Lawsuit Protection After Pre-Foreclosure
Some Homeowners don't want to lose their home and want a workable solution so they can stay...I've read where you can offer to pay all back payments and fees in exchange for "contract for deed" and have them sign a Promissory note for the amount you have invested plus interest or just an agreed amount...when the note is paid they get back the deed or have them sign the deed over to you and lease/ option the house to them for 3 years and make them temporarily the "Tenant" until note is paid and Deed returned...However, the chance of them going into default again due to bad money managing is forseeable...if they default...here we go again with pre-forclosure...so what to do??? simple Evict...but here's the snag...they are previous owners and have "Equitable Interest" and can file a Lawsuit claiming that they were "under Duress" and because of your Knowledge took advantage of them...so I've heard that you have them go to the their attorney or the attorney of their choice and have the attorney explain what they are doing and have them sign the contract and Promissory note along with a "Promise Not to File Litigation" form...which states that you in good faith have presented a workable solution to their financial delimma and have had their attorney explain the outcome and that both parties agree to the terms. Also, that no Litigation is needed nor will be needed in the future regarding this transaction. Whew! Ok the bottom line... The homeowner has an emotional attachment to the home and wants to stay...You Help, they default, they refuse to Move out, They Sue...meanwhile the lawsuit could drag for months having you make the payments... Any Lawyers in the House?...I think it be rare for them to sue after they have gone to their attorney and had it expained...a judge would probably tell them to move out...the meantime they got several months if not a years free rent. any suggestions 
Here in California, land of great politicians and a really well balanced budget. I follow a much simplified procedure designed to reduce future litigation.
To save a person, bring them out of foreclosure pay up the back due payments and accrued costs of foreclosure. Given that there is equity.
I make them a second mortgage and charge a 5% commission as a real estate broker and the lender who I supply makes them a loan at an interest rate of 12% high but not as high as a credit card. I give them a grace period of about two months before any payment and I monitor them closely. If they start to slip I counsel, oh god how I counsel
name it. jobs, personal problems, marriage problems attitude etc. etc. etc.
'If they cannot make it. I try to get them to sell the house. For this I make a commission. If they refuse and decide to wait for the great hand to reach down from heaven and save them. Then I usualy have the Lender substitute me in as Trustee and I start the www.foreclosure.In the meantime continue to counsel. If the foreclosure goes thru. I then do the Unlawful detainer and arrange their departure. In the meantime I am still counseling. Trying to set them up in an apartment. Help them go home to mother whatever. Cradle to the www.Grave.In the end I go in fix up the property and sell it. I get a commission for this. Sometimes I have an arrangement with the lender merely to buy his note with interest to date and do the rest myself.Some investors only want interest and they do not want to be bothered. Just mail their checks to the South of France whatever. Thats is it. I really try to help, but alas there are some among us who cannot be saved, they are on a downward path so destructive they injure all around them. Name the story I have heard it. But it is interesting.
cheers Lucius