short-sale problem - Posted by michaela-ATL

Posted by JoeKaiser on August 20, 2002 at 18:03:35:

The point of the suit in this case would be to “encourage” them to deal with you and to prevent them from dealing with someone else. By filing suit, they may see their options eliminated and have not choice but to deal with you or no one.

Joe

short-sale problem - Posted by michaela-ATL

Posted by michaela-ATL on August 20, 2002 at 14:33:19:

here’s a problem i didn’t foresee. it’s obvious, that this can happen, looking back, but… having a contract with a pre-foreclosure seller doesn;t mean a whole lot, if they decide to just sell to someone else in the meantime. what are you gong to do? sue them for performance? 2 weeks later they’re somewhere else. having an affidavit at the courthouse doesn’t mean a lot, if it’s based on a contract, that subject to bank’s approval. just an experience i may be having right now - seller not returning calls, went by their house and their not home (don’t have car) or won’t open the door. i assume someone else just went ahead and bought it ‘subject to’ and gave her cash now. there’s nothig i can really do about it other than cutting my losses and saying 'next!'
michaela

Hate To Say I Told You So. - Posted by Bill - FL

Posted by Bill - FL on August 20, 2002 at 14:58:16:

Always get the deed. Next.

Re: Hate To Say I Told You So. - Posted by jerry

Posted by jerry on August 21, 2002 at 24:18:26:

Bill-
You say, “always get the deed”. Well, I got the deed, but haven’t recorded it because I’m waiting on short sale information from the lender. Should I be recording it so that what happened to Michaela doesn’t happen to me? Or does the fact that it’s notarized and dated prior to a potential claim-jumper’s deal protect me?

Re: Hate To Say I Told You So. - Posted by michaela-ATL

Posted by michaela-ATL on August 20, 2002 at 15:03:49:

what do you mean “always get the deed”? i didn’t want the house at the price of mortgage and backpayment, since there was still some money needed to be put into it. someone else obviously decided, that it was enough profit for him/her. my point is just, that she did sign a contract with me and obviously there’s no way to enforce that, since they won’t be around.
michaela

The Point Is… - Posted by Bill - FL

Posted by Bill - FL on August 20, 2002 at 15:35:20:

You are going to go thru the same motions whether you have the deed or not. By having the deed you are insuring if your efforts are fruitful you can actually realize them.

Re: The Point Is… - Posted by michaela-ATL

Posted by michaela-ATL on August 20, 2002 at 15:46:31:

i don’t really understand. i only want the property, if the bank is willing to negotiate the total down, so, getting the deed somehow beforehand, wouldn’t that tie me to the property? what if i don’t want it at that price?
michaela

Re: The Point Is… - Posted by Bill - FL

Posted by Bill - FL on August 20, 2002 at 17:09:57:

Michaela,
When I say “get the deed” I’m talking about in states that are mortgage states not deed of trust states. If you are in a mortgage state there is nothing wrong with entering into an agreement with someone in foreclosure and agreeing to try to do certain things in the future in exchange for the deed now. You exclude yourself from liability by obtaining their signature on a cya letter. You disclose upfront you are making no promises but will do your best to get them whatever you both can agree on. You are not taking advantage of anyone if you do it this way. You are providing them with a possible solution where there was none. You have to look at each situation on it’s own merits. Generalizing makes no sense. Personally, I usually don’t pursue a deal unless there is a decent amount equity upfront without having to discount anything. If I do have to discount I make sure there is enough time to do so. I tell them up front I am going to have to discount to get involved. If they are OK with that I go to work. I don’t record the deed unless there is alot of upfront equity or until I know exactly how the deal will get done. If it doesn’t work out I simply give them back the deed. Hope this helps. Remember, we are helping people.

Re: The Point Is… - Posted by ScottE

Posted by ScottE on August 20, 2002 at 16:08:54:

Michaela,

The point is that you have ALL of the control when you have the deed. You could put a clause in your contract with the seller that you have the right to deed back the property to the seller (say, within 30 days after ‘closing’…getting the deed) if the numbers are unsuitable or something comes up (i.e. finding a big IRS tax lien). Your contract should indicate that the conditions/your contract will survive closing.

When you get the deed, you aren’t on the hook for anything unless you have contacturally obligated yourself. The seller is still on the hook for the loan, they just no longer have an interest in the property…you have ALL of the interest.

Scott

Re: The Point Is… - Posted by LeonNC

Posted by LeonNC on August 22, 2002 at 01:42:24:

Bill,

How about this. What if you got a deed. It sounds like you’re not recording the deed until you’re able to do something with it. What if to somewhat secure your position you got an OPTION from the seller and a MEMORANDUM OF OPTION. At least then you would have something to record?

Does this sound like something that you would use?? I’ve been trying to figure out how to secure the position of having a deed while not recording it and this is the best I’ve come up with.

How would you put a value on the option?

LeonNC

Re: The Point Is… - Posted by Alan(CO)

Posted by Alan(CO) on August 21, 2002 at 15:25:23:

What about those of us in trust deed states? What are we supposed to do?

