Some friend of DW’s and I have informed us that an aquaintance of theirs is living in a house that is or is about to go into foreclosure.
How would I approach getting more information on something like this? From what I have been learning/seeing lately, banks are REALLY slow to foreclose on properties around here.
I could probably talk to the owner. Or is there a way to find out who owns the mortgage? How do I approach the lender and what would they expect from me?
I understand they did not pay a lot for this house, but they bought way before the bubble and have been experiencing “employment” difficulties so my guess is that they have this thing HEL’d out to the max.
Thanks in advance,
Eric
Replies
I've got a friend who fell on hard times and had his house foreclosed on. He arranged with someone he knew to buy the house at auction and rent it back to him.
"Let's go to Memphis in the meantime, baby" - John Hiatt.
http://grantlogan.net/
Well that's a friend to count on.
I want to buy this house or at least look in to it. I'm not trying to help anyone out but me.
Thanks[email protected]
It's Never Too Late To Become What You Might Have Been
Check at the county court house (register of deeds or whatever it is called in your area).Nowdays this is often online.In my area you can only look up property information with a legal description or the name of the owner. But the looking by name is often a problem with exact spelling and many common names.But you can lookup property tax info by address. And the property tax record will both the name and the legal description.But you need to search the records by the legal secription even if you have the name, because mortages and liens might not show up other wise.Now this is not exact, but it can get you some idea of what is going on.For example the mortages are bought and sold so you might see a mortage from one company, but a release from another one so it is hard to tell exactly.But based on that you can see who has the morgage and if there re other loans are liens on the property.But it won't tell you how much is owed on the property.Remember if you buy it from them there are still all of the other liens and loans that need to be paid off, if any.If you it sold at the court house then all of them are canceled.Most often the first mortgage hold will bid exactly what they are owed. If they win then the get the property for "no cash".But they will stop at that point.Then anyone else can bid more. Now if the 2nd mortgage is large compared to the first the the 2nd mortage hold might start bidding.But the details of foreclousre and court house sales will vary alot from state to state.
You could buy the home from the owner. Would he sell it for what is owed. This would save him from having a foreclosure on his record. The question is would that number work for you.Can you guys do this without a realtor in order to avoid paying a commission?Good luck!^^^^^^
S N A F U (Situation Normal: All Fouled Up)
You could buy the home from the owner. Would he sell it for what is owed.
So, I should go knock on his door; call him?[email protected]
It's Never Too Late To Become What You Might Have Been
If I was you, I'd first try to get an intro from the friend of a friend.
If your local re market is anything like Southern Calif, the owners have already received somewhere between 1,000 & 100,000 offers in the mail from the folks who watch late night TV (instead of BT).
They all offer to help with their troubles and come daily by the dozens.
So, you might do better with a personal introduction.
Worth a try, good luck.
Joe H
Thanks everyone! I'll keep you posted. I realize that it's a long shot.
The house looks like it has decent bones; it's a 40's or 50's Cape. Around here that means pretty decent and it hasn't been added on to with a bunch of lean to's and dormers that don't fit.
Eric[email protected]
It's Never Too Late To Become What You Might Have Been
My personality is to find out as much as possible about the property PRIOR to making contact with the owners. County records will tell you who owns it, and some times they will tell you who holds the mortgage (but I don't know if this covers MULTIPLE mortgages). Dig around and you might be surprised at what you can find out. If it's in a neighborhood, I've even talked to a neighbor to get the local gossip.
The story you get from the ho might be accurate, or might be a lot of BS. I like knowing when they are BS'ing me.
jt8
"Success is not the key to happiness. Happiness is the key to success." --Albert Schweitzer
"County records will tell you who owns it, and some times they will tell you who holds the mortgage (but I don't know if this covers MULTIPLE mortgages). "No matter if it is first, 3rd or 99th, if it is a lien on the property then it has to be recorded or else it is worthless.But simple, online searches, might not always show everthing or make it clear which is current and which have been paid off.Also the mortages that I have seen locally only list the amoun borrowed. They don't list the interest rate.I am in MO and we use trust deed for mortages. That is recorded. When you get a mortage you issue both a trust deed and a loan agreement. The loan agreement is separate document that list the interest and all of the other requirements, such as maintaining insurance.Also if someone is interested in buying "at the court house steps", they need to investigate how the details work in their state.AFAIK, if you buy one in MO, it is yours as soon as you make payment.In some state there is still some period where the orginal owner can redeem it.
Joe
Completely unrelated to this topic but.......I got your letter the other day, thanks.
I've moved and don't have the net yet(using someone else's) so didn't have your e-mail address so waited to see your name on here.
