Re: Help: Purchasing house in bankruptcy - Posted by Matt
Posted by Matt on February 22, 2002 at 24:07:30:
Rob in IN -
I’m not a lawyer or accountant however I make deals with people in bankruptcy/foreclosure all the time. Your milage may vary and you may want to check the laws in your state regarding this info:
First thing I get when dealing with bankrupt/foreclosure sellers is “Authorization For Release of Information”. This signed document is faxed to both the atty (foreclosure) and lender regarding the seller’s loan. This allows anyone from my company to speak with them as if we were the borrower. It specifically allows any type of communication be it fax, email, voice et al.
Second, we receive a signed deed which our atty holds “in escrow” meaning the document will only be recorded in the event we reach a mutual agreement (to be drilled into at a later time).
I have a preliminary title search done by a close friend of mine which costs nothing.
I have our title company give us title committment (even it’s preliminary at this point) so that we know the title is clear. This can usually cost us from $0 to $50 depending on how much research is needed.
So far all of this will be for either bankruptcy or foreclosure. It tends to get a little more specific now.
In foreclosure situations, I then contact the lender or lawyer and get a payoff document which is usually good until the end of the following month. I also inquire as to whether the loan was conventional or other. Conventional notes may be bought by anyone and at this point I can make them a cash offer to “step into the lender’s shoes.” FHA loans can only be sold to FHA qualified lenders and the only way to get them is to offer a short pay which often isn’t very short of the full amount plus additional fees i.e., atty’s, interest, late fees etc. In these situations I negotiate directly with the lender and submit payments to the atty’s office for collection, record the deed and fix, sell and profit!
In bankruptcy cases it’s a little different:
Most of the above holds true such as title searches, committments, etc., but as Utah Investor states then it’s time to talk to the trustee to negotiate the payoff. I still get a deed which is held in escrow as I mentioned earlier which is recorded once I have the mortgage covered.
I hope this gives you a little bit of information and hopefully you’ll have some success with getting the right properties at the right price. I do agree with Utah Investor when he asked about you watching your maximum LTV though… keep in mind that you will have costs associated with either fixing up, holding and reselling the property or simply getting it leased out to someone else. Keep your eye on your bottom line and make sure you get paid. Just because it’s a bankruptcy or foreclosure doesn’t mean you need to be the next one it takes down with it!
MPD Investments Inc.