pre foreclosure w/ judgements - Posted by Dan

Posted by chris on June 05, 1999 at 24:36:03:

Bill , if I understand the fundementals of the PACTrust correctly , the name of the game is to avoid legal headaches & extract as much $ a month as possible from the resident co-benificiary . The resco-ben pays above market rent for several things , some of these being:
-tax writeoff
-equity build up
-right of first refusal to purchase property @ market price @ termination of trust.

Now I think one would want to trade these for higher rent on every deal possible … right? . … Are there some deals where one would, let’s say, share only the appreciation and not the equity build up or visa-versa? … On your second to last sentence in your above post you mention doing a simplified version of the PACTrust? Similar to a traditional L/O ? What’s the criteria for taking those steps as opposed to your standard PACTrust? …Your PACTrust book came today in the mail , so perhaps I’ll find my answers there this weekend, but I’d still like for you to expand more on your techniques and when/when not to use certain aspects of them on what types of deals. I know that every deal is different and the only set rule that applies in real estate investing/speculating is “it depends” , but I still look foward to seeing some general guidlines that may elevate my thinking. Thanx in advance.

pre foreclosure w/ judgements - Posted by Dan

Posted by Dan on June 04, 1999 at 18:13:35:

Rec. a call from an heir who has inherited a house, he wants 10,000 in excess of the outstanding loan balance.

The house is in early stages of foreclosure, good news is the house is worth $80-90,000, the balance of the loan in default is only 21,000.

The bad news is I ran a title search and the deceased has (3) hospital judgements totaling over 50,000.

If I buy the house and pay the 31,000 I will not be able to have clear title when I go to re-sell.

Looking for some ideas - Should I place the house under contract and attempt to contact the (3) judgement attorneys and negotiate a discount on the judgements - All three would have to settle for pennies on the dollar. They may go for it as all three get wiped out if the property goes to sheriff sale.

OR, should I call the bank or banks Esq. and try to purchase the mortgage for $21,000 and continue with the foreclosure (the judgements would be wiped out at the sale). Problem with this is there would be plenty of bidders at the sale willing to bid in excess of $21,000.

Any exp. foreclosre investors with any ideas?

Would love to hear from you - Thanks.

Re: pre foreclosure w/ judgements - Posted by Bill Gatten

Posted by Bill Gatten on June 04, 1999 at 19:16:15:

At first blush, this seems like an indredible opportunty… for you.

Personally were I you, I would take the property subject to the seller carrying the $31,000 (the 21K loan and the 10K spread he wants) and subject to my being able to work out a payment arrangement with the lien holders. I’d first, however, tie the property up with an option agreement until ready to roll.

I would plan to hold for about five years or so (the time the sellers would need to carry the $31,000), and then get a resident (co-beneficiary in a land trust–or a Sub-Lease Optionee) make all payments, with the agreement that at the end of our arrangement, we (the resident and I) would split all profits on sale. My equity at start would, of course, be the difference between the $81K value and the $31,000 owed (the loan and the $10,000 the seller wants).

At termination I would then end up with $50,000 equity due me; the postivie cash flow I’ve received over the term (after lien holders’ payments); the amount the resident came in with up front; and half of whatever the apprecciation will have been by that time.

If the totl payments were low enough, I just do a straight Lease Option (well… I do PACTrusts, but it’s the same idea overall).

I’d take this deal in heart beat.