Doug
Here is an article on "mortgage rescue" scams. I have seen a number of these recently in all parts of the country.http://seattlepi.nwsource.com/local/285940_mortgagescam21.html?source=mypiAnyone that is trying to any creative "finacing" with the existing owner would be wise to read these.And to make sure that you explain to them each and every item in the contract. And record that session.
Looks like I have (DW) some leg work to do about as I figured.
Thanks[email protected]
It's Never Too Late To Become What You Might Have Been
You can look it up in tax reccords at the court house here.
Electric bills carry a record and water too. Thats the quickest way for me.
Mail man.
Often whats hard is to find the bank that has it if thats the case. I call all the banks on a regualar basis. They will give me prebees. Name and number . They are happy to do it for they just want paid at that point . Often I catch them with a property before they let a agent have it .
One thing it takes about the repo business , is balls . I couldnt think of any other better way to describe it . Tell the guy what you want and he or she will give you an answer. No reason to feel timid .
Good Luck.
Tim
Memphest 2006
November 18th
There are procedures, established by law and custom, to handle this situation. They exist, in part, to prevent anyone involved from being "hustled" by the unscrupulous.
No matter how ignorant, foolish, or desperate the person might be, you will have to deal with the bank at some point. Banks have been called many things.... but ignorant, foolish, and desperate are not among the terms used!
The bank will insist on following the forms... foreclosing, having the property appraised, selling in an open manner. You can be sure that the bank will act to prevent any sale for back taxes.
If you think you will pick up this property for only the "balance due" on the mortgage, and that the desperate owner will not benefit from the increase in the value.... you've been enjoying pipeweed too much.
You could approach the guy and ask him if his house is for sale.Sometimes the homeowner stops making payments and the lender calls and asks "what's going on?"The homeowner says "I lost my job" and the lender says if you don't make your payments we will foreclose and the process will take about 6 mo's.The lender says "See if you can sell it and avoid ruining your credit".The homeowner says okay and then scractches his head and says "now what do I do".Anyway a starting point would be to contact the homeowner and just ask if it's for sale and how much he wants. Here where I'm at the mortgage is recorded at the courthouse. That means you can look at the courthouse records and see how much was borrowed at the time of the purchase. You would then get your calculator out to estimate what is owed or what is the "loan payoff".Some people just flat out ask the seller "if you don't mind me asking, how much do you owe on the property?" Again, you're doing the guy a favor if you help him avoid ruining his credit.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
If you think you will pick up this property for only the "balance due" on the mortgage, and that the desperate owner will not benefit from the increase in the value.... you've been enjoying pipeweed too much.
You know when I started the repo business folks always said things like that . They also tried hard to discourage me from rentals with all the bad stories. Im not picking at you . We just seem to adapt what the paper prints which is bad news.
The truth is he can expect to pick up the property for whats owed. Now that it seems Ive bit at you , Ill explain.
Repos are not like your house and the people are different thinkers. Ive been doing it for 15 years and If I live to be a 100 which aint gonna happen, Ill never understand it . People will let the property be taken with out trying to clean it up and sell it . There doesnt seem to be any pride in the ones I look at and neither good thinking on their part. Sure there are people that are smart enough to avoid forclousure all together , but the ones it happens to arent the select ones. Unless they are upside down or even.
Lets assume they are even up in that they owe what its worth. They cant pay an agent to sell it so it gets repoed. They cant pay their part of closing and the list goes on. It takes money to sell a property.
Tim Memphest 2006
November 18th
No worries, mate! We're all adults here, and each of us has their own experiences and talents. As for accuract of our opinions....once I thought I was wrong, but I was mistaken..... :)
You need to deal with the owner of the house. The banks won't/can't give you any info without some sort of release /authorization from the owner.
Laws and procedures obviously differ by state, but until the sheriffs auction--the owner still is the owner..
In my experience the owner will down play his hard luck and the amount of liens on the property. If you can reach an agreement, the next step for me is to engage an attorney to do an abstract and deed search. Never give the owner a deposit, let the lawyer handle it.
If the property does go to auction you need cash within 24 hrs in my state--- I've heard 10% down and balance within 30 days in some other states.
You would assume a pretty good discount from FMV considering these terms. But lately in my area even the auctioned property is going for a premium.
If the owner owes 25K and the auction brings in 100K supposedly the owner would recieve the 75K difference, but by the time the lending institution gets through adding all the legal and maintenance fees the owner gets little or anything so its always favorable to sell the property prior to auction if possible.
