I am potentially facing foreclosure on an REI property; my investment partners backed up and left country. Has anyone had this happen to them before? What could I expect?
whose name in on the mortgage? whose on title?
Normally, this would have a negative effect on the partners, too, so your questions make me wonder if you did all of the financing personally (and they did none) and whether you had a written partnership agreement in place.
If not, then a word to others reading this: if it’s not in writing, it does not exist. always and I do mean always protect yourself, especially when entering business transactions with friends and relatives. (and people who may “leave the country”)
gmt: it depends on your other resources. can you sell it? can you personally afford to take a loss? begin by telling the bank what’s going on and attempting to negotiate. don’t surprise them; they don’t like that.
I can afford to take a $20,000 hit, nothing more.
I owe 122,000; appraisal of last year was 130k. I can sell for 100,000. I am not having much luck at the moment.
do you have the cashflow to hold until you can get 130?
I figure I can hold for 1 year.
so, then foreclosure isn’t imminent. if there’s no immediate crisis, why not hold it for closer to full price? that should come close to breaking you even.
can you rent it? that will give you time and time gives you lots more options.
do you have clear title so that you alone can sell it?
as per aak, who is on title and mortgage?
I have a clear title, my name and only my name is on the mortgage.
I can rent the property out as a duplex; I will still pay utilities since it only have one meter. I just have a feeling I am really going to have to spend alot of time on it in the event it destroys me.
why did you buy it and what was your exit strategy?
it doesn’t sound like it’s destroying you. sounds like you’re just nervous. like maybe you didn’t plan on having a rental property.
maybe you need to be in the rental business for a while. figure utilities into the rent.
I bought it on a joint venture; thinks looked great on paper but there was some fraud from the original seller. I have spoken to a lawyer and it’s a long story; not sure if I can pursue the matter though.
As for an exit strategy; I figured I could sell it but never planned to be left high and dry. I have to test the waters to see how much rent I can get; the neighborhood is not the greatest (downtown) and I can only charge so much or I will price myself right out of the place.
You may have outs as Mark is exploring with you. Meanwhile, let’s answer your worst case scenario question.
In the event of a foreclosure, you will lose the property. If the property is sold at a foreclosure sale for more than what you owe plus the lender’s foreclosure costs, then you get the excess proceeds of the sale. This does not happen very much.
The usual outcome is that the note holder is the winning bidder. The note holder takes the property and then sells it for whatever the market will bear. Should the note holder fail to receive enough revenue from the sale to recover the amount of your defaulted loan and his costs of foreclosure, you could be subject to a deficiency judgement.
Additionally, the foreclosure action stays on your credit report for seven years.