Seller Financed Buyers Bolted with Deed! - Posted by Heidi W

Posted by Ronald * Starr(in No CA) on January 23, 2002 at 11:41:13:

Kristine–(CA)------------

In the original post we have: “His friends have a house they sold a few years ago to a couple and took back paper.” Thus the property was sold. The couple have moved out. They are still the owners until either of several events occur, as I mentioned in the earlier post.

Good Investing************Ron Starr***************

Seller Financed Buyers Bolted with Deed! - Posted by Heidi W

Posted by Heidi W on January 21, 2002 at 01:52:31:

My dad called with a lead. His friends have a house they sold a few years ago to a couple and took back paper. It was owned free and clear. Recently, the couple stopped making their payments and have vacated the property - without leaving a forwarding address. 12

My Dad’s Friends have (or about to start) Foreclosure, and they think it’ll take 4 months to get the property back.

My dad just wanted me to see if I could help his friends.

Any advice?

Re: Seller Financed Buyers Bolted with Deed! - Posted by David Krulac

Posted by David Krulac on January 22, 2002 at 13:42:59:

it depends on whether the original owners did a contract for deed and still retain deeded ownership, aka record ownership, and the vendee, the couple, have equity ownership.

On the other hand if the origanl owners gave the deed to the couple and took back a mortgage, then the original owner have neither record ownership or equity ownership.

David Krulac

Re: Seller Financed Buyers Bolted with Deed! - Posted by GL(On)

Posted by GL(On) on January 21, 2002 at 13:30:02:

May I suggest, you buy the MORTGAGE from your dad’s friends, then do your own foreclosure?

You should be able to buy the mortgage for a discount. And give them your own mortgage in exchange. Or if necessary, remortgage the property and give them the cash.

If they are leery of taking a mortgage, especially on that property, (who could blame them) I would try offering them a mortgage on my own home, for one year, promising that as soon as I can get the house fixed up and the legal problems cleared I will get a new mortgage and pay them off in cash. I would do this only after consulting a lawyer, and examining the house, to be sure I could do this in the time allotted.

Being the mortgage holder you should have the right to secure the property, do necessary repairs, pay taxes and insurance etc.

If the old owners come back you can charge them for what you spent, plus legal fees, back mortgage payments etc. and in some cases, the whole mortgage becomes due and payable, in other words they have to pay you back in full, plus expenses, even if you bought the mortgage for half price.

Get a good Lawyer… - Posted by JT-IN

Posted by JT-IN on January 21, 2002 at 06:36:42:

Heidi:

They should get a good RE Lawyer, well versed in foreclosures, as this is a specialty. Other than that, the rest should be elementary, but it will take some time, as you mentioned.

If the house is vacant, and I were the former owner, I would secure the house with a hasp and padlock, so that no other unwanted occupants could inhabit the place. Also, to secure against vandalism or deterioration from weather conditions.

In the title of your post. “Seller Financed Buyers Bolted with Deed!”. I just wanted to point out that this is not exactly what happens, as the Deed is a recorded instrument, at the county courthouse. The possession of the original deed, is worthless once recordation occurs, and as long as the family friends had matters properly set up, recorded as a secured first lien holder, then there is no real worry. Additionally, there are many things that they “could have done”, to eliminate such a tramatic event as foreclosure. To name a few: L/O or CFD… instead of tranferring the deed, which is more cumbersome to remedy, when things go sour, as they are seeing now.

Just the way that I view things…

JT-IN

More Info and More Questions - Posted by Heidi White

Posted by Heidi White on January 21, 2002 at 12:17:39:

I found out more info.

#1) They ‘trashed’ the house.
#2) Prior Owners havn’t started foreclosure yet.

Questions:
#1) If an ‘investor’ could track down these people who abandoned the property and offered them, say $500 in exchange for the deed (I’d send them a new deed to fill out and have them FEDEX it to an Escrow Service - which would pay them their $500 upon receipt of properly executed document)- is that something that might help my parent’s friends out (if I just gave it to them for $500 + my cost?)

#2) Would they still need to foreclose?

#3) Would it make it any more difficult to go after these people for late payments and damages to the property?

This couple is older and is not interested in doing alot of ‘work’ on the property. They may just want to get out of this the fastest way possible. Once they get ownership - they obviously wouldn’t want to do another Seller Financing deal, so I’d probably suggest they sell it to me wholesale, or list it with a Realtor that specializes in that type of property.

Thanks as usual for everyone’s great advice.

Heidi

Re: More Info and More Questions - Posted by JT-IN

Posted by JT-IN on January 21, 2002 at 22:01:04:

Heidi:

Let’s try to clear some of this up for you…

  1. Trashed House: Not a factor to the deed and title issue. It may be a factor to any judgement, or possible criminal damages, depending upon how far the Mortgagor (former owner), wants to push matters.

