Owner Hasn't Paid In 2 Yrs & Hasn't Been Foreclosed On ?
I mailed a letter to an owner about 1 prop & as it turns out owner has 3 props in trouble (2 investments & primary rez).
Here's my note buying q:
- in 2002 basement burned out in a 3 unit semi-attached house on a HUGE lot -owner sold the other attached 3 unit in 2003 for $190k but has not been able to sell the one w/the fire damage. The lender HAS NOT foreclosed, rather they continue to send statements w/the arrears (179k prinicipal, 50k arrears,10k legal). Owner called lender today & they said they "will take 179k".
We're going on 3 yrs of non-payment. Should I approach the lender to buy the note & then sell the prop? If so, what would you offer (assume $40k rehab costs)
Sidenotes: I was going to market the prop as a handyman special & attempt a short if we can't cut a deal w/the owner of the other 3 unit. My specialty is construction. This would be my 1st note purchase should the experts deem this strategy feasible :-D
Thanks in advance for your insight.
I do not know in which state you are operating. Check out the rules and regulations.
Seems to make sense. But with care.
It could be that the insurance is in failure and the mortgage holder is trying to play good guy and still protect his equity by having others seek solutions while he awaits the solving of all problems.
Looks like a value. Go for it.
Lucius
After the fire occurred the owner realized the policy was written incorrectly and admitted to not double checking things. It was written as an own occ rez vs investment prop so the insurance did not pay for the repairs. That's why it's been sitting for 2 yrs +.
The prop is in NYC.
So tell me more about this owner. Does he appear to be an "upright" guy? Have you caught him failing to reveal stuff?
Does he seem competent? Got in this mess because he doesn't know what to do? Does he have a good attny?
Even written wrong you may have recourse against the insurance co. or against the bank for not catching the insurance error. Did they think it was an OO loan?
Why hasn't the bank foreclosed?
If I were going to buy the note I'd start off offering around $80 K. Make sure you get an assignment of insurance proceeds along with the loan.
The owner seems like a stand up guy. I think he was an individual that wanted to invest and didn't necessarily manage the situation like a business. He owned both units and that fire did him in since the insurance didn't pay. His mom co-signed so they're credit is down the tubes. The fire dept said the fire was caused by someone smoking in bed. What they think happened was they had contractors working on the units & perhaps one of the workers took a cigarette break....(speculation).
Thanks for mentioning the info re: the lender (Fairbanks) catching the error on the insurance policy. I will check to see if the loan was for an inv prop or OO.
What I'm hearing is that I should go for the note. I'm working with the owner now to try to sell it to a contractor or the owner of the attached unit. I think I would be in a good spot if I can buy the note at a discount ($75k?) & sell the prop at appraised value. Since we own a construction company we can do the work @ cost but would really like to sell as is, get the owner out of the loan, make some $ off the deal and move on (owner's primary rez is in trouble too). I will talk to my attorney Mon. Anything else I should know in prep for convo w/attorney, owner, lender ? Thanks so much.