Subject To Advice
I have a home that I purchased subject to the existing mortgage and
created a land trust, but I have not recorded the deed for the land
trust yet. The reason I have not recorded the deed yet is because I
am trying to work a short sale on it. I am just about there with the
short sale, and am just waiting on the mortgages companies to accept
my offer. In the mean time I am afraid that the owner might end up
with a lein or judgement against their name before I complete the
short sale.
1. Should I record the Deed to avoid a judgement attaching to the
house?
2. If I record the deed, what impact will that have on the shortsale
process?
3. Should I wait to record the deed and cross my fingers?
Tim
Thanks for the reply Shortsalepro,
Let me see if I can give you a little more info. I started working on this property back in March 06, which was originally a straight option on the property. The seller and their spouse were going through a divorce, and part of the divorce was that the seller’s husband was going to live in the home and make all of the payments. The seller moved out and moved in with her friend. The seller was the only one on title. The seller’s husband decided in March he was going to move out and stop making payments on the house. The last payment on the house was made in February. That’s where I came in with an Option to buy it for what they owed and I was going to sell it and get the difference.
However, it turned out that the owner had just completed a bankruptcy and had their debts discharged in January 06. At the time I had no experience with a seller in Bankruptcy. After putting a few dollars in fixing up the property, to get it ready for resale, the owner sent me some paper work on the bankruptcy discharge and a letter she received from the 1st mortgage holder. I found this out around May when they 1st mortgage company decided they where going to start the foreclosure process due to the sellers husband not making payments for 3 months. The letter showed that the 1st mortgage holder was asking for a relief from stay from the bankruptcy.
It was then that I realized that I might have a problem. So, I put a hold on everything and started asking for advice on how to proceed by posting questions on various forums and asking other investors I new. I also talked to my Title Company, whom I have built a relationship with. The title company suggested I get a TBD (To Be Determined) report run on the property and the seller. The TBD showed that the seller had a bankruptcy and that the house was under the control of the Bankruptcy Trustee. The Title Company said that I would need to get permission from the Bankruptcy Trustee in order to buy the property. In other words, the Bankruptcy Trustee had legal control over the property, until they determine that the property was not worth anything. If it was worth anything then the Bankruptcy Trustee has the right to recover any money from the sell of the property in order to pay back some of the creditors that where loosing money due to the bankruptcy.
I then called the Bankruptcy Trustee and tried to convince him that the property did not have enough equity in it for him to recover. I asked him based on this if he could release the property from the bankruptcy so that I could buy it and keep a foreclosure off of the Sellers record. The Bankruptcy Trustee said that it was not time for him to release it from the bankruptcy yet and that he would not release it until July or August of 06, but I could get the seller to file for an abandonment of the property. This would involve paying a lawyer at least $600 and it would take 30 or 40 days to get an answer from the court and then wait for all of the creditors to decide if they want to file an objection. If the creditors did not file an objection then the property would be released from the Bankruptcy with the Bankruptcy Trustee’s permission. The Bankruptcy Trustee said he would not object to the petition for abandonment and he would release it from the bankruptcy sense he believed it did not have any equity. In the meantime the 1st mortgage holder was trying to get a relief from stay so they could foreclose on the property.
The 1st mortgage company received their relief from stay at the end of June and sent the information to the seller that they would be starting the foreclosure process. The owner then sent a letter back to the 1st mortgage company at the end of June. This action held up the foreclosure process a few weeks. In the meantime, I decided to do a short sale instead of an Option sense it seemed like it would be the best route to create some equity. I also figured that would slow up the foreclosure process a little more and gave me some time until the Bankruptcy Trustee released it from the Bankruptcy. I also decided not to pay a lawyer to file abandonment because I thought the Bankruptcy Trustee would release it from the Bankruptcy sooner then going the abandonment process route.
The letter did effectively hold up the foreclosure process and gave me some time to get all of the necessary paper work together to start the short sale process. I sent in all of the paper work to both mortgage companies, and both mortgage companies ordered a BPO (Broker’s Price Opinion). A BPO is when a mortgage company gets a local Realtor to do a market analysis on the property to see how much the property is worth in it’s as is condition.
During this time the Bankruptcy Trustee finally released the home from the Bankruptcy in mid July. Currently both mortgage companies finished their BPO’s and I am waiting for them to accept or reject my offer. While waiting for the mortgage companies to make a decision I decided to figure out where to get money to secure the deal when the mortgage companies came back with an acceptance letter. After asking around I was asked if I had the deed to the property yet, and was told that I should get the deed in order to make sure the owner did not back out later and that no other investor could come in and steel the deal and that I could always deed it back later. I decide to take the deed in a land trust, but not file it yet. In the meantime I wondered what would happen if the seller got another judgment against her name. This concerned me because it would attach to the house sense I had not yet recorded the deed. That it is why I posted the question on this board. I hope that all made sense.
Shortsalepro,
The reason I am concerned about another judgement is because the seller just informed me that a relative that she co-signed a student loan for stopped making payments on the student loan and now the bank is coming after her. This loan was not a part of the bankruptsy because she probably forgot about the cosign for here niece.
Ah, oftentimes, student loans are exempt from discharge in bankruptcy. You might pose your question to the bankruptcy trustee. Whatever happens, good luck.
Quick question for you short sale. I met with a lender that has a deed of trust on a property that is not in her name. She filed for bankruptcy, and missed around 5 payments. The attorney will not call her back.
Since the mortgage is in her name but the deed is not. Will this keep the lender from doing a short sale? In your opinion?