Good Luck
Eric, I'd contact the owner directly and have a conversation with them. Before I went to see them I'd refresh my memory from a great book on the subject:
Making Big Money Investing in Foreclosures: Without Cash or Credit (Paperback)
by Peter Conti (Author), David Finkel (Author)
Do a search at Amazon for that title.
This particular book gives you a four step process for discussing this matter with the owner. It is a very simple formula and it will get you in and out of that house in about 30 minutes and you will know where both of you stand when you leave the house. Three days ago, I was picking up some chairs for a friend at a garage sale and I used the authors questions when I found out the owner was moving. He immediately agreed to sell his house to me for what he owed (72k) and let me assume his mortgage(s). It is a very easy process because the wording of the question is so non-threatening.
Don't listen to the naysayers. They've never investigated these issues enough to understand them.
blue
He immediately agreed to sell his house to me for what he owed (72k) and let me assume his mortgage(s).
Most mortgages are not assumable.
He immediately agreed to sell his house to me for what he owed (72k) and let me assume his mortgage(s).
Most mortgages are not assumable.
Most mortgages contain a due-on-sale clause if the mortgages are assumed. They are assumable but the mortgage company has the option of calling the note. I'm in MI and I highly doubt that any mortgage company would call a note that is performing.
blue
Virtually all residential mortgages obtained through a bank or mortgage company contain a due-on-sale provision and are never assumable. Most residential mortgages nationwide are sold into the secondary market. The original lender, even if still servicing the loan, doesn't own it and had no authority to change the material terms of the loan by swapping one borrower for another.
I believe due on sale clauses have no effect on loans.The lender only has a right to the payments agreed upon. They can be made by anyone. The lender can only go after the persons named on the loan.In general, the lender simply adds the new name to the loan.
78917.20 in reply to 78917.19
Virtually all residential mortgages obtained through a bank or mortgage company contain a due-on-sale provision and are never assumable.
I dont agree about the "never assumable" comment. There is no wording in the mortgages that prevent assumptions. In fact, the language of the due on sale provisions indicates that assumptions can and will happen and the bank has a right to call the note.
If a bank wanted to, they could easily include contractural language that prohibits the loan from being assigned. I've never heard of a mortgage containing that language, but it is very probable that some exist unless the laws prevent them from inserting such a clause.
In any event, if I had any fear of assuming the note (I don't) and getting the loan called in (I would refi it and clear the old note out or pay cash), I could opt to take control of the property using a lease option arrangement that is legal in MI at this time.
blue
I think you're right on target. Sometimes people fall behind and they want out and so they sign the house over to the Buyer - Investor.The Buyer - Investor walks in the front door and they sit down at the dining room table and the Seller/homeowner signs some documents and moves out.The new owner - investor gets the payment coupon book and writes monthly checks for the mortgage payment and nothing is said and you don't hear a squeak out of the bank.The payments are getting made and everyone's happy.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
I would assume that the new owner wants his name on the title. If a new deed is recorded, are you saying that the existing loan to the former owner will just continue to 'sit there'? I gotta think that lenders monitor activity on titles that they hold loans on. Maybe not.
In addition, there is the home insurance policy, the one that the mortgage will require. Yes, lenders monitor this, and I believe most will eventually call the loan, unless it is at a higher interest rate than is prevailing at the time.But that still leaves time to get a new mortgage. Just realize that there may well come a time when the mortgagor calls the loan.
Most mortgages are not assumable.
This is undoubtedly true on paper, but in practice it is very doable--- VA loans were always assumable, but this practice stopped for loans written in the mid 90's I believe.
Still the best means to secure the equity in a home from imminent foreclosure is still the sale with assumption . The trick to making the sale with assumption work is the underlying mortgage: is it assumable without the lender's consent?
Most are not, as you've stated, and for those that are not, the lender may give its permission to prevent a foreclosure and the expense for the bank that goes along with it.IMO the sale with assumption should never be attempted without the assistance of a competent real estate atty.
Still the best means to secure the equity in a home from imminent foreclosure is still the sale with assumption . The trick to making the sale with assumption work is the underlying mortgage: is it assumable without the lender's consent?
We might be splitting hairs but I'd say the best way to save a house from imminent foreclosure is to buy the house "subject to" the outstanding mortgage. The lender does not have to "consent' to make the deal a legal deal but they might decide to call the note due if you do this deal without a formal assumption agreement. Here in MI, we are already experiencing record foreclosure rates and I'm fairly certain every bank would be glad to let the deal go through without foreclosing. Most of the properties would be losers for them to foreclose on because once they take possession, they won't have anyone that will buy them! I'd bet that we currently have aabout 50 years worth of inventory at the rate that houses are selling!
