Foreclosing On 3rd Position Lien
Hey all! My first time posting here!
This home is worth 300k. There is a balance on the first of 83k. There is also a second with 25k on it for a total of 108k. I am finding out today through title if there are any other liens on the property.
I am buying the defaulted 3rd lien. It was interest only for 25k and the payee did not pay the balloon payment which was due on 1-27-01! Instead he has paid the monthly payment after the fact once in a while. Seller agreed to just keep getting the payments. Last one was in January of 2004, 4 months ago. Seller is an older gentleman and did not get a remodification of this note so in essence it is in default and all 25k is due and payable now!
I have offered to buy this note for 10k and the seller accepted. The first is current and also the second. How should I approach this payor after I close this deal? I could mention to him that he refinance. Are there other feasible options like letting the first 2 lien holders that he is in default on my 3rd and possibly get a hard money loan to pay those off and own the property outright through a foreclosure??
I can not see the owner not paying me the 25k since there is about 65% equity in the home, a beautiful home as I went to look at it yesterday. Also did a property profile on it and home next dooe with same s.f. sold for 335k 2 months ago!!
Any suggestions would be appreciated and thanks in advance!
Warmly, Richard P. Belliveau aka the note detective
Dodger88,
Sounds like a sweet deal on the surface. Do your due diligence before you hand over the 10K. If your position holds true, it is a no brainer. Even if the HO pays off, you win. If it goes to sale and gets bid to your limit for paying you the 25K, take the money and run, if no one bids then you have a sweeter deal.
Quote:
On 2004-05-24 13:04, csfg wrote:
Dodger88,
Sounds like a sweet deal on the surface. Do your due diligence before you hand over the 10K. If your position holds true, it is a no brainer. Even if the HO pays off, you win. If it goes to sale and gets bid to your limit for paying you the 25K, take the money and run, if no one bids then you have a sweeter deal.
Thanks for the reply and that is basically what I thought as well. Good day to you!
One other warning.
You indicated that the balloon came and went with no pay-off. You said that the lender continued to accept irregular payments.
It could be argued (maybe not successfully) that the lender who is selling you the note has created a precedent that regular payments and pay-off are not required to keep the loan in good standing. A good lawyer might not win but they could tie it up for a while. 3 years of precedent is pretty strong.
When you buy a note you get all the rights and responsibilities. Even ones that you do not want.
I think you might have a good deal in any case but you should establish that you can and will foreclosure with the borrower so that when you start the process they do not find a way to block it.
As to the 1st and 2nd, they are fine so they will not care much about what is going on with the third. HML are not really a good option for an owner occupied person. With a low LTV there will likely be other options.
You do not want to be seen as offering the owner advice. You are not their advisor and you do not want to be held liable for offering advice that impacts them adversely.
You will not get the home unless you successfully foreclose or get the borrower to turn over the keys in lieu of foreclosure.
John
[addsig]