Owner Carry Contract Went Sour--Need Advice
Hello,
We moved into our mobile home 11/2 ago. We had a contract with the mobile home owners, that we were to take over the payments and make the payments to the owner.
They were building a new home, so our contract said we would pay them rent, until they closed on their house, and then the contract would revert to a owner carry contract sale, which didn't happen.
We have lived here for 11/2 years and paid them the payment and also we have paid the property taxes for this year in our name.
Well we just got notice that the owners filed a Chapter 7 Bankruptcy and named us as one of their creditors. Their lawyer informed us, that they have already surrendered the mobile home, back to the mortgage company. This just happened this last week.
We want to stay here, we have already been approved to live in this park. According to the Utah State Tax Commission's appraisel for tax purposes, the home is worth 37,000
but they owed about 55,000 still on the place, and our current payment reflects that amount.
Now, around here you can buy a used mobile home, bigger than this in the upper 30,000 range. I would say this place's fair market resale value is probably about 34,000.
Now, of course the payment for Nov will be coming due, and we don't know who to give the payment to.
We are also paying the park rent. So I am wondering if we should contact the mortgage company before the creditors meeting at the end of the month or what?
We don't even know if the owners applied our payments to the mortgage.
We welcome any advise someone would like to share.
Regards,
gabbyg
If their BK is filed, your rights are going to be determined by the BK trustee and the sellers are no longer in charge.
What to do with your payment money now? I'd save it until you get a demand from the BK court to pay the trustee.
That will probably happen, because now the contract between you and the bankrupts is now a BK asset.
It's the job of the BK trustee to gather and collect all the assets of the bankrupt...and distribute to the creditors.
If I were you I'd go talk to a lawyer and have him submit an offer to the trustee to buy the MH for whatever you'd LIKE to pay for it...the seller/creditor of that MH who's now owed $55,000 might be forced into the position of taking a lot less for their debt and that new figure would be your new price.
Hello John Merchant,
Thanks so much for the much needed info. We will contact a lawyer and see what we can do. We will also hold the payment in the bank until the end of the month when we will be attending the creditors meeting, where I guess we will be meeting with the trustee.
I guess an investor would be interested in paying a wholesale price for the home.
It is a 1998 28 x 44 Golden West. 3 bedroom 2 bath, No air conditioning of any kind, No Dishwasher, 1180 sq feet , in park. It has a covered sit down front porch and two car carport. Hardboard siding.
What price would those of you who have experience in investing offer to the trustee. Or is it pretty much what we want to offer? We were thinking about 20,000
Thanks again for responding to my post. I sure appreciate it!
Regards,
gabbyg
John's advice is good. That said I do want to pick at a few things in the original note that might not line up exactly with John's advice.
1. If the owner of the MH has successfully handed back the MH to the lender (and therefore it was released or kept outside the BK), you should be speaking with the lender as to what they want to do. Be prepared to move out. I say this because you do not want to pay more then you have to. The lender has to believe that you are not staying if you can not get the place for a knock down price.
2. You should find out why you were listed as a creditor to the BK. What does the family in BK expect they owe you? If they already gave back the asset do they think they owe you the money paid for the last X months?
3. How you handle the park is an interesting question. I would say to contact the manager and explain the situation. If you are current with the lot rent then they will not kick you out. At the same time I am not sure if they want renters in the unit. If they have a policy against it they will need you to leave and then have to speak with the lender about paying the rent. This could be bad for the park if the lender does not pay right away. If you stay and keep making the payments then the lender might have a mixed reaction. No pressure from the park for the rent but no rent being paid to the lender.
BTW - I would pay as little as possible and bank the funds so that you have more of a deposit to buy the unit when the lender discovers they have an issue. I would try to keep the park happy in the mean time.
As John notes, speaking with a lawyer is recommended. You might have a breach of contract in that the sellers of the unit did not take the agreed steps. As they are in BK it is likely a technicality if you have a claim.
John
[addsig]
Hi John
You don't know how much of a help this has been. At least, we have an idea of steps to take.
