Q: Twenty-two months ago we purchased a home with owner financing. I paid my mortgage on time each month, and also put $15,000 down on the house.

Two weeks ago I found out that the home was going into foreclosure and that the owner had not made any mortgage payments in 12 months on the property. There is a lien on the property for 2001 property taxes of $1,960, and a lien on the house for $2,100 for non-payment of federal income taxes from the owner. Property taxes for 2002 are also due ($1,600).

The home appraised for $182,500 and the principal balance was $156,199, I was able to get pre-approved for $164,000 so I had no problem buying the house. But this is where everything goes down hill.

The mortgage company was not willing to work with me. They wanted $24,952 in late payments and interest for a grand total of $181,151 or $5,000 now and $3,000 a month for 12 months or I was told to buy the house on the courthouse steps.

With the $6,000 in liens on the property, the cost of the home is near $190,000 — way above its appraised value. The existing mortgage company refused our lender’s offer for a short sale of $157,000.

I have since moved out of the house and it sold for back taxes on September 3rd. I had invested about $10,000 in remodeling in the home as well, so I lost a total of about $44,000.

Can I apply a lien on the property for this huge amount I am out of pocket?

A: I believe you’re completely out of luck when it comes to recovering your money, but let me go through what I believe happened here and how it could have been prevented.

First, you didn’t purchase this property outright. You bought it on a land contract, also known as the installment plan.

For buyers, there is no benefit in purchasing property this way. All you’re doing is putting yourself at great risk. The only benefit to a seller is that he or she controls the property in case the buyer fails to make the payments. The seller is still the owner and can kick out the buyer much as he or she would kick out a renter. It doesn’t require foreclosing on a loan gone bad.

Your first mistake was not having a real estate attorney assist you with the purchase of this home, even though you live in a state where attorneys are not normally used to close residential transactions. When you purchase by installment contract or do owner financing, you must have someone who represents your interests.

Your second mistake was not knowing what liens were filed against the title to the property. Title insurance would not necessarily have protected you in this situation, but would have told you that your seller had a mortgage and may have revealed other liens.

Your third mistake was that you didn’t record your installment contract with the recorder of deeds. That would have put the world on notice that someone else had an interest in the property.

Your fourth mistake was paying good money after bad. Buying on a land contract is similar to being a renter. As a renter, you would never have put $10,000 in improvements into that property.

Clearly, your seller defrauded you. He basically said, “I’ll sell to you and you pay me and I’ll pay my lender.” But he didn’t hold up his end of the deal.

What could you have done to prevent this situation?

You should have bought this home outright with a mortgage from the seller. This would have required the seller to pay off his loan, and any other liens, and put the title in your name.

Barring that, you should have paid the seller’s lender directly, with any extra being paid to the seller. That way, at least you would have known that the mortgage was being paid and that the lender had enough cash to pay the real estate taxes.

Clearly, you could have afforded conventional financing. I’m unclear why you didn’t get it. You put your trust in the wrong guy.

You can try and sue the seller, but more likely than not, you’re out $44,000 in cash. If the seller authorized you to complete the improvements, you may be able to file a mechanic’s lien against the property. But more likely than not, it will get wiped out when the lender sells the property.

Consult with an attorney regarding any legal options that may be available to you.