It's getting serious around here.
blue
I think even talking about assumable mortgages is a moot point , so I agree that its splitting hairs. Of course we can discuss any thing we want . <G>
The reason I think its a moot point is that one , the person buying it should be able to afford it and qualify. Two , we are only a couple percent off the lowest prime that we have enjoyed. The stuff that was bought at 5 percent sold HIGH. So that makes it a moot point in my mind .
Plus ; Once the lender ends up with it and its added to an inventory that staggers the bank, they will take losses and move on. In turn they will go after the person , persons that let it go back. So in that event it can be cheaper .
If its a goverment loan , they will discount it heavily if it dosnt move . Ive bought some of them for 50 cents on the dollar from US marshal sales .
The fact is the bank cant keep holding them if thats the case and those properties will sell cheaper than assumming a loan and costs such as back taxes.
Tim Memphest 2006
November 18th
In turn they will go after the person , persons that let it go back.
You can't squeeze blood out of a rock. I doubt that banks would be chasing Michiganders that have been left homeless because of them losing their jobs. There are a ton of people downsizing and scrambling to meet their basic needs. The banks might win their lawsuits but they'll have a hell of a time collecting....
blue
You are right.
But they will still hold a judgement if they ever do accummulate anything . Or a job. Would you forgive a 100,000 dollars for example?
Tim
Memphest 2006
November 18th
Edited 9/21/2006 7:15 am by Mooney
"This particular book gives you a four step process for discussing this matter with the owner."The above is your statement from several days ago and I was just wondering what the four steps are.I'm guessing they're something like:1. How much is owed on the home?2. Would you be willing to sell your home for what is owed so that you can walk away and avoid ruining your credit?If they hesitate or have not said "yes" you go to question #3.3. Would you sell the home for the above price if I were to provide you a u-haul moving truck as part of this deal?If they have not said "yes" you go to question #4.4. Can I help you by paying your first month's rent in an apartment?Of course the numbers would have to work and you would need to buy from someone with some equity. Maybe they've lived there a while and there's some equity.Maybe they paid 20% down when they bought the home and there's some equity.Several people have said to "do your homework" prior to approaching these people.This approach has not worked for me because I have done my homework only to find the homeowner is unmotivated, uncooperative, has no equity in the home, etc etc and I've spent numerous hours gathering information as to the home's value, repairs list, expenses, projected sold price, etc. ^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Sorry Mr Fixitusa you are not right about those four steps. I just spent ten minutes explaining and it was all lost when I hit the wrong button. I think that is a sign....someone wants you to get the book and read it!
Rober J Bruss, a nationally known syndicated writer gives this book a glowing review: "This book contains the best real estate negotiation strategies that I've ever read. I wish I had know their techniques when I stated investing in real estate." I agree with that statemen myself!
blue
The book sounds interesting - I wonder if it's a book on tape?I hope Eric who started this post is successful in buying the home and making some money on the deal and putting some coin in his pocket.This forum is a way to help people and learn from other's mistakes.I would like to buy houses like Eric is talking about and I've studies the process from top to bottom. My original plan was that "I would do it right" and buy the home outright from the homeowner.I would pay 20% down and I would finance the home and pay the loan costs and prepaid and I would do some work on the home and I would either sell it or use it as a rent to own property.I would purchase the home, pay a year of homeowners insurance, pay the closing fees, write a check for the down payment, pay the utilities and holding costs for a few months, etc. and eventually I would get a return for my investment, the risk I took, my hard work, etc.Yesterday I listened to a book on tape I had bought about a year ago and the author outlined how one (like Eric) would approach the homeowner and simply have the owner sign the house over and give him (the investor) a lease option.The investor simply makes the next house payment (and maybe makes up the payments which are behind).The investor then finds a buyer and gives him a lease option. Sounds simple.With this method there are no expenses like I've described. You don't write a check for a 20% down payment, you don't have loan costs and prepaids, you don't have the headaches of financing an investment property (which is more difficult than financing owner occupied).If you're on the ball you find someone to lease-option to and and they sign on immediately and the house doesn't sit vacant for months while you're advertising, having open house, etc.The book says the investor is in the drivers seat as there are many people who are in trouble and have fallen behind on their payments. Other people have become "accidental landlords". They have a property for rent because they couldn't sell it, the marriage has ended, and they are at their wit's end and simply are not going to make that Oct 1st house payment. It's too painful. They are ready to walk away and if someone can help them by "taking over the payments" they will sign whatever you place in front of them.Maybe the process should be directed around meeting the homeowner and just getting to know them and finding out what the situation is and make a call as to how motivated they are and get a feel for whether they would jump at a chance to walk away from that next monthly payment.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
What is always different about these types of dicussions is location.
