I Need Help With This Deal
Hello,
I am working on my first foreclosure deal. The house is in pre-foreclosure; the auction is scheduled for 1/19. The homeowner just called me last week, so I really don't have any time. The payoff amount is 44k, the house is worth over 90k. The confusing part is the lady and ex-husband are both on mortgage and title. The divorce decree dated last Sept. stated that the defendant (wife) was supposed to take steps to remove plaintiffs name off the mortgage within 30 days and if not the plaintiff (ex husband) needs to sell the house and split proceeds with wife. The lady lives in the house and is the one who called me -she just wants to save the house or her credit -she doesn't want money. The ex-husband doesn't care about it going into foreclosure -he just wants money. I offered 60k for the house and he just now accepted. Here's the problem: I don't work foreclosures and am not thoroughly familiar with all the processes. The lady called me responding to one of my ads for a house to rent and then she just explained her situation to me. I want to get into this area of investing, so I asked as many questions as I could think of and got inside to see the house. It is in excellent condition because the husband fixed it up before he left. I can close really fast after getting the signed purchase agreement, but of course not before the 19th. How does the auction affect my deal in progress? If someone bids much higher -I don't want the deal. If it goes back to the bank -is there a different process? Will the bank postpone the sale if they were aware of the pending sale? I contacted the bank and law firm initially and they said the sale couldn't be postponed and the lady could not get a forbearance because her income is too low to qualify. I know this is a potential deal, but it’s outside the scope of my experience and knowledge, so I'm considering just passing it on to someone else. Any help will be appreciated. Also, I am in MI –as I know the laws and procedures vary from state to state.
Thanks
I would not recommend waiting until the auction, then it's out of your hands, and property could be bid up higher then you are willing to pay.
Since it's so close to sale, your best move at this point is to put a property under contract, get authorization to release information from owners, and contact their bank first thing Monday. Tell them to postpone auction for a week, since that's how long it would take you to close. Banks would generally rather postpone the auction, then have a possibility of HO declare a bankruptcy. Fax them your contract, this way you are presenting them with something concrete.
Once you get some breathing room, it'll be easier to get someone else involved.
Thank you. I got the release on the day I met with the owner and I've been in contact with the bank. But, I could not get them to push back the date. They said absolutely NOT. Maybe I just didn't know how to work it. I told them "we" had a buyer, but I did not say the buyer was me. I'll try the bank again. Is it best to try to deal with the bank or the bank's lawyer? Also, if I can't get it postponed, should I attend the auction to make sure there are no bidders and proceed with the sale?
Thanks again for your help.
The lender is EMC. I've been talking to two people in Loss Mitigation. The person who is actually assigned to that file, never returns my calls. I'll work on it first thing Monday and see what happens.
Thanks,
Vicki
Vicki,
You might get a response from the loss mit department if the owner gives written permission for them to talk with you. You might get additional time if you offer to put up a non-refundable amount that would be applied to the loan payoff if you close within the agreed time. You might not want to do this if you need to obtain new institutional financing to close or if you are not absolutely sure that the owners will go through with the sale. This has worked for me.
As a last resort--and best, in consultation with an attorney--you could help them file an "answer" to the foreclosure, stating some technicality or misspelling or improper notice or something. That could buy you some more time. I don't know how likely this is, but if either of the owners filed the initial papers for bankruptcy--they wouldn't actually have to go through with it, just file--that can also stop the sale and give you some breathing room.
Both of those tactics work best with homeowners who need more time to come up with the money they owe, or want to drag out the process. If you're sure the deal will work and comfortable that the title is OK, you could pay off the back payments yourself as part of buying the property, just make sure you have title so you don't end up paying off THEIR debt, which would give them more options and time to sell to someone else for more.
If you plan on bringing your own money to the table--as opposed to doing a Sub2--the bank's probably OK with that. They'd rather just get their money than go through with the foreclosure. Meet with the president or the highest up person you can, schmooze him/her, and explain that you've gotten to know these people, they're having problems, you want to help them and benefit yourself in the process. You'd like to buy this property from the owners and have the cash, ask about the best way to make this happen. Be sincere, deferrent, and even naive, this will hopefully help make this person your ally in the process. I like the (paraphrased?) words of Andrew Carnegie in situations like this, "be hearty with your approbation and lavish with your praise."
Thanks to all for the advice. I will follow up with the bank on Monday and let you know how it goes. It’s been a difficult situation, because the ex-husband doesn't want to sign anything unless I promise him the money, but I can't promise the money until I can be sure about the deal.
Vicki
Haste makes waste. In addition to the payoff, what else encumbers the house? Credit card judgments? Tax liens? Child support?
Ask for a 30 day adjournment. The mortgagee operates on a monthly calandar... a week or a month won't make too much difference... but in that extra time you can get a title search, and close without rushing.
Hire yourself an attny NOW. For a few hundred bucks he can file some motion which will delay matters at least a month. Michigan is a judicial state-- its always possible to delay proceedings in a judicial state. Ask the court to force the bank to re-instate in exchange for the deliquent payments or something like that, its a motion you'll loose but it will buy you a month because the bank will have to have time to answer, and you will have to have time to respond to their answer.