Anyone See Any Problems Im Missing?
Hello I am currently involved with a owner who is in trouble with thier property they are behind 7 payments for a total of 12,500 including all fees, the place is in great shape. I cannot lend them the money cause my position as a 2nd would not be good if they default again(lost Job but has currently been re-employed) They are currently owing about 166K on their first +the 12,500 they are into the property for a total of 178,500. property is worth about 200k. I would take deed to the property as a QC deed after catching up their payments. with them buying the property back after 1yr at 187,500 or 2 yrs at 196500. Properties in there area have been going up about at least 5%. So i am only charging them appreciation, they keep making there payments on the loan plus they can give me 1.5 months payments in advance which goes towards my costs on the 12,500. If they default I think they would move out peacefully but if i have to evict im looking at 2-3 months probably before i get possesion possibly. I would already be into the property around 89% which doesnt leave much room for unloading the property though i am a licenced Real Estate broker. My best option would be to probably re-rent the place. But then i have to deal with the DOS Clause and cash the place out. Which is my biggest worry i can get a loan for the property no problem but making payments while i look for renters would eat up some of my equity . I run into several deal like this but am worried about the risks v.s reward so wanted to gather some more opinions and see what im missing.[ Edited by Lindell219 on Date 08/27/2004 ]
You are a real estate broker, one of us. You have laid out the problems of the now and of the then. You answered your question several times.
You go back to the owners. You sit and talk to them, take them out buy them a drink or whatever and watch and listen. Hear the sound behind the sound, now thats what you do you are a transactor. Go do it. All the information as to their acts and intents will be exposed. Then make your decision and it will be correct.
Should I help them? Should I just take Deed and get them out as part consideration. Should I do future business with them etc. etc. etc.
That is what we do, we pick up on the signals of Buyers, Sellers, Investors etc.
Sort of fun. Do I make a mistake? yes but I work them out or call John of Locke and he will work it out.
Cheers Lucius
Yep, several problems with it, in my opinion, at a glance.
First and foremost, leaving the original owners in the home is a major no-no in this business. If you take the time to do a forum search, you'll see that the majority of professional investors will never, ever do this. There is simply too much potential risk for the reward. Only if they move would I take the deal.
Second, never do a quit claim deed. Always get a warranty deed, or your state's version of, and always do a title search. I'd recommend title insurance, as well, but that's a personal choice.
Third ties into the first. As a licensed agent, you are at a higher risk of being sued because you are considered a professional in the real estate business and are held at a higher standard than an "average" investor. As such, I feel that you have a greater risk involved and even a stronger reason to not keep the original owners in the property. They may be telling you now that they'll leave peacefully, but that is likely to change if you to have to evict. When they go to the judge claiming that they didn't understand, that they were distraught, or that they thought that you were giving them a loan, eviction will be the last thing on your mind.
If you're worried about the DOS clause id you have to re-rent the property, don't. When you record your deed, the DOS clause within the sellers' note is violated. The lender could call the note at that point. Leaving the original owners in the home as no bearing on that.
Roger
Oh I almost forgot. As a Real Estaste Broker you do not have to sell thru normal chanels like the MLS and etc.
Sometimes, If I am involved, I just do a really great for sale by owner.
For Example. I just forclosed on this dog and would like to sell to some brillant highly talented magic fingered person.who will turn it into a thing of beauty and a joy to behold.
Calll Lucius Foster present time owner.
This property is going to be hosed off and offered for sale. You can save big money by buying it now prior to hosing.
The Owner who has a real estate license, a car license and honorary membership in the KKK. Has to dump this dump prior to major seasonal wind change. Call at once. If the cat answers ask where is Lucius Foster tele number.
This property just remodeled for eclectic elderly flack who has decided to go back and live in his Yurt. This is your chance to buy for peanuts, er, walnuts whatever
Call Lucius Foster he needs the money.
OK they are stupid and dumb, but oh my god do they work. Some people call you just to talk to a kook and guess what they sometimes buy the house.
A fun thing is to paper the house to some stirling family with great credit and no money. I then discount the second I took back which was padded cause I overcharged the buyer as he did not have established credit. It works.
Wait til you see my ad with the Klingon standing in front of this really modern glass and steel house in the middle of nowhere. It is so far out in no no land we have to put in a tank on a raised platform for water. If you want to talk to the neighbor you have to howel and they of course being Coyotes howel back. Very social.
Lucius
Lucius
Lots of danger here! Basically, I agree with Raj (except that I don't think you have to worry about the DOS clause). The DOS should be the last of your worries in this deal. Being a licensed agent makes it even worse. If this ends up in court, you are likely to be found to have taken advantage of the Sellers.
Just for clarity's sake here, LOK, I don't have any worries about the DOS either. Lindell219 is the one who mentioned it, but thought that it would only be enforcable if the original owners were evicted. That is not the case. The DOS would be violated when Lindell219 recorded the deed. IF the lender wanted, they could call the note due then. Just because the original sellers remain in the house doesn't mean that the DOS clause has not been violated.
Roger
Very true, Raj. Thanks for the clarification. You are, of course, correct.
So what if i had a disclosure saying the seller was aware of the terms and stated all the details of the deal in which the buyer signed. (Buyer wants this to be done im just trying to figure out a way to do it for him) In reality he would not be in much worse shape after he re-purchases the house as far as LTV. Plus he gets to keep his loan in place paying it down. Im not trying to take advantage of him in any way. As far as the DOS clause i was more concernered that he could call the lenders attention to this if in fact i had to evict. (may hold some sort of resentment even though this was all done at his request more or less)
Lindell219,
their home. They love that home and would have never sold it if they had only known.
I think that you missing the point that we have been trying to make here which is, it's a bad idea, period. The DOS clause is the least of your worries. I didn't go into great detail because it has been beat to death on these forums, but maybe I need to do so here.
The owners didn't pay the bank, why do you think that they will pay you? If they have jobs now, great, that's a start. Why don't they try to work with the bank to set up a payment plan or something? In short, why is selling their only option? If it is because the bank won't work with them, then there is probably a good reason ( ie a belief that they won't pay).
Now, if you do this deal, leave them in the property as renters and at some point you do have to evict. First and foremost, I seriously doubt that they will leave peacefully. They aren't leaving now are they? Second, what will likely happen at the courthouse is their plea to the judge that they didn't understand and thought that you were loaning them the money, not buying (or as they'll say "stealing"
To keep this short, what could happen at the point is that you get charged with all kinds of things: ursury lending, fraud, unlawful eviction, etc, etc. Doesn't really matter at that point whether the charges are valid or not. You'll still have to fight them.
At best, you'll probably have to file a foreclosure instead of evction. Worse cases: lose the house, face fines/fees, and absolute worst case, jail time. All for just trying to help someone. In fact, as a licensed agent, you stand a much better chance of losing the case, merely because you would be treated as an "expert" in real estate matters, and should have known better.
Yes, that is a scare tactic, but there have been too many cases that have went to that point. Since the majority of professional fulltime investors won't do this, it is definitely not a deal for a first time investor to be doing, in my opinion.
As I said, if you get thru that, the DOS should be the last of your concerns.
Roger
Well-said, Raj. I can't add anything to that.