Posted by Bill Gatten on May 26, 1999 at 13:44:11:
Doggone it, I feel your pain (no joke). This is one of the major reasons for the PA… (oh never mind). I had an identical situation with an equity share once…I was in the middle, the resident was sending the payments to the non-resident who was trying to bail his failing pizza parlor out of financial problems… and with best intentions to pay–eventually–once the payment hit his bank account it invariably ended up with the cheese and pepperoni guy.
The only thing to do now, is get the information from the seller (acct #, mother’s maiden name… assuming she was ever a maiden… 'sounds as if she may never have been) and contact the bank. If the payments are not current, and the seller is broke, you may have to foot the bill or risk the wrath of the optionee (and believe me, bringing the loan current will be cheaper).
Also be sure to verify that the property taxes and insurance are current too: unless the loan is impounded, you can bet they’re not… and if the insurance is called upon and it’s not there…well… the grits could indeed hit the pan.
I am concerned that one of my sellers is not paying his note and the people that I put in are nervous that they will lose the right to use there option if the bank takes back the property. I have spoken to seller and he states all is ok, But my people have stated that people are sending cards and stopping by to buy the house before forclosure.
Any Ideas? I have thought of trying to get tenants Qaulified
and present offer to seller.
Rich
I would check the public records right away to make sure a foreclosure has not been filed. If you live in a state which has redemption rights, you may have to right to redeem the property out of foreclosure at a discount. This only applies if your lease is recorded, so if the foreclosure hasn’t been started, file a copy now so that the lender sends you notice of the foreclosure.
I’m wondering what your position is in regards to this transaction? Are you sandwiched between the seller and the tenant/buyer? Or did you assign the lease/option to the tenant/buyer? Either way, if I were in EITHER your shoes or the tenant’s shoes I would be nervous as h*ll?.and that’s putting it mildly.
First, it goes without saying that a third party collection account should ALWAYS be set up to insure that the tenant’s payment is FIRST used to pay the underlying loan, and THEN the proceeds are distributed to the owner, and perhaps to you if your sandwiched in the middle of this deal. Had this been done this situation would not be occurring assuming the tenant has made their payments, and assuming that the tenant’s payment cover the loan payment.
Second, I would work with the operating premise that this seller is lying?things AREN’T ok. People don’t send cards or stop by the house trying to buy UNLESS there is something in the public records that has taken place. You need to rapidly determine what that something is. Chances are it’s a filing of a notice of default, the recording of a substitution of trustee, or some other document that may be unique to your state which is a sign that a foreclosure action has been initiated. I’d either go to the courthouse and check it out if you know how?.or have the title company do it.
I would want to make sure my option is recorded?..as in IMMEDIATELY. It’s hard to say based on your knowledge what the condition of title is right now?.but if the option is NOT recorded there is nothing to stop this seller from deeding the property to one of these buyers who’s pursuing the property. NOTHING will stop the lender from foreclosing IF they haven’t been paid.
The option gives the tenant the right to exercise their option?.defined by the terms and conditions contained in the option. It does NOT require the tenant to make an offer?.all they have to do is EXERCISE. But time is of the essence here.
This situation may be more complicated than you think?.and depending on your position in all of this?so may yours. I would IMMEDIATELY light a fire under my b*tt and dig out the information, and depending on what that information is?.I might contact an attorney for additional information.
When you enter into a l/o with a seller that has an existing mortgage on the property you shouldn’t be sending the seller the total payment every month in hopes that he will be making the payments. What you need to do is either send the mortgage payment directly to the bank yourself and send the difference if there is any to the seller. OR you can set up a 3rd party escrow to where you send the sellers payment to and they will distribute the funds out to where they’re suppose to go. But NEVER, EVER, trust the seller to make those payments once you take over the property.
What I would do at this point is get with the seller and get the account number on his loan so you can call the 800 number of the lender to verify that all the payments are up to date. Most lenders have this set up as an automated service. You just call the number, enter the account number and the sellers password code to hear the statis of the account. You can also check the county court house to see if the property has gone into foreclosure. But the quickest way is to call the lender and get the current statis of the loan. If the seller says everything is ok then he won’t have a problem with giving you this information so you can verify it.
From this point on you should make the mortgage payment to the lender yourself and send the difference to the seller if there is any. Or at least send the seller a cashiers check every month made out to the lender so he can’t spend the money on something else.