Umm, I did speak with the lawyer's office who is handling the MH owners bankruptcy. She said they surrendered the mobile home, but before I read your post I didn't know to ask her if the MH is tied up in the bankruptcy, or if they kept the MH outside the bankruptcy, I just assumed they filed on the MH along with everything else.
I will have to contact the lawyer's office tomorrow and find out. I also asked the secretary why we were included as one their creditors, and she said something about them owing us rent, so apparently John, what you suggested about them thinking they owe x amount of the payments, we paid them, could be why they listed us as creditors.
I will also speak to the park manager tomorrow.
Regards,
gabbyg
Hi John,
Since my last post I did speak with the lawyer's office and was told the mobile home is included in the bankruptcy, so they filed on everything.
Umm, so I guess we will be giving the payment to the trustee, when it is asked for.
Now, we don't have a down payment, except for the money that we saved for our payment.
Umm, now if we have an attorney draw up an offer to buy paper, I was wondering if you could offer some suggestions about what could be in the offer.
Maybe some of you seasoned investors can give us some creative financing ideas, so that when the trustee deals with the lender, we have a good chance of having our offer accepted.
We sure don't want to be out on the street if we can help it..
Joining this forum has been very educational, and I have been thinking about real estate investment for a long time, and especially doing mobile homes. I am thinking of buying Lonnie Scruggs book.
Regards,
gabbyg
Quote:
On 2004-11-07 15:21, active_re_investor wrote:
John's advice is good. That said I do want to pick at a few things in the original note that might not line up exactly with John's advice.
1. If the owner of the MH has successfully handed back the MH to the lender (and therefore it was released or kept outside the BK), you should be speaking with the lender as to what they want to do. Be prepared to move out. I say this because you do not want to pay more then you have to. The lender has to believe that you are not staying if you can not get the place for a knock down price.
2. You should find out why you were listed as a creditor to the BK. What does the family in BK expect they owe you? If they already gave back the asset do they think they owe you the money paid for the last X months?
3. How you handle the park is an interesting question. I would say to contact the manager and explain the situation. If you are current with the lot rent then they will not kick you out. At the same time I am not sure if they want renters in the unit. If they have a policy against it they will need you to leave and then have to speak with the lender about paying the rent. This could be bad for the park if the lender does not pay right away. If you stay and keep making the payments then the lender might have a mixed reaction. No pressure from the park for the rent but no rent being paid to the lender.
BTW - I would pay as little as possible and bank the funds so that you have more of a deposit to buy the unit when the lender discovers they have an issue. I would try to keep the park happy in the mean time.
As John notes, speaking with a lawyer is recommended. You might have a breach of contract in that the sellers of the unit did not take the agreed steps. As they are in BK it is likely a technicality if you have a claim.
John
:-D :-D :-D
I read an interesting thing recently re BK procedures around the country: While the Trustee might legally demand back any property given or paid to any creditor prior to BK filing, generally they DON'T...meaning anything you might get from the BK himself, you could probably keep.
Don't think that's really much help here but if you do get paid by somebody just before he goes into BK, you can probably keep it!
Hi John,
That is just the problem. The payment we sent to the BK for Nov payment, was spent by them, because they had already filed bankruptcy, so that payment was not sent on to the lender
In essence, they stole our money. Now that we will have the payment for Dec in the bank, I understand we will have to give that one to the Bk Trustee.
So how will the trustee handle that payment?... will he handle it as a payment or if an offer is given on the home by our attorney, will the payment be used as deposit or downpayment?
We want to increase our chances of getting this home, so we are open to suggestions & ideas.
Like I said we don't have a down payment, just the money we have saved up for the payment on the place.
Regards,
gabbyg
When you get the bill for the rrent owed the trustee, you'll have a chance to prove your prior payments and you'll get whatever credit is due you then.
Hello John,
Thank you so much for the info. Umm, could the credit that the trustee will give us, when we show our past payments, possibly count towards money down, to the lender for the mobile home?
Also, we have paid the property taxes in our own name, because the State Of Utah couldn't find the the owners. The taxes were supposed to be included in the rent, according to our written contract we had with them. So we paid extra on the taxes.
