BiggerPockets

Charlie,
This will vary from state to state, so I would suggest that your friend invest a few hundred bucks in a real estate attorney consultation to find out the procedure and cost. Considering that your friend is owed a good sum of money, I think that getting the information from an attorney would be a good investment.
Good Luck,
Bill

The problem is that he doesn't have the $ to buy anyone off. I am trying to help him out w/o spending a ton of money. I will call my attorney and ask him what it would cost to file the papers after I get the Deed of Trust and title report. I don't want to offer to pay for an attorney and then find out it may cost $10k. Then there is the problem of bankruptcy filing should the guy in the building decide to do that.

Has your friend tried just asking for a deed-in-lieu? He agrees to take a deed to the property in exchange for forgiving the debt. That's by far the fastest and cheapest way to handle this situation. It won't be free, since there is some paperwork to be filed, but it will be far cheaper and FAR, FAR faster than a foreclosure.

To do a foreclosure will take several months. Don't know that it will cost $10,000, but it will very likely cost several grand. I've looked at a number of the residential foreclosure opening bids in Denver county. Its not unusual to see $10,000 in fees tacked onto the amount due on a $150K residential mortgage.

The only way to really find out is to speak with an attorney. You need an attorney who specializes in this sort of action. Unless your lawyer does this, ask for a recommendation. Call around. Most should be willing to at least speak with you on the phone for a few minutes to discuss what might happen and what it might cost. Most should be willing to do an in-person meeting to discuss the situation. At worst, you'll spend an hour's time and a few hundred.

Unfortunately, this will not be free. Unless your friend is willing to just walk away, he's going to have to come up with the money to take the necessary action.

Thanks for all the replies. If you guys are interested I will keep you informed on how things go. There is some very good information/advice here. I'm still unclear if my friend is in first position or second. He is actually getting ready to sail from Panama to Hawaii and then head back to the SF Bay Area to deal with this. He had a medical issue and was forced to turn around after five days at sea. I figured I would help him out and do some of the legwork for him.

Charlie, not sure if you received the response you were looking for, but since I just foreclosed on two projects I will give you some numbers on what I spent.

You can find some attorneys cheaper than others, but you need to ask your friends some questions. There are a ton of variables involved before receiving advice you can take to your friend. You need to know how the note was structured, i.e. contract, deed of trust, etc. You also need to know whether he sold the property subject to prior financing. It sounds like your friend doesn't have equity for a reason and my guess is it's due to the fact that there was a previous note on the property. Your friend may be in the subordinate position on the loan which would put him in a difficult position.

I spent $2K on two separate transaction which included all court and county fees. There are going to be some differences depending on how the transfer was structured, but I suggest you create an email with all the information and you blast it out to 10-15 different attorneys in the area for a free consultation. That's your best bet. Good on you for helping a friend!

Fees for foreclosing aren't too bad in non judicial foreclsoure states, $500-1500. However in judicial foreclsoure states, they run much higher.

If the borrower declares bankruptcy, the skys the limit.

Steve, I agree with you. What I meant was that a lawyer who does not do this often is going to have a higher screw-up ratio than these mills. (In addition to the higher costs.)

But you are right that the mills deal with standard stuff, which is presumably what almost all foreclosures are going to be.

I finally received all the info from my buddy. As I suspected he is in second position on the property. How much he is owed is open for debate because the note that he wrote up is a little vague. On the high end he could be entitled to $100k on the low end $15k. Just to throw a wrinkle in things his medical problem has turned out to be a stage four cancer. He is going to fly into the US to have treatment and wants to use this foreclosure to keep his mind off of cancer while he receives treatment. Since he is in second position he will need to pay off the first in order to foreclose. I haven't seen a copy of the first mortgage but my buddy says that it is for $250k. The property is probably worth $400k to $500k. In order to foreclose he will need to sell his boat (its also his home) to pay off the first. If he does that he will have a the potential to make $100k above the $100k he is owed. I suggested to him that it might be best to start the process of foreclosure and then renegotiate the terms of the second mortgage. He agreed.