Question for the EXPERTS regarding short sales and collecting rent from a homeowner who deeds you the house. - Posted by Mark

Posted by TCB on March 08, 2000 at 21:00:51:

What your friend is doing IS legal. They inform the homeowner they will stop the foreclosure, and lease the house back once it is deeded to the company. Often, they will be unsuccessful in resolving the foreclosure through the lender, so a bankruptcy will be filed in the name of the homeowner or their company (which changes names often). This allows your friend to collect more money, because the lender can not pursue foreclosure during an active bankruptcy.
During the time your friend is collecting rent, the property will be listed for sale, or purchased by your friend at a shortfall amount acceptable to the bank (and the trustee of the bankruptcy, if still in BK).
It is very unlikely the lender will work with your friend, under these circumstances. The homeowner is often seen as the victim, because your friend is working the system as long as possible before the eventual foreclosure.
I will add my opinion, even though you requested it not be done. Your friend is very likely a dirtbag.

Question for the EXPERTS regarding short sales and collecting rent from a homeowner who deeds you the house. - Posted by Mark

Posted by Mark on March 08, 2000 at 14:05:51:

I know of a local investor, and company for that matter who seek out properties that are overencumbered and WAY past due on payments and other liens. What they do is get the homeowner to deed the property to them, give them a lease, caharge them a below market rent and negotiate a deal with the lender. Now , once the lender agrees to the deal, they sell the house to a new buyer with new mortgage money , and keep the spread for themselves, or in some instances will give the prior owner %40 of the profit.
My real question is…Is it illegal to collect this rent even though the lender refuses to accept the payments, and there is no assignment of rents and Leases recorded with the mortgage. Thank You for all anticipated responses.

P.S. I would appreciate ONLY real experienced investors orfactual information. NO Theory or moral judgements please

Re: Question for the EXPERTS regarding short sales and collecting rent from a homeowner who deeds you the house. - Posted by chris

Posted by chris on March 11, 2000 at 16:43:22:

Mark-

It is probably best for you to bounce any ideas off of a real estate lawyer who is familiar with foreclosure law in your area. A good example of a California investor getting screwed helping out a homeowner is at this link.

http://www.calpost.com/Library/Cameron/cameron1.htm

-Chris

rent skimming and jail time. - Posted by leslie

Posted by leslie on March 11, 2000 at 04:30:33:

please do a little research into the term “rent skimming” especially where FHA VA loans are concerned. the feds are very serious and have made a few examples of investors in the past.

Re: Question for the EXPERTS regarding short sales and collecting rent from a homeowner who deeds you the house. - Posted by Ben in Ohio

Posted by Ben in Ohio on March 09, 2000 at 08:11:34:

TCB-- CAVEAT!! BEFORE you read the following please take note I am NO EXPERT, but a work in progress–and learning the CRE strategies every day.

In my experience there are a number of ways investors are exploring these types of deals. And from what I have gathered, very often success depends on the amount of equity in the home (of course, condition of property and the like must be taken into consideration).

We have a guy in town who finds an imminent foreclosure. As long as there is equity and the property can be repaired for a price that allows for an equity of about 80% market price, he will advertise to investors the deal. In his case, a new loan must be brought to the table. The existing loan in arrears is paid off. He is paid on a small portion of the 20% spread. The homeowner becomes a L/O tenant to re-purchase the property two years down the road at a price of about 115% ABOVE today’s price. If the homeowner/LO tenant cannot perform on the rent payments they are booted.

On the other hand if there is little or no equity a possible short sale with the note holder is a possibility. I am working on one now. The after repaired value is aboout $100K. The existing lien, first and only lien is in the amount of $40K + 5-6K in accrued late fees, atty fees, etc. The noteholder has agreed to let me negotiate on the owners behalf, by submitting a letter signed by the owner that discusses my intentions, i.e., to negotiate with the noteholder.

My deal is butressed by the fact that the banks appraiser submitted a PV of $19K! I had offerd $22 BEFORE the appraisal. Though I have not completed the deal, and as we all know it ain’t over til it’s over, the rep at the bank has given every indication they will go through with the deal on my behalf, pending approval from the appropriate department/persons.

Now, this is not necessarily a NO money down deal, but it can be. My offer gives me 60 days to close, and I may flip to an investor. If I hold, it is a cash deal. OR, a hard money on this would bring in about $65 for rehab AND purchase.

There is another investor in town that uses a legal leverage with the note holder by obtaing all the necessary loan docs and looks for possible errors and ommissions, such as violations of RESPA, or something. But, other than that I have no idea how it works.

If you like I can get more details on the first technique maybe I can track down the guy. I met him a few times, three years ago and I still see him out and about, so he must be successful. Let me know if I can help