Re: seller screwed by investor - Posted by eric-fl
Posted by eric-fl on October 03, 2003 at 10:18:31:
Les, I noticed you didn’t directly ask a question here, but rather just asked for thoughts on the matter. So then, going to that, my first thought is that I’m not sure what any of this has to do with you. I’m sure you sympathize with seller’s plight, but I still don’t understand how that makes you involved. Why did the seller call you? Do you know them personally, or were they just responding to your marketing, trying to get another investor’s take on the situation? It would be helpful if you could clarify this. If you’re trying to find out how you could potentially profit from it, I don’t see how. After all, the thing is in foreclosure, and she doesn’t even have the deed. It’s a mess to be sure.
If you’re just wondering aloud if there’s anything you can do to help the seller, whether there’s anything in it for you or not, I’d venture to say “not much”, other than offer advice. That doesn’t mean there isn’t a lot SHE can do, of course. The first, and fairly obvious thing it would seem to me, for her to do, is contact an attorney.
The bottom line here, is that the investor is committing fraud, a practice called “equity skimming”, wherein you promise to make underlying loan payments, and don’t, all the while collecting rents. Unless, of course, they’re not collecting rents, in which case they’re just incompetent, and on the hook for culpable negligence.
As far as the CYA disclosure wherein the investor is to be “held harmless” for “ANY” reason, any competent attorney is going to steamroll over that in about 4 seconds. There are 4 elements to a contract:
- Meeting of the minds
- Competent parties
- Consideration
- Legal subject matter
The thing that’s missing here is #4. If we were to take this to it’s logical extreme, the investor could set fire to the house, collect insurance money, and there’s nothing the seller could do. Well, obviously, that’s ARSON, which is inherently illegal, and so therefore that stipulation of the contract is unenforcable. Ditto for something less dramatic, like loan fraud.
As far as your last statement, I completely agree. They should deed the house back to her immediately, and should have several months ago, when they stopped making payment. It’s not just the ethical thing to do, it’s also the practical thing, too. If you find yourself upside down on a property, then really you should take responsibility and eat it, which is why you should always buy right in the first place. But if you’re not going to do that, you should at least have the temerity to recuse yourself if you know you’re not going to be able to handle it. Of course, we’re talking about the behavior of OTHER people here, and trying to amend that is always a lost cause.
