I recently sold a property I owned by using a wrap-around. My buyer has begun to fall behind on payments. This is a Florida property. I would appreciate some advise on starting a foreclosure, since this was all done privately. Is a private foreclosure the same as a bank foreclosure. I know I will eventually need an attorney’s help, but until I’m ready to spend that money, I would like to get some suggestions from some other investors who may have gone thru this already.
If what you mean by a private foreclosure is a sale where no one else but you show up and therefore guarantee that you will regain title to the property, the you are really saying that you want the boyer/borrower to just give you the DEED IN LIEU of foreclosure.
Consult a FL real estate attorney about the process and procedures that must be followed in a foreclosure. Get the attorney’s advice on how to offer your buyer/borrower a deed in lieu of foreclosure and the advantages to them for accepting an offer of deed in lieu of foreclosure.
Take Dave’s advice, it’s very good…
I think John Locke says it best… And I am paraphrasing… If you can sell on a contract then you should be able to un-sell as well. Just sit down with the buyers and work out the details… It is a lot cheaper especially if you didn’t disclose properly…
Michael,
landmarkhb said the property was sold with a wrap-around mortgage and thus implies that title has changed hands with no contract for deed involved.
If this is a traditional wrap transaction, landmarkhb erred in referring to his deal as a subject to.
I suspect foreclosure is the seller’s only recourse.
If landmarkhb does reacquire the property by deed in lieu of foreclosure, then landmarkhb has to wade through a confusing algorithm to determine his reacquisition cost basis. Once the attorney gets through the deed in lieu formalities, landmarkhb’s next step is to consult a licensed tax advisor.
Still think that if the Seller was smart enough to sell the deal he should be able to un-sell the deal and avoid foreclosure costs.
Deed in lieu of foreclosure only happens if the buyer cooperates, otherwise, landmarkhb has to go through with the foreclosure. In some states, this is also the case in a contact for deed sale,
I have never had to use the judicial foreclosure process to remove a buyer who was not paying.
Whether the deed is held by the sub 2 investor or is recorded in the name of the buyer it can be done. If the buyer has the deed then a simple filing of the deed back in the sellers name works.
My philosophy is if the buyer is not paying needs money, then offer enough $ to get them to vacate the property. Or I buy houses with U-Haul money and those who don’t pay me, I use U-Haul money to have them move…cheaper than a foreclosure big time.
“U-Haul” money is “Moving Money”…you would be surprised how a few dollars waved in front of someone who is having financial problems works.
Michael, thanks for jumping in, your paraphrasing was very close.
John $Cash$ Locke
John,
It is not apparent that this is a subject to transaction.
landmarkhb said he sold his property with a wrap-around mortgage. If this is in fact the case, then the buyer has legal title while landmarkhb only has a secured lien.
I still affirm that foreclosure is his legal remedy unless the seller cooperates by offering deed in lieu of foreclosure.
Dave,
Not disagreeing that if a person has to, they foreclose, my stance is if the parties can agree then easiest solution is to deed the property back to the seller for consideration “U-Haul Money”.
A regular deed will suffice as the seller is not pursing a foreclosure, he is merely purchasing the property from the buyer.
If a deed in lieu is used, then I would suggest having an attorney prepare the paperwork as there are contingencies such as the parol evidence rule, there is also the right of recission, which may or not apply.
It can get complicated with today’s laws, personally I would take the most expedient way without complications if at all possible.
John $Cash$ Locke
First, let me thank you all for your input. I am not a seasoned investor. Tried to get my feet wet, but managed to do screw up everything I touched. Guess we sometimes need to learn the hard way. I will explain this better:
The property was my son’s home. He needed to sell fast before he went to Iraq. House needed a lot of work, and on top of that it is a doublewide (not easy to sell), on 6 acres. Property was really worth more than the home. Anyway, I intended the sale to be a sub2, on a contract for deed, but buyer insisted on getting the deed, as they were (and did) put $20K of repairs into it.
We sold it for $167K using a wrap-around and special warranty deed (drawn up by our attorney, although they still advised us not to do it). The buyer gave us $20K cash up front. The mortgage balance with Bank of America is $117K. We were having them pay the mortgage direct to Bank of America, and they actually were paying on time until June. (sale was November 2008). We set the interest rate 2 points higher than the existing mortgage.
I felt it was a pretty low risk, as they had well over $40K invested in the property. My son may have eventually lost the house anyway, as he could no longer afford the mortgage of $1360 a month. He tried for over a year to get it sold. Every thing the house needed was fully disclosed to the buyer, and they knew exactly what they were buying. They bragged about owning a bunch of other properties, but really wanted this one to live in. (and they are). Maybe this info will make this a little clearer. Thanks again for your suggestions.
landmarkhb,
Glad to meet you.
Since you involved an attorney, which I can understand why, in my opinion you need to consult your attorney on the best avenue to take.
Because he put the paperwork together, he will understand the best way to accomplish what you are trying to do.
John $Cash$ Locke
The attorney advised us to record the mortgage and deed, but we both agreed not to, as we were afraid of the DOS clause. It is difficult to go back to this attorney as I foolishly did not take his advise in the first place.
I provided the buyer with a copy of the default and demand letter from the bank. They had already paid the June payment, but the letter states that we must also make the July and August payment and late fees by August 15. Perhaps, if we are lucky, they will get the message that the bank will be doing the foreclosing anyway. Unfortunately, my son is in no position to catch up the arrearage with the bank. Nor can we help him anymore. Been there, done that. If our buyer does not catch this up, we cannot save the property ourselves. It’s a shame, because the property is now worth over $200K due to the work they did. Can’t believe they are going to risk it all now. We might have to just let the chips fall where they may. The only thing I think we have left is to see if we can maybe sell this note at a discount. At least enough to pay-off the balance of the mortgage. Is there a market for that these days?
landmarkhb,
I understand what you are saying. Before you put you and yours sons position in “harms way” anymore than it already is, here is your plan of action.
Take off your hat and put it in your hand, then immediately proceed to the attorney that put this together for his help!
As I have often said, “I am not fond of attorneys, but not crazy enough not to use one”.
John $Cash$ Locke
nuff said…guess I can eat some of that humble pie.