Below, I will tell you what I would do… and I am NOT advising you to do the same…
I would get a letter from the homeowner, maybe even a POA, (if I was that concerned over this point), which authorizes you to enter the property for the purpose of inspection, by any means necessary… Keep in mind that the Owner still owns the house, and is entitled to enter that anytime they want to, regardless of whether the Lender has changed the locks or not… You could drill the lock off the door, which would be perfectly legal, but me, I would call a locksmith and have them pick the lock and make you a key… This way if you choose to re-enter, you can, for the purpose of meeting contractors, etc… Now you can inspect the interior and verify your rehab costs…
With the cost estimates you speak of, you are probably OK, with lots of profit potential left over… Of course, you didn’t mention how much you are planning on paying the Owner/Seller for the Deed. This could have some impact on the overall number.
You will certainly want to have a complete title search done here prior to finalizing negotitations; or maybe beginning them. Make certain that you haven’t overlooked a tx lien, or any other judgment that may effect the title and your overall cost to receive a clear title… You could also use a Land Trust to tranfer title of the property, to keep it form going into your own name… which could eliminate some potential problems, if a title problem arose… Of course this is a whole another subject of discussion…
Deed in lieu of foreclosure question. - Posted by Gillian - NY
Posted by Gillian - NY on October 29, 2003 at 13:02:14:
Hi all,…
I have a seller who has suddenly become extremely motivated with the arrival of a letter from her bank’s attorney requesting deed in lieu of foreclosure. I have not run into this yet, so who should I talk to at this time, the loss mit dept. at the bank, or the attorney they have hired?
She is quite willing to deed the prop. to me however. If this were to happen would I still be in a position to negotiate with the bank as to payoff amount, or as owner, would they require full payoff from me.
Please clarify.
Thanks so much,
Gillian
In addition to getting the Deed from the owner, you should have a contract that stipulates your agreement between you and the seller; Agreement of Purchase & Sale. This agreement should contain a contingency whereby you are not bound to act on the Deed, unless you receive favorable terms acceptable to you from the Lender… etc.
Also get a POA signed and notarized by Owner, which authorizes you to negotiate on behalf of the Owner, with the Lender for reinstatement or payoff in total. Do not let the Lender know that you are taking title to the property, as this will work against you; IMHO. You will be dealing with the Loss Mitigation Dept to negotiate a short pay, or an assignment and sale of the Note & Mtg… depending upon what is best here.
You don;t mention anything about the deal, so this is blind advice, really. Maybe you intend to purchase the property anyway, regardless of what can be worked out with the Lender; don’t really know. If not, then stipulate what is acceptable, or not acceptable in your deal with the Owner…
Who si sthe Lender…? Sometimes knowing this, it is possible that one or more of the posters on cre has had similar experience with them… It always helps to have the complete story, and what your objective is, so that specifics can be taken into account when providing advice…
Gillian,
If the seller deeds the house to you, it gives you ownership of the property.
Whether that has an effect on the negotiation position you have with the lender or not, I could not tell you.
I’d assume it would be the same.
The thing is, if the lender does decide for some reason they want the house, after telling them that you own it, they could refuse a discounted offer to settle, and still proceed with foreclosure.
If you were to reinstate, or be allowed to regardless of the lenders wishes, they could call the loan.
Doubtful, but a possibility.
I think rather than just get a deed from the sellers, which is the right move, also get other things.
Entertain the short sale idea with the lender.
The seller will have to help prepare a short sale package etc.
You never know til you ask, and what the circumstances are with the house, loan etc.
Perhaps getting the house under agreement, with the deed signed, notarized and held in escrow by you, pending successful negotiation with the lender is your best bet here.
This way, the deed is there to record as soon as you get a deal with the lender…and if not, it gets voided and returned to the seller, from escrow.
Re: Deed in lieu of foreclosure question. - Posted by Gillian - NY
Posted by Gillian - NY on October 29, 2003 at 18:55:15:
Thank you JT and Jim for your responses.
A couple of details; 2 family house,empty and not lived in for about 1 year, ARV between 115k and 120k. Payoff to bank including lates and penalties at 47k. Estimation of repairs about 20k BUT, and this is a big BUT, I cannot get inside the house because the bank has a lockbox on the door. So I am basing my repair estimte on what the owner tells me is in need of repair, which could be totally skewed of course.
Owner “just wants to get rid of it”. She wants to sign over the house to me rather than the bank however because I will pay her to do so, wheras the bank, of course, will not.
It was suggested to me that, because they are offering the deed in lieu of foreclosure, they know they can sell the house for the amount outstanding. I would be willing to pay that, but wanted to see if they would settle for less.
So, with them hungry for the deed, I want to be sure I get it and not them, but of course I need to get inside to verify repair costs.
With the additional info. what do you consider to be a reasonable next step?
Gillian