Sub2 with Lender who went Bankrupt and isn't making payments

General Real Estate Investing
1

Hello,

I was about to close my first sub2 deal and right now there are some title issues and I need advice. Title report was over 100 pages long. Current owner inherited the property and never paid taxes or cut grass, so there were 19K in back taxes and $1800 in city grass cutting liens and was to be free and clear of mortgage debt. I was going to take title sub2 back taxes which ended up being 13K (savings of 6K) for just 2K to seller. Title report revealed 2 DOTs, one which was from the City that expired after 10 years or death of Grantor (her uncle) 2nd DOT for 35K taken out in 2000 for 30 years. No record of 2nd DOT being satisfied. I searched and found out that lender merged with another company whom filed bankruptcy SMH. I could get title insurance sub2 back taxes but without that 2nd having record of satisfaction it’s a no go. I would be basically getting a property for 15K (downpayment and back taxes) that once fixed up (15K) could sell for more than 100K but with no title insurance no lender/buyer would go thru with the sale. I was going to keep it for a rental though.

What can I do? Do you think this deal is dead?

Only thing I can come up with was reaching out to the Trustee of the Lender that filed bankruptcy and asking some questions and seeing what my options are.

I know that if the city forecloses due to back taxes it would wipe all the DOTs away but then I would have to come up with all the cash to do the back taxes and fix up totalling more than 30K, and I might not even be the highest bidder since its in prime area.

2

This is something that you really need to speak with an attorney and see if a quiet title action may work.

3

The assets of the bankrupt lender were purchased by someone. If you can find out who that is, you may be able to negotiate a note purchase for a few hundred $. Once you are the lien holder, then you can freely purchase from the current owner, or, let the county take the property to a tax sale subject to the underlying mortgage. If you are not the winning bidder, then you get paid off on the full amount of the note you purchased. If you are successful in purchasing the note, work with a real estate attorney to make sure you preserve all your rights as the note holder should the property go to tax sale.