Seems we all live in different markets and we have different laws governing real estate . That was one of the first things that was ever pointed out to me years ago about this place. As Ive read posts here over the years it keeps re-announcing the fact.
I truly believe I have a market different than most any one here .
Probably you and Blue are worlds apart on your markets.
What you and I have printed about the nature of the folks in repossesion holds true because of people are not a lot different animals. Mostly they are the same and whether they come from the East coast or the West , they all put their britches on the same way.
So, they are unmotivated people for the most part and that does cause profiling although they are not all that way. A lot of them are uneducated and if they are are not business managers of their own life in many cases. Again, not all.
Its interresting in case studies that the majarioty didnt stump their toes on one deal. Most have lived a life of it not paying thier bills for different reasons however. Some are smarter but refuse to live with in their means . So maybe while they were making those luxury payments to keep up with the joneses they cashed in their retirement and dropped their health insurance . Of course life insurance wasnt considered until a tragedy struck. Several bread winners have died here recently and yes some were wommen . Its been a two income world for quite some time and planning for raising a family on one wasnt planned for so it still comes back to personal business planning and living out side of their means . We are still found dealing with the people that didnt do it . Same same same .
Tim Memphest 2006
November 18th
Blue,
I ordered the book a few days ago when I first saw your post on it.... $7 used on amazon (+$3 shipping). Thanks for the suggestion.
Looking fwd to readin it. I've bid on forclosures at the courthouse, but have yet to be successful at it. I know the real deal is getting it before it hits forclosure, but I haven't acted on that yet either.
time is getting ripe, with the housing market in a downturn. Lots of people leveraged too far.Ithaca, NY "10 square miles, surrounded by reality"
Stray, you won't be sorry. I have two books by Conti and both are very similar. I also have a couple shelves full of other real estate books and maybe that many out on loan to others. Of all the books, I was most impressed with the simplicity that is offered in their "offer system".
I've been to the courthouse steps myself and I don't think I'll ever return. If I had a wheelbarrow of cash, I'd be doing short sales with the banks like Mooney suggests.
blue
"I've been to the courthouse steps myself and I don't think I'll ever return. If I had a wheelbarrow of cash, I'd be doing short sales with the banks like Mooney suggests."
I dont understand .
Tim
Memphest 2006
November 18th
"I've been to the courthouse steps myself and I don't think I'll ever return. If I had a wheelbarrow of cash, I'd be doing short sales with the banks like Mooney suggests."
I dont understand .
Tim
I thought you mentioned something about buying things for 50 cents on the dollar from banks. I don't see any reason why I should hang around the courthouse steps when I could just as easy make offers to the banks themselves on their REOs.
blue
Who knows what I typed but Ill clarify it . Not worth sifting through it .
When someone loses their home to a local bank , theres an auction for them to forclose really . Thats the first auction or sale. Those dont get a lot of traffic because the full principle and fees are tacked on. They tack on all they can in hopes of getting them. After it belongs wholly to the bank again they normally list the property with the real estate. They normally sell them retail unless its a case like you are in and they cant get rid of them. Here they can, so the trick is to slip in and buy them at their own auction. Thats takes a lot of time and research . Its a tough way to do it because too many arent worth it for pay off . Only a few , but I could make a living off a few a year doing a lot of investigation. Thats probably not your senario at all . But , I CAN resell them where you are handicapped. You probaly could buy them from the bank where I cant really. But what would you do with them if they arent selling ? Sell them much cheaper? Im just guessing at some price they will sell.
Goverment auctions are where I can get the 50 to 60 percent . I dont really know why they set them so low. But you do have to have cash the day of the sale . That may be it .
I do understand what you meant now . Why buy off the court house steps with cash money when you can do as well buying from the banks with financing. I get it now. Different situations.
Tim
Tim
Memphest 2006
November 18th
Edited 9/25/2006 9:17 pm by Mooney
Excellent advice and I appreciate your positive attitude.I just wanted to throw something else out here about books. Have you ever gone to a used book store?Around here the used book stores sell books for half the cover price.The older books or less popular books are priced even lower and at a couple of bucks and you can find some really good bargains. ^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Used to work in the F/C field -- long, long time and everywhere
Before you knock on the door do some work to find out the values and amount owed -- public on-line records show assessment and the mortgage is online too -- so you know the equity. then knock on the door and see if you can buy the house -- take a quick look around to see the condition because you might not want to go thorough the deal -- you can also talk short sale with the mtg co -- but you are going to have to go when they say do this and this -- good luck
I'd talk to the owner - see if there's a chance you could buy in from him (or her) for the amount still owed on his loan.