Seller needs serious Help! Please help - Posted by brian_wa

import · May 20, 2005, 10:45pm

Posted by Nike on May 23, 2005 at 14:19:49:

You may be right. He asked how could help her and I gave him a possible solution. The penalty portion of the agreement will not withstand legal scrutiny. The owner is at fault for not paying the note. The investor created a problem by setting up a byzantine agreement rather than taking his interest upfront and treating initial investment as equity rather than a loan/option agreement that gave him a big-upside if the owner defaulted again (penalty portion of the agreement). The investor knew there was a strong possibility that the owner would default and he structured a deal that rewarded him for such a default.

import · May 20, 2005, 10:45pm

Posted by brian_wa on May 20, 2005 at 22:45:27:

Here’s the short version:

owner of a house got into preforeclosure situation a year ago due to a big medical problem. An investor offered to lend her 15k in exchange for 50% interest in the property, which was like 50k, in addition to his 15k investment. Due to the constraints, owner agreed.
Now, one year later, she got into foreclosure again and this investor wants his 65k or so now.

I want to help her because I think this investor took advantage of her. It’s like lending 15k on a principle residence in exchange for like 300% return. Isn’t that usurious or something?

On top of that, the owner got raped during the past year, too. Not by that investor but I’m especially motivated to help her… Is there anything I can do? Please help!

import · May 23, 2005, 9:21am

My thoughts… - Posted by Sean

Posted by Sean on May 23, 2005 at 09:21:59:

Not to get into the specifics of this case, but there are folks out there that do indeed take advantage of folks… Know a family right now that were sold a house that basically should be condemned less than 2 years ago by an investor with no scruples… now they have an overleveraged home with a foundation that is litterally disintegrating.

I do wish these shysters would get the hell out of the business… they give us all a bad name.

However, with that said, there are also folks who can play the victim card well… and folks who are legitimate victims… however remember lead with your mind, not with your heart. Wanting to help, doesn’t mean its the best move, or that you can do it.

I would say, if the house is in good condition, and worth a reasonable amount of money, run the numbers, what is your payday when you look at cost to purchase of 65k for the other investor plus back payments and mortgage? If the mortgage balance is low enough, and the total property value is high enough, buying off the other investor and taking full posession of the house might be possible.

Likely its not.

What is the house truly worth? What is the mortgage balance? What is the condition of the house?

Way I see it this other “investor” basically is about to be whiped out, as the bank isn’t going to care if he’s half owner or not, they foreclose the house is gone, and obviously this lady is not going to pay him back his 15k let alone the 65k he claims he’s owed.

Investor #1 is not in a position of much power honestly, unless the difference between the morgage balance and back payments is vastly under the market value of the home… I suspect its not. For him to exercise his 1/2 and make a profit, he’s going to have to bring the 1st current himself, and deal with the owner currently occupying the property… and he’s going to have a devil of the time getting her half given the nature of the situation… so he’s going to have to hold off the foreclosure, force the other 1/2 owner OUT… and then sell it and hope to make a profit… Basically investor #1 likely didn’t have a clue about what he was doing, and is not in a mess of his own creation.

This owner is being pressured by this guy, but in reality he’s not in control, she is… she just doesn’t realize it. Investor cannot evict her, she has posession and is 1/2 owner… he’s going to have to spend lots of money to get her out if he can manage at all to get a judge to do so… I doubt it. He’s going to have to hold off the foreclosure, as its obvious she isn’t and can’t make payments, or watch his 1/2 go away to the bank as well… etc etc etc…

Basically all investor #1 can do is harrass her for his money… and that’s it. He’s in a LOUSY position, and its his own fault for being there.

I say, call up investor #1 and play some hardball… he isn’t getting his 65k, if he’s got a brain in his head he’ll quickly figure out that he’s on the path to not getting a dime, and possibly going to have to spend even more money. See where he things his position his, and then see if he is anywhere near reality, or just in dreamworld… if he’s in dreamworld, tell him exactly where his position is and offer him something to walk away… If he has any business sense he’ll realize something is better than nothing.