When the tax commisson couldn't find the owners, they called the mobile home park, and the manager told them we were living here, so they sent us the tax bill.
Would this also be something that we should take proof of , to the trustee?
I am just trying to think of everything. Thank you so much for your time.
Regards,
gabbyg
At this point I think you should divide the 'problem' into three areas.
1. Facts - What are they? Who are the players? What are the roles? How to you contact them directly? Will they even talk with you based on your position in all of this?
2. Rules - What are the rules of a BK? Just what rights (if any) do you have? You are both a tenant, a possible creditor and maybe someone who could file a breach of contract law suit. What are the rules for a land contract or other forms of agreements that you might be held to (or could hold the seller to)? What is your contract in the eyes of the law? Will it stand up?
3. Strategy - What are your options? Figure out all of them so you know where you have room to bargain. What will you do and what will you not do? How much do you have to work with? Can your position make another parties situation better so they will want to team up with you (the lender for the MH might want to cut a deal for example). Have multiple exit plans and decide what each one is worth as you might have limited choices late in the game.
While working through the 3 different axis above you need expert advice or be willing to really do your homework. There are multiple levels here and you want to play well the hand you have been dealt.
Folks here can offer some tips as to what to look for but we are not able to see enough details to offer well thought out advice. Never mind that we might lack the knowledge and experience in all aspects of this topic.
John
[addsig]
Hi John, thank you so much for your response. You have articulated the steps that we need to take. Thank you for taking the time to help.
Have a good day!
Regards,
gabbyg
Hello everyone,
We have lots more info on our mobile home situation, since the last time I posted. I thought I would share it here, not only to get ideas in case others wanted to reply, but also to contribute some helpful info on bankruptcy situations involving mobile homes.
We took advice given here, and saw a lawyer today. He said also just keep the park happy, and that the park wants the space rent. He also said that there would probably be nothing done, as far as the lender is concerned until about April, which he said gives us enough time to save up and we could have about $3,000 to put down on the home, if the park is able to buy it. So that was positive.
Also, ARC who is a big corporation that owns mobile parks throughout the nation, has a first option on buying mobile homes that go into forclosure, so that they can sell them or lease them, as they see fit.
They require park residents to sign 5 year leases, as the deal on their homes is to lease or sell the homes, so there are no renters, just homebuyers.
ARC the mobile home park owners, also got a notice of bankruptcy concerning this place, so they know that these people filed bankruptcy, and they haven't contacted us at all, so I guess they want the park rent, more than they want us out. We'll see.
The lawyer called the lender while we were there, and the lender said we could just assume the loan, with no credit check or anything. I guess so, since the balance on the home is 56,000 and the home is worth between 34,000 and 36,000 giving us a deficit of 20,000 to 22,000. We told the lawyer to tell them no thanks.
Also, mobile homes in Utah are real property, in case anyone would want to know, so we owe property taxes like anyone else.
The lawyer had the bankrupt's bankruptcy papers sent over, while we were sitting there. So now we were able to see what was going on where it concerned our mobile home.
My husband crunched some figures based on the balance owed on the mobile home, and how long they have been paying on it. Well it comes out that they probably paid did make payments to the lender for the first 5 months of our living in the home, so 5 months of our payments to them, went to the lender.
That leaves 13 months that they cashed our payment checks to them, and probably saved them up for a down payment on their new home, which they just moved into in August. So they took a little over $7,000
of our money to go towards their downpayment, we believe.
But since they are in bankruptcy we have no recourse. I think owner carry financing is a great way for folks to get into a home, if they need that sort of financing, but sometimes you can end up with a deal like we got!
By the way, we have been paying the property taxes since the Utah State Tax Commission called the park manager, and were told we are the ones living here.
They couldn't find the owners of the mobile home. I explained to the Tax Commission, what the deal was, that we were currently the renters. The person at the tax commission, said that we owed the taxes. and that we would just have to take it up with the owners, how we wanted to handle it between ourselves.
Apparently here they don't have to have proof of ownership, to send you a tax notice.
Has anyone here ran into a similar situation?
Regards,
Debbie