The Feds
Hi all:
I have a house under contract worth approximately $85K for $40K, which is the balance on the mortgage. The house is currently under foreclosure and one of the co-owners is in jail. Both co-owners are ready and willing to deal. Heres the rub...the non-incarcerated coowner has just received notice that the house is going to be seized by the federal government. Apparently the house was being used as a crystal meth lab.
Has everyone ever worked with the federal government (FBI) in an attempt to stop a seizure? In such case, what are the rights of the mortgagee? Does the FBi trump the rights of the mortgagee as a secured creditor?
I'm kinda at a loss here; any help is sincerely appreciated. Thanks.
Wow! I'm interested to hear the answer on this one! Any attorneys in the house?
Do you have the deed? If you're the owner, how can they take the house, if the guy they put in jail doesn't own it anymore?
I think this is one for either an attorney, or straight to the source.
Good luck - let us know how it turns out!!
The federal gov.t can seize the property. Normally, it isn't done if there is a balance on the loan. However, if the value is alot more than what is owed, it can be seized, the mortgage paid off by the gov't and then auctioned off with the proceeds going to the U.S. Treasury. The owners(s) of the property can fight the seizure, but may not have the interest or the resources to do so. Especially true of meth monkeys. Without showing cause, you probably couldn't stop the seizure, even if you are represtenting the owners. As an investor, the seizing authorities probably won't even talk to you.
Hope this helps and good luck
BA4504 is correct,the other problem is the cost for deconing the house!The EPA frowns on this. And the Feds dont pick up clean up burdens.
I say forget the deal, because you will be in for a world of headaches trying to make this happen.
First, if one owner is incarcerated (especially on drug charges), you will want to ensure that if the owner signs a contract, he is "competent" to contract. Although he may be over 18, if he is not competent, the contract would be voidable by him later. Given that he would have a good argument that he is incarcerated and some states require court approval in situations like this, you could have your work cut out for you.
Second, the DEA will likely be the agency seizing the property, not the FBI, since your description leads me to believe that the DEA will have jurisdiction over the property. The federal drug seizure laws do permit the government to seize the property.
Third, can you image the disclosures you might have to give to a potential buyer (and if not, the buyer would likely find out from a neighbor and may try to sue you to rescind the contract in the future). Not too many people would want to live in a former know house that was used as a drug processing plant.
Fourth, as one poster noted, you will have a heck of a time cleaning any drug residue out of the property (which, if not done, could leave you liable to a buyer or renter living in the house you may have in the future).
Fifth, the Fed might already have a "U.S. Marshall's Lien" on the property now, which would require you to get court approval for removal before any title insurance company would insure the title (which would be necessary for any new financing put on the property).
Sixth, I would think that most bankers or lenders would refuse to finance the house if they found out it was used as a drug lab.
Seventh, I would hate to have former drug buyers who did not know about the owner being incarcerated and you buying the property to knock on the door of my tenant (if you decide to rent the property) or the person that bought the property from me, looking for drugs, wondering why the police is constantly having their property under surveyance, or worse, a former drug buyer breaking into the property to "square up" a prior deal he/she thought they were ripped off by the incarcerated person.
While $40k profit may look like a good deal, if you factor in all of the above problems and future liability that you normally would not otherwise have on a real estate deal, you might think that you time is better spent looking at other properties.
Just my 2 cents worth,
Taxjunkie
Thanks folks for all of your input on this. I think I'll take your collective advice and pass on this deal. Much appreciated.
J