However . . . - Posted by JoeKaiser

Posted by JoeKaiser on August 20, 2002 at 16:12:57:

If you’re in CA, it is unlawful to obtain a deed from someone in foreclosure.

Joe

Re: The Point Is… - Posted by Bill - FL

Posted by Bill - FL on August 22, 2002 at 08:17:47:

Leon,
If there was significant verified equity I would record right away. Most of the time there is not enough equity until I get a discount to bother with recording. I don’t want to break the chain of title unnecessarily. With all the negative publicity on flipping lenders are looking harder at this. Honestly, it hasn’t been a problem for me with owners selling twice etc.

Re: However . . . - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on August 20, 2002 at 20:26:07:

Joe Kaiser–(CA)------------

Let me clarify the provisions of the Home Equity Purchase Statute of CA.

In a sense you are right, you cannot just take a deed upon meeting with the owner. You must sign a contract and give the owner a 5-day right of rescission. You can give no consideration during this period. You can get a deed after the 5-day period. The contract has mandated language about the right of recission. Also, some of the type size in the equity purchase contract is mandated–at least 10 point, bold faced, etc.

This applies only to 1-4 residential units occupied by the property owner who has had a notice of default filed against them within the last year.

It does not apply if you are buying the house to live in yourself. The 5-day requirement is nullified at 8:00 on the day that the trustee’s auction is scheduled. So, you could get a deed then and pay the lender to prevent the sale–might have to pay the total loan, at the lender’s option.

Good InvestingRon Starr*

California disclaimer… - Posted by ScottE

Posted by ScottE on August 20, 2002 at 16:24:53:

Thanks, Joe…
I should just add a California disclaimer to all of my posts. We’ll just call it my little gift to the land of fruits and nuts!

Isn’t it California that doesn’t require attorneys graduate from an ABA-accredited law school in order to be licensed? :wink:

Scott

Re: California disclaimer… - Posted by michaela-ATL

Posted by michaela-ATL on August 20, 2002 at 16:35:17:

i understand what you’re all saying. i’m not even really mad at her. i understand where she’s coming from. here she has one deal with me, that’s not completely certain and someone else comes up and gives her certain cash. her property’s going to the steps on sept 3rd. i would have never felt comfortable to put some kind of clause in saying, that the deed can be returned after a month or so. i feel i have an obligation to the seller (that is my conscions - even with all the contingencies in the world) to not let her lose it all. it’s different if someone is not in foreclosure and has the extra time. my post was more a comment, that a contract does not give you security in this case. i just write off the money i spent on title search and figure she needs the $ 50 earnest money more than i do. i believe, that things always work out for the best and the deal may have not been right for me anyway (there might have been other problems, that i didn’t know about etc) i do appreciate all the comments.
thank you.
michaela

The point…revisited - Posted by ScottE

Posted by ScottE on August 20, 2002 at 17:43:03:

Michaela,

If you knew enough to know you had a ‘deal’ and tied it up, you should follow through. Perhaps not on this deal, but maybe on one where there is a TON of equity and you get a contract only to have the seller make another deal with someone else. Now you have to fight to GET something…much more difficult. If you had the deed, then they would have to take it FROM you…a much better position.

Certainly fighting things out in court(e.g. in specific performance cases) should be a last resort. It is usually costly and even when you win, you frequently lose something (time, etc.).

The point is CONTROL. I have had a few deals where they weren’t great deals for me as an investor (bad location for me, not enough equity), but I could flip them (even ‘subject to’ deals) and make a few dollars. I could do this because I had those tools in my bag. I knew it would be a good deal for someone, if not me. I closed the deal and controlled it to the point of making a modest sum for coordinating things. You want to keep yourself in the loop. You will learn many things and it is a great bargaining position…provided you KNOW it’s a ‘deal’.

You must be prepared to strike fast on the real deals. If you play slow, too lax or too nice, you are destined to take it on the chin more often. And believe me, you can count that chin music all the way to the bottom line.

Good luck
Scott

Re: California disclaimer… - Posted by Kristine-CA

Posted by Kristine-CA on August 20, 2002 at 16:53:18:

Michaela–my experience has been the same about contracts–they are only as good as the ability (or desire) to enforce them. Technically, we can sue for anything and everything, but realistically we can’t squeeze blood out of a turnip (as my mother says). Suing for performance? I can’t imagine a more wasteful expenditure of life energy–and obviously you don’t think it’s worth it either.

Regarding a clause: you could make the deal subject to anything–including a short sale with a lender. But that wouldn’t prevent someone with cash from coming along and offering a better deal. Or prevent your contracted seller from bailing.

I think you are on the right track. Next deal.

Sincerely, Kristine

Re: California disclaimer… - Posted by michaela-ATL

Posted by michaela-ATL on August 20, 2002 at 16:59:37:

kristine,
actually, i am suing someone for performance, but that’s a different story, that i have told here already ;-). but in the case of a foreclosure it would be futile, because the whole process takes about a year and the property’s gone by the time you win and you still lose.
michaela