  2. Not starting FC yet: A non-factor

1a) Yes, this would be a deed-in-lieu of foreclosure, essentially. I would suggest an agreement being structured, identifying what is happening, (signing of the deed, for x dollars). This approach is not all that likely to be fruitful, IMHO.

2a) No foreclosure necessary, once they have clear title to the property. However, and this is a big however, as there should be a thorough title search performed first, prior to the Mortgagor accepting any deed. Why, you say? What if there is a huge fed’l tax lien recorded to the property, or a judgement against the present owner for x, y, or z; you name it! Once the deed transfers, so does any lien. Many lenders will not accept a deed-in-lieu-of, for this very reason, as they prefer to foreclose and clean-up the title, if need be. I cannot stress the importance of this issue enough!

3a) If Mortgagor accept a deed-in-lieu-of, then yes they are waiving any deficiency judgement, and hopes to collect same, unless the structured agreement, as mentioned in 1 above, does address this issue with the Mortgagee essentially agreeing to damages. Don’t hold your breath for this to happen!

The cleanest, clearcut route is to proceed with a foreclosure action ASAP; it is what I would do, or have done long ago. These folks are obviously intimidated by this course of action, and the possible unpleasant dealings of this. Maybe you should test their interest in unloading this problem on you, or another willing investor.

In all the above posting, I did not see the state mentioned, where these proceedings will take place. If so, I missed it. Best of luck on this one…

Just the way that I view things…

JT-IN

Re: More Info and More Questions - Posted by Kristine-CA

Posted by Kristine-CA on January 21, 2002 at 14:43:10:

Heidi: I’m not an expert on deeds, but I don’t think the “owners,” the one’s not making payments, are in any position to deed the property to someone else because they don’t own it. It is possible for your parent’s friends, if they find these people and can work with them, to get a “deed in lieu of” (payment) and not foreclose. But it is my understanding that if they want to keep the chain of title and have right to payment as the situation now stands, they must foreclose.

I’m sure the more experienced here can address any deal possibilities here. Sincerely, Kristine

JT… - Posted by Paul_MA

Posted by Paul_MA on January 21, 2002 at 23:04:37:

If the party accepting the deed-in-lieu-of foreclosure does a title search first, wouldn’t this make the title safe?

I always heard ‘never take a deed-in-lieu of foreclosure’, but never fully understood why. I can see your point about the foreclosure clearing the title, but don’t understand why a title search wouldn’t solve the problem.

Paul_MA

Re: More Info and More Questions - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on January 22, 2002 at 20:30:56:

Heidi W--------------

You are right. They are still the owners until they deed away their interest or have been foreclosed upon. If you could get them to deed you the property it would be a good deed, if properly carried out. By the way, I suggest starting at $200, not $500.

Good InvestingRon Starr*****

Re: More Info and More Questions - Posted by Heidi W

Posted by Heidi W on January 21, 2002 at 20:28:48:

Kristine: Thanks.

I’m confused about ownership. If they don’t own it now - then why foreclose on them?

Re: JT… - Posted by JT-IN

Posted by JT-IN on January 21, 2002 at 23:57:39:

Jim:

A title search is never fool proof, due to the moment the title is being checked, liens could have bene filed sometimes as long as a week ago, and not show up. This is always a risk in every Re deal, but it is ocmpounded many times over, when dealing with a party who is not culpable, and in the midst of financial turmoil to boot.

I have heard several good horror stories, as to why some banks will not take a deed-in-lieu-of, and none of them end in: “they lived happily ever after”.

Furthermore, this also eliminates any judgement on the part of the Plaintiff (in Judicial filing states), in which the Plaintiff may seek a deficiency judgement. This is less of a factor, when the Defendent is penniless, I suppose. One must measure the “time value” of money, and the value of the “bird in the hand, over the flock that one would hope to capture” in a deficiency judgement…

Just the way that I view things…

JT-IN

Re: More Info and More Questions - Posted by Kristine-CA

Posted by Kristine-CA on January 22, 2002 at 23:40:39:

Dear Ronald Starr: I am confused about this. All the owners have is an “interest” in the property until it is paid for in full, right? So the deed that Heidi may be able to get from the owners would be a quit claim on this interest? Is that right? Or is it the other way around: the bank/lender has an interest until the debt is paid off? So, I guess my question really is: if Heidi gets a quit claim from the owners, she doesn’t really own the property any more than they did, as she would then be responsible for the debt. But if she finds a buyer that can pay an amount greater than the debt, that is where the deal (her profit) is, right?

I thought I understood all this, and now I am confused again. I think I am confused about the semantics of ownership vs. interest. But in the case of deeds, maybe these are the same thing?

Sincerely, Kristine

Re: JT… - Posted by David Krulac

Posted by David Krulac on January 22, 2002 at 13:39:32:

I went to a county last week where they are months behind in recording mortgages, deeds, etc. They told me that they’re getting ready to start November’s work.
What a blanking mess! And there not a thing that you can do about it.

David Krulac