Purchase The 2nd And Payoff The First...
Consider a pre-foreclosure senario where a first and second exist on a home that total a bit more than the FMV. As you might expect, the second mortgage holder is eager to resolve the issue as are the homeowners. Is it feasible to purchase the note at a discount from the 2nd mortgage holder then payoff the 1st mortgage holder as a way to take ownership of the property?
Yes, that is similar to what a short sale is.
Quote:
On 2004-11-17 01:08, cygnus wrote:
Consider a pre-foreclosure senario where a first and second exist on a home that total a bit more than the FMV. As you might expect, the second mortgage holder is eager to resolve the issue as are the homeowners. Is it feasible to purchase the note at a discount from the 2nd mortgage holder then payoff the 1st mortgage holder as a way to take ownership of the property?
Is the first currently delequent and/or in foreclosure?
Well you must either get a deed from the current owner or you must foreclose after you purchase the second and before you pay off the first. Or check carefully that the language of the 3nd or the case law in your state allows you to pay off the first and add the amount to your second. Otherwise you have reduced the owners outstanding indebtedness without necessarily creating a claim against them for the money.
There is a discussion of the issue at
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=731&mode=nested#3159
Just so it is completely clear. I can not tell if you misunderstand the process or were just a little lose with how you wrote the question.
If you hold the notes you have not taken title to the property. If holding the notes was the same as taking title then the lenders would own the property.
Given the way the question was asked, the answer is NO. You can not buy the 2nd, pay off the 1st to 'take ownership' of the property. All you would have done is change or taken over the debt. The present owner would continue to be the owner of the actual property.
As CK points out you need to agree a sale with the present owner and transfer the title if they is presently no default. If they are in default the note owner has specific and limited rights to foreclose so as to protect their loan. The owner of the home has rights to pay off the loan or bring it current which would cure the default and stop the owner of the note from taking the property.
John
[addsig]
Thanks to each of you for your feedback.
In this case, both mortgages are delinquent and I am working with the homeowner to purchase the property. Since the property is in good condition and is mortgaged for close to FMV, I'm thinking it may be the path of greatest effort/reward for me to discount the second and just payoff the first. I was trying to get my hands around the best way to transfer ownership in this scenario. Taking deed on the property up front woul;d seem to be critical. I would also get a contract together with them before dropping a dime. Any other suggestions?
CK - I will definetly check out that link.