations have to be assumed. Before construction, if proper protocols are followed, soil samples are tested in the lab to determine how much "swell" is possible when the particular soil is saturated. Engineers then must assume the worst-case soil moisture conditions when they design against expansion and shrinkage.

Solutions are limited, however when this pre-construction engineering has not been done. The obvious preventive measure is to over-excavate and evacuate any such soils. The second is to assure a foundation and slab substrate, underlayment or under-composition that has the compressive strength and depth to hold the building weights stable, but is porous enough to permit water and soil fluctuations to infiltrate and defiltrate without weakening or moving the underlayment or the building component atop it. Thereafter, the site and structure must nonetheless engineered to make sure water does not pool next to buildings. Lots are usually graded to slope to the street. However, builders can change drainage patterns during construction or landscaping. Builders often fail to provide proper roof gutters and surface drainage control such as sloping away from structures, such that water can sheet off roofs into the soils around the building and pond or infiltrate under the foundation.

Another pre-construction solution consists of replacing expansive soils with non-expansive, sandy or gravelly soils to a depth of several feet. Although effective as a remedy, this solution is not always practical because of the cost and availability of non-expansive materials. But with the costs of damages so high for the defect, the pre-construction expense is actually negligible.

QUESTION: These all appear to be before-the-fact control methods. What happens when these were not done and the slab or foundations fail or of flexations and deflections there damage the improvements after the structure is built?

ANSWER: When the project was not done correctly during the pre-build, post-build failure-repair options are limited and none of them as are acceptable as merely “doing It right in the first place”. Expansive-soil properties can be modified by adding chemicals such as lime or cement as a pre-pour treatment, in addition to engineering subsoil drains, drainfields away from the slab footprint and subsoil moisture curtains. Studies have suggested that these are modest measures and usually have a useful life of three years or less before failure or exhaustion, with subsequent damages continuing.

Polyurethane liquid can be injected into the soil, which hardens it to a plastic-like material and cementacious injection grouts can then be inserted between the bottom of the slab and the subsoils to fill voids . This is effective with soil collapses, but it troublesome with swells which have already distended and disrupted the slab surface. In those cases, opening the slab and refusing the offending soils substrate, replacing or amending it with ABC, concrete slurry or non-expansive soils is the only more reliable fix. Some experimentation is being done now with “deflating the soils” by use of long term forced-air subslab dehydration accompanied by injected condensate lines for weep and these have had favorable early results, gently “deflating the soils” and “settling down the slab,” but these are still experimental.

However, this kind of post-construction fix is not as reliable as doing the pre-construction site work that prevents its need entirely and it often fails or lasts only a few years before failure. In addition, these types of materials are not always inert and might be harmful to occupants and landscaping, but often they are the better solution in the trade-off.

Another more widely used approach is to support buildings on stiff, heavily reinforced PST foundations. With this method, steel tendons built into the floor slabs and footings are tightened after the concrete sets to make foundation systems more rigid. Other remedies include "pile foundations," which hold the building down like large anchors. As noted, above, these slabs have their own issues, will also be adversely affected by expansive and collapsing soils over time and are no substitute at all for simply doing the pre-construction geotechnical treatments noted, above.

Helical or push-piers are another post-construction abatement for failing (typically collapsing) slabs. They can also be used (coupled with subslab injection grouts) to raise a low portion of a slab to an inflated portion. Piers are long steel pinions deeply inserted into the ground, anchored to the slab or foundation, and then elevated to support and level the component. They are permanently bonded to the component and left in the ground as a permanent “pier” for the component.

QUESTION: So what is the best scenario to avoid these issues?

ANSWER: Simple. Good pre-construction pre-testing and pre-engineering and structure design are the keys. The soils on the lot must be analyzed PER LOT by the recognized ASTM methods to determine compaction, optimum moisture, composition, mix. Fills must be done in stage-tested lifts, certified by an engineer; cuts must also be shot and certified. Grading must be away from the pad site; water is to be vented well away from the site; adjacent properties must not drain to the subject lot on or below the surface; the home must be designed to vent water AWAY from it (gutters, downspouts that drop to piping away form the footprint of the home); pond-points, irrigation and valve boxes must be away from the footprint. The roof and flatwork must not generate more run off than the disposal area away from the footprint can safely dispense or percolate.

Sinking foundations, cracked and buckled walls and uneven floors are serious problems commonly faced annually by millions of homeowners who have homes situated on unstable soils which settle when their foundations are subjected to extreme moisture conditions, lack proper drainage are improperly engineered or installed and other causes. A shifting foundation may result in structural damage to a home and a loss of the investment.

One does not always need to be a specialist to determine that foundation problems exist. These can determined even by the untrained observer by examining the house carefully for the following. When any two of these are seen, it is time to call in an expert for a complete audit of the site and home.

• doors that stick and squeak
• separation of door sills from frames
• windows that stick. raise and lower the windows in each room, open and close all doors. do they fit squarely without binding?
• cracks in interior walls near corners of doors or windows. look at all the corners of windows and doors, and at joints where walls meet walls, ceilings or doors for signs that they are pulling away from each other. also look for cracks in a brick fireplace wall.
• nails popping out of sheetrock or gypsum board. examine walls and ceilings for evidence that nails may be working themselves loose.
• wallpaper that curls and separates
• curling and tearing of existing sheetrock repairs
• leaks and cracks in and around the fireplace
• cracks in the exposed concrete grade beam of the house. check the exposed concrete at the base of the house for cracks. if there are only small cracks, they may also be nonstructural, but they may also be the first indication of trouble to come
• caulking that pulls away from exterior surfaces. outside the house, check the bottom corners of windows and doors. do cracks run diagonally, along mortar joints in the brick veneer? are the caulked joints pulling apart?
• nails popping out of corner frames
• obvious cracks in brick and mortar
• cracks and uneven elevations in structures attached to adjoining patios.

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