Make whatever you offer him contingent on the bank (if there is little to no equity) working with you as well… if there is equity after getting rid of chump investor #1, dont’ worry about the bank contingency. Then just handle it as you would any other pre-foreclosure…

You get investor #1 to walk away for $X Dollars, plus back fees plus mortgage balance… you might make a nice payday… if you can do even better by getting the bank to accept a short on top of that… more power and payday for ya.

import · May 23, 2005, 6:27am

Nightmare owner - Posted by michaela-ATL

Posted by michaela-ATL on May 23, 2005 at 06:27:21:

This is excactly the reason why we always say:“Don’t ever let the owner/seller stay in the proeprty after purchase!” Here the investor did even more: Let her keep part of the house, Give her more money than most investors would have. Boy, what a poor sucker he was, falling for this mooch of a seller, who would have long been out on the street without his help. Now she’s even thinking of suing the investor and you are actually not seeing what’s going on and are trying to help her? Boy, she’s got you wrapped around her finger.

Michaela

import · May 22, 2005, 1:06pm

Re: As we dig out the facts - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on May 22, 2005 at 13:06:43:

We find that there was no loan, just a delinquent property owner who needed a rescue. She got the rescue in cash. Now she whats to “play with the system” by filing BK to stop the foreclosure (oops she needs rescued again, poor victim). She wants to be able to be able to sell down the road and keep all the money. I guess the guy that put up the cash in the first place can just take a hike.

Now there may be a blazing liberal judge that will find in her favor, since she was raped later on (and we do not have the facts on that either, since it has nothing to do with the financial arrangement).

So what’s new? Nothing. They want to live free without being bothered with payments. They want a rescue, and maybe the opportunity to do this two or three times. Then they want to keep all the money and all the appriciation. So far credit cards have not been mentioned, but she could stretch this thing out a lot longer with only a dozen or so credit cards before the BK. Then she would have plenty of appriciation to keep all of.

Nothing ever changes.

import · May 21, 2005, 7:15pm

Re: Seller needs serious Help! Please help - Posted by JohnBoy

Posted by JohnBoy on May 21, 2005 at 19:15:07:

How did they draw up the paperwork on this deal?

Did the investor give her a LOAN using loan documents like a promissory note and mortgage or trust deed?

Did the investor have her deed the property into both their names?

Did he he just BUY $65k of the equity interest in the property for $15k?

You don’t give near enough info here to determine anything.

Was it actually a loan? A purchase for equity share?

It all depends on how they structured this deal as to whether the investor could have a problem with lending money at usurious rates or not.

Maybe he gave her a loan. Maybe not. Maybe he bought the equity for $15k. Maybe she is confusing this with being a loan when it’s not a loan.

What does her paperwork say?

import · May 21, 2005, 6:44pm

Re: Do we have all the info? - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on May 21, 2005 at 18:44:06:

Your post sounds like the investor purchased an undivided half interest in the house. That would not be a loan at all but a sale of half of the equity for $15k. So a year later the half owner wants his half of the equity.

There is a guru who sells on this board who teaches this tactic.

It would be prudent to get the paperwork and read it. It might also be a good idea to get a lawyer to read the paperwork and give his opinion.

import · May 21, 2005, 10:13am

Re: Seller needs serious Help! Please help - Posted by Mr. Big

Posted by Mr. Big on May 21, 2005 at 10:13:32:

Sure, buy the house and deed it over to her. God will bless you and give you 2 halos when you get to heaven. See how much thanks you get on this earth. Keep on doing things like this and feel the warm glow of being one of the best people on earth until you run out of money . When you are down and out go back to the people you helped and see what you get.

import · May 21, 2005, 6:44am

Am I missing something? - Posted by michaela-ATL

Posted by michaela-ATL on May 21, 2005 at 06:44:48:

Daily, we see posts about investors getting houses ‘sub to’ when owners are in preforeclosure with very little down. Owners lose the house and get very little.

Here, the owner got a loan (which is pretty impossible through normal channels), which allowed her to stay in the house and keep even half of the equity.

