Purchasing Property Included In Seller's Bk13
I'm finding bits and pieces of the answer here, but...
I live with someone who is in a repayment via bk13. The current and past due mortgage payments are included in that schedule. She is on the note. I am not. She is considering moving to a smaller house or condo as she cannot afford the upkeep.
I have made minor improvements to the house and have a great deal of time invested. I also made a number of her payments for her when she was unable, and no longer have additional funds available to me.
If I choose to stay in the house (and rent out one of the rooms), what are my options to purchase it from her? Do I Sub2, and just pay her note until I can refi in a year or so (in the midst of credit repair... right now I couldn't pay all the new closing, or compete with her rate). If so, how exactly do I proceed with the trustee in order to exempt the house? What about the back-payments?
I am trying to find the best solution for me, and for her as well as her credit is now quite damaged, and she will need to find a way to move into a smaller place or condo.
I can check the licensing laws here. My understanding in FL is that everything (including panhandlig in Orlando) requires a license. Some have formalized licenses (I hold RE and Massage Therapy for instance) and some are simply a business license not through a field specific agency.
I would assume I at least need a business license to collect monies of any sort, I'll look into it.
What's got me really confused right now is the part about the bk. Commercialking, you're telling me that the bk is a good time to negotiate with the mortgage company. On the face of it, and without any experience, this makes sense.
I've asked the question twice in the SS forum, however, and the ONLY answer I've gotten is that the mortgage company will not entertain any offers while she's in bk. I've been asking how to get around this (like maybe get either the mortgage company or the trustee to agree to do their part contingent on the other party) but no answers.
I'm just being told the mortgage company won't listen in bk, and the trustee would have to release. Now I can't see why the trustee wouldn't release if the seller requests, but I'm not clear on the possible reprocussions to the seller of getting it released. For instance: what about all the back-payments that were rolled in... what's to stop the mortgage company from calling all of them and the total package due, and foreclosing.
I understand this may be unlikely if they have a good offer, but what if my financing falls through, or something of that nature.... or the bank decides that they know someone who can move it quickly and get it repaired cheaply, so they insist on more $ to the point where I can't get it financed? Unless I'm missing something, she will have lost her bk protection which was the purpose of her filing in the first place.
Hmmm... how about if I add a "pretty please?"
btw... If there is something unclear or incomplete about my post, feel free to point it out. I'm just trying to find the right, simple, and best solution for me and her.
Thanks.
Well, OK, I'll take a shot since no-one else seems willing to.
A sub to would work.
Can you itemize how much you spent on the house in terms of time and money? You might write a purchase contract giving yourself credit for all these items as a downpayment .
This is made more difficult by her 13. What is the status of that?
Itemizing should be easy enough. I have a home business, so I keep all receipts.
As for her bk13, she just had the trustee's meeting last month and started making the payments. There were around $7-8k or so in missed mortgage payments rolled-in.
I'm assuming I'd have to help find her a new place as well, maybe take out the financing in my name and put her on an L/O, something like that... She's making much better money now, and would be able to pay it, and would like the idea about being able to work her way up to ownership again, but current house has too much $ going out for her blood because it needs new ac, tile, insulation, extensive yardwork / rostorative landscaping. She wants to downsize... condo probably, no yardwork, etc.
Personally, I'm happy here, and there's a good $20k spread between the note and FMV once all those items are addressed, so I'd prefer to stay and knock them out (even leasing out a room if necessary.)
Plus, if we both leave, she'd have to take a hit because the house has carpets and landscaping torn-up, and in the process of replacement.
Well with the added info I think I'd try to structure it as a short sale. Get lots of pictures of all that torn carpet and bad landscaping. And lots of low priced comps. Go to the bank and try to convince them that the value isn't there and they should discount. Give me a clue here-- whats the FMV and how much is the note and how much would it cost to do the work?
OK...
Work to be done:
Replace AC / handler, stat..........$1700
Attic insulation...............................$ 500(?)
Replace dishwasher...................$ 400
Tile 1500sf.....................................$3700
Landscaping/ lawn.......................$2000
Fix Water treatment sys...............$ 300(?)
Fix fireplace....................................$ 500
Total.................................................$9100
Of course, it could be carpeeted for less, and I could do some of the work myself as I do like the house, and don't mind working on my own castle.
Anyway, the loan balance is somewhere around $125k, and I feel confident that it would appraise at around $145k with all of the above completed. The appraisal they're looking at, however from a few years ago says $129k.
This month is her first payment to the trustee... so all they've seen so far is that she hasn't sent them a dime in 8 months. The PITI (without back payments) is around $950.
The other thing I should mention is that I dragged myself down last year paying the note, and that's AFTER me digging myself out of bk a few years back, so I've got FICO's in the 620's right now, with 3 related, but incorrect open collections I'm in the process of cleaning up. My reports will read MUCH better in 4-6 months as I've already started to do the repair, but it will take time. I mention this because it obviously affects my bargaining if negotiating a short-sale. [ Edited by thestudentisready on Date 05/19/2004 ]
And, just curious, how much did you spend on fixing things up and helping her with back payments already? And how many hours of fixing up did you have?