This investor did more for her than most, so I don’t see how he took advantage of her. I’m very sorry for the unfortunate things this lady had happen to her, but it’s not the investor’s fault. She had a 2nd chance to get herself back on her feet and got into foreclosure a 2nd time. Now she wants to blame the investor? Without him she would have been out of the house a year ago, without anything.

Sounds to me like ‘biting the hand that feeds you’.

Michaela

import · May 21, 2005, 6:44am

Am I missing something? - Posted by michaela-ATL

Posted by michaela-ATL on May 21, 2005 at 06:44:23:

Daily, we see posts about investors getting houses ‘sub to’ when owners are in preforeclosure with very little down. Owners lose the house and get very little.

Here, the owner got a loan (which is pretty impossible through normal channels), which allowed her to stay in the house and keep even half of the equity.

This investor did more for her than most, so I don’t see how he took advantage of her. I’m very sorry for the unfortunate things this lady had happen to her, but it’s not the investor’s fault. She had a 2nd chance to get herself back on her feet and got into foreclosure a 2nd time. Now she wants to blame the investor? Without him she would have been out of the house a year ago, without anything.

Sounds to me like ‘the hand that feeds you’.

Michaela

import · May 21, 2005, 3:57am

Re: Seller needs serious Help! Please help - Posted by Vic

Posted by Vic on May 21, 2005 at 03:57:50:

Did the owner of that house put the investor on the deed? If not, what type of agreement did they have in writing? Was there a 2nd mtg.?

It seems to me that if the investor’s not on the deed then he loses, unless he recorded some type of 2nd mtg, in which case he would then have to pay the first off.

The investor can demand all he wants, but unless there’s something in writing, then the investor would probably lose out.

If the investor is on the deed for half, but not on the loan, then the investor will have to catch the payments up or lose the house.

Vic

import · May 20, 2005, 10:56pm

Re: Seller needs serious Help! Please help - Posted by Killer Joe

Posted by Killer Joe on May 20, 2005 at 22:56:46:

Hi Brian,

Don’t know if this will help, but it might be a good start, here’s a link to check out…

http://search.leg.wa.gov/pub/textsearch/ViewRoot.asp?Action=Html&Item=14&X=520205730&p=1

Good luck,

KJ

import · May 23, 2005, 11:47am

Here are the numbers - Posted by Brian_wa

Posted by Brian_wa on May 23, 2005 at 11:47:36:

House’s as-is value: 210k
Loan balance including arrears: 100k

This investor placed a deed of trust against the property for 14k even though this 14k was supposed to be the option consideration. When you pay someone option consideration for the option to purchase something, you just don’t create a deed of trust exactly equal to the option consideration amount and record it against the property. Many judge would see this as a loan.

Sean, thank you for your insight. I truly appreciate your help.

As for the investor, he’s been doing this for years and have had many judgments filed against him by previous owners, many of which he’d lost.

Brian

import · May 23, 2005, 10:34am

Re: My thoughts… - Posted by JohnBoy

Posted by JohnBoy on May 23, 2005 at 10:34:56:

Maybe not. He said the investor has a deed of trust against the property. That would make him a second lien holder on the property. So he could buy the thing at the foreclosure sale to protect his interest and get the place for what’s owed on the first. Based on the first post it appears there was a $100k in equity when he bought in a year ago. His half was for the $50k existing equity, plus his $15k he gave her, for a total of $65k. It depends on the amount of the trust deed he has, but if he shows up as a secured creditor and the house sells at auction for more than what’s owed on the first, he could get his money. At least the $15k he invested or maybe more, depending on the amount of his deed of trust. Or he can buy it at auction for the balance of the first if no one else bids.

Based on the way it sounds like he structured this deal that may be his best way to go. Show up at the sale, see if anyone bids more than what’s owed on the first, and if so, how much more, then get his cash back and possibly plus some, or just buy it himself for what’s owed on the first if no one else bids.