Its kinda tricky but you could argue that the money and time you expended could be treated as a mechanics lein since you had no ownership interest in the house. A mechanics lein is senior even to the first mortgage in most states. Quantify the number and file a lein.
Then you can go to the first mortgage and offer to buy them out short since they are junior to your lein. Now you have perhaps reduced the value of the first mortgage by say another $10,000 of money and time you've already sunk in the place.
Start your offers at around $90,000. (their $129,000 appraisal minus $9,000 in repairs minus $10,000 for your lein minus $10,000 that they will save in attny's fees by not foreclosing) Remind them that the chpt 13 could keep them tied up for a long time.
Read up on Florida lein law before you do this. There will be rules regarding timing of work and filings. You need to comply with those rules carefully or this could be construed as a fraud.
Hmmm...
Much more complicated, but I think I see where you're going.
Most of what I put in is in the form of work, though... cutting down nuisance trees, painting, light electrical, etc. Now, I also have a number (I'll have to check) but let's say $7000 or so in payments either to the mortgage company out of my account, or to gf which she used to pay.
Additionally, though... there are a number of transactions paid to her for half the PITI in those months where we both paid. It would seem to me that this would be viewed legally as rent since I am living in the house. Any thoughts?
*edit*
Also... a few thoughts: Can you think of any potential issues relating to the fact that I am not licensed to perform any handyman, painting services, etc?
And: All work was performed before the bk... does that matter? Or: is it most relavent that she did not include me as a creditor when filing, and so lost the ability to include my fees in the bk?
Hmm... that's all I can think of right now. You're definitely putting the whole situation in a brand new light for me. The more I think about it, we've got the worst lawn on the block (if you can call it a lawn), rooms with bare cement floors, etc... the bank would undoubtedly have to wholesale it to get rid of it to someone who would expect to make at least another $10k for their troubles as well...[ Edited by thestudentisready on Date 05/20/2004 ]
why don't you just keep it simple and sub2 her house buy her a condo and let her sub2 it lol
'Cause if you sub2 you have to assume that whole mortgage. With a short sale you negotiate down the principle as well.
RE: your license. Check the local code. Most handyman type services do not require a license.
Most of the time you must file your lien "in a timely manner" which means within so many days of the completion of work. However usually the code recognizes that certain tasks may not be completed for quite some time. So go out there and "finish" these projects so that you can file your lien. The fact that most of these projects are mostly labor is not a problem.
More problematic is trying to sort out which jobs you did as rent and which ones you did as contract labor. I'm sure you will find some "equitable" solution to this problem given that this relationship seems to be more than a simple exchange of services.
Just to be clear...
It's not any agreement between seller (my girlfriend) and I that is the issue. I can call it rent, or I can call it a ham sandwich as far as she's concerned...
I'm just trying to figure out whether my lien might be called into question due to the fact that I clearly lived here at the time (and claimed a portion of "rent" on my taxes due to portion of the house being used for small business)
It would seem obvious to me that an outside observer would come to the logical conclusion that monies I paid were in consideration for living quarters.
I don't know if this is an issue or not, but I'm trying to be clear about legal implications of filing a lien and using this for leverage with the mortgage company.
As for arrangements between me and seller, that's not an issue.
If anybody has any info on the legal implication of the lien issue, I'd love the input.
Also, Commercialking, thanks a lot. I've moved the short-sale portion of this quandry over to that forum. I would certainly appreciate any input you have over there.
Right now I'm trying to figure out how to short with the mortgage company if they won't negotiate while she's in bk.
The only problem with a mechanics lien is that your not licensed.
In Oregon in order to collect you would have to be licensed. If you did the work and then billed for it they would turn you over to the state, you couldn't collect and you would get a big fine. Additionally you didn't servfe her with the "notice of right to lien" or any of those papers normally associated with a mechanics lien.
[addsig]
The mortgage co is most likely to negotitate with her while she is in BK. That is, after all the purpose of the BK, to give the debtor time to negotiate with her creditors.
The notice provisions, etc. of the mechanics lein law are tricky and specific and you must figure out how to deal with those. Likewise the license issue. However I'd be very surprized if Florida had a landscapers license requirement, for example. So at least those charges are lienable. Though the electrical work is probably a different matter. However the lien law probably does not require you to specify what work was done at that level of detail. The other thing to remember here is that if you follow this path you probably want to charge the highest rate that could be reasonably charged for such services.
To some extent however it does not matter if there are defenses to this lein. Making those defenses requires the lender to hire attorneys and do research and go to court. These are all expenses the lender is reluctant to make and which cost them a great deal more than they cost you. The lein must have sufficient validity that it is not false on the face but I'm assuming you will make sure thats true.
As to your "ham sandwich" issue. I am assuming that your girl friend would have allowed you to stay in her house simply out of love and affection. That she did not charge you "rent". Though she may have agreed to pay you to engage in repairs, etc. The portions of her mortgage that you paid are, on reflection, perhaps added claims in the bankruptcy but are not able to be added to the Mechanics lien.