Having the deed of trust recorded may be all the control he needs to either get paid from the sale if it sells for enough or buy it himself if no one else bids on it. With a $100k of equity on the table he is in good position to get his money back, plus some or buy it himself at the sale and get all the equity.

import · May 23, 2005, 11:50am

Re: Nightmare owner - Posted by Brian_wa

Posted by Brian_wa on May 23, 2005 at 11:50:39:

It’s easy to create your own version of the story. I could do the same thing, too.

Brian

import · May 22, 2005, 2:18pm

Re: As we dig out the facts - Posted by Brian_wa

Posted by Brian_wa on May 22, 2005 at 14:18:52:

I fully realize that there are deadbeats out there who take advantage of the system. However, there are people who truly need help. I take pride in the fact that I like to help these people out.

So what if I don’t make any money out of this? Money is not the most important things in the world. So what if they want to take advantage of me? I’ll gain more experience and wisdom for later use.

Open your heart a bit and you’ll be happier regardless of how it turns out.

Brian

import · May 21, 2005, 9:24pm

additional information - Posted by brian_wa

Posted by brian_wa on May 21, 2005 at 21:24:00:

This wasn’t a loan. It was an Option to Purchase 1/2 of the interest in the property. The option consideration is 13k. But if the owner defaults any loan against the property, then this investor has the right to purchase 100% of the property by paying the owner an additional $10,000.

Furthermore, “To protect (the investor) from any judgment or liens, the property shall be put into a land trust and a deed of trust in favor of (the investor) shall be recorded against the property”…

import · May 23, 2005, 8:41am

Re: Seller needs serious Help! Please help - Posted by Jonathan

Posted by Jonathan on May 23, 2005 at 08:41:11:

kj, email me at Jonnyw82@hotmail.com, I have a couple questions for you, thanks.

import · May 20, 2005, 11:42pm

Re: Seller needs serious Help! Please help - Posted by brian_wa

Posted by brian_wa on May 20, 2005 at 23:42:12:

That link doesn’t work… Can you recheck it for me?

Phong

import · May 23, 2005, 12:33pm

Re: Here are the numbers - Posted by JohnBoy

Posted by JohnBoy on May 23, 2005 at 12:33:38:

He has the deed of trust for the $14k, but how did he secure his 50% interest? Did she deed the property into both their names as joint owners or what?

The fact he doesn’t know how to properly go about structuring this type of deal does not make him a crook or shady.

Giving the owner $15k to bail them out of losing their home for $50k of their $110k equity isn’t that bad of a deal. He could have just as easily let her lose the house and purchased at the foreclosure sale, getting ALL of equity.

People in her situation lose all their equity all the time. They may not have a $100k in equity, but where they may only have $50k in equity, they just deed their property to investors to avoid a foreclosure. They give away 100% of that equity. In some cases, they might get a few thousand for moving expenses if their is enough equity involved.

In this case, this lady got to keep her home. Remain living in the home. PLUS, she got to keep half her equity to boot! That is a lot more than what most investors would have done! Most investors would only help her if she agreed to move out and deed the property over. She may have gotten $25k - $50k for part of her equity, but that is about all she would have got, if that!

So exactly how did this guy take advantage her??? It sounds like he gave her a GIFT! Now she has problems again and playing the victim. The big bad investor took advantage of her. Sounds like SHE took advantage of the investor. She needed his help, probably gave him her sad story like she’s giving you now, and he fell for it, like you are doing now, and now that she messed up again she’s the victim because she can’t pay and the investor wants his money!

So now, since the investor may have not properly structured this deal to protect his interest, she can cry foul and use that against him trying to make him look like a crook! Had he properly structured this the right way, she wouldn’t have a legg to stand on!

He wants his money. So have her tell him to just pay her for her $45k equity, MINUS any outstanding back payments, attorney fees, interest, etc., and she’ll move on! He gets his $50k equity plus his $15k he paid in equity, and everyone is happy!

Do you think he shouldn’t get the $50k in equity she AGREED to give him for the $15k he gave her to bail herself out? SHE agreed to that! SHE needs to stand behind her end of the agreement and quit playing victim. Right now he is the victim. He is the sucker!