From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1514 topics, 14412 posts — Last Post 04/24/14, 05:53PM

BiggerPockets Exclusive PRO Area

117 topics, 841 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10994 topics, 86671 posts — Last Post 04/24/14, 05:49PM

Real Estate Success Stories

400 topics, 6221 posts — Last Post 04/24/14, 05:13PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

6001 topics, 47283 posts — Last Post 04/24/14, 05:49PM

Renters

651 topics, 5873 posts — Last Post 04/24/14, 03:20PM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

660 topics, 6333 posts — Last Post 04/24/14, 02:46PM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3716 topics, 29810 posts — Last Post 04/24/14, 04:47PM

Real Estate Guru, Book & Course Reviews and Discussions

1140 topics, 11615 posts — Last Post 04/24/14, 05:04PM

Ask About A Real Estate Company

743 topics, 7348 posts — Last Post 04/24/14, 03:12PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5647 topics, 44004 posts — Last Post 04/24/14, 05:56PM

Rehabbing and House Flipping

3354 topics, 31116 posts — Last Post 04/24/14, 05:56PM

Real Estate Development & New Home Construction

554 topics, 4695 posts — Last Post 04/24/14, 06:22AM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

869 topics, 6702 posts — Last Post 04/24/14, 05:46PM

Rent to Own a.k.a. Lease Purchase, Lease Options

700 topics, 4961 posts — Last Post 04/24/14, 11:26AM

1031 Exchanges

143 topics, 1063 posts — Last Post 04/24/14, 11:10AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1692 topics, 11317 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10604 posts — Last Post 04/24/14, 07:13AM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7259 topics, 71276 posts — Last Post 04/24/14, 05:44PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5146 posts — Last Post 04/24/14, 05:13AM

Investor Basics

Starting Out

7739 topics, 60719 posts — Last Post 04/24/14, 05:30PM

Investor Psychology

434 topics, 6130 posts — Last Post 04/24/14, 05:48PM

General Real Estate Investing

4732 topics, 37336 posts — Last Post 04/24/14, 02:34PM

Real Estate Investor Marketing

1740 topics, 14165 posts — Last Post 04/24/14, 05:08PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1414 topics, 9022 posts — Last Post 04/24/14, 04:12PM

Multi-Family and Apartment Investing

1124 topics, 9411 posts — Last Post 04/24/14, 05:56PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

645 topics, 4913 posts — Last Post 04/24/14, 12:21PM

Business Basics

Goals, Business Plans & Entities

835 topics, 7595 posts — Last Post 04/24/14, 05:56PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2803 topics, 20142 posts — Last Post 04/24/14, 05:04PM

Property Insurance

312 topics, 2059 posts — Last Post 04/24/14, 10:22AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2853 topics, 19851 posts — Last Post 04/24/14, 05:15PM

Creative Real Estate Financing

1221 topics, 8870 posts — Last Post 04/24/14, 03:19PM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1218 topics, 8051 posts — Last Post 04/24/14, 01:43PM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

268 topics, 1689 posts — Last Post 04/24/14, 05:05PM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2023 topics, 11775 posts — Last Post 04/24/14, 05:28PM

Americans & International Real Estate

162 topics, 572 posts — Last Post 04/24/14, 03:31AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

66 topics, 440 posts — Last Post 04/24/14, 05:54AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15097 topics, 54165 posts — Last Post 04/24/14, 05:17PM

Real Estate Events and Happenings

169 topics, 2622 posts — Last Post 04/24/14, 05:42PM

Off-Topic

Off Topic

Off-Topic

2909 topics, 32450 posts — Last Post 04/24/14, 05:32PM

Housing News & Real Estate Market

922 topics, 8397 posts — Last Post 04/24/14, 02:57PM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » General Foreclosure & Pre-Foreclosure Forums » I Loaned Money On A Property, Borrower Defaulted, Then Passed Away

I Loaned Money On A Property, Borrower Defaulted, Then Passed Away

34 posts by 14 users

Signup

Real Estate Investor · Naples, Florida


The title pretty much says it all. I hired a law firm to foreclose. I received a letter in the mail yesterday from the attorney handling the estate. Now what? What should I do if I want the property? Any comments, suggestions, helpful hints, or words of condolences to me as the lender?

Thanks!
MGJohn



SFR Investor · Texas


Sounds like your lawyer just got more work?



Real Estate Investor · Naples, Florida


No doubt! What if I want the property? What is the best way to approach it? Anyone ever had this happen to them?

Thanks!
MGJohn



Rehabber · Lexington, Kentucky


John, I have never had this happen but cant the lawyer you hired tell you right away? I would bet there is still a legal way for you to get the property...but these law questions are best left to the lawyers.

Good luck!


Small_kvJames Vermillion, K&V Investing
E-Mail: [email protected]
Telephone: 859-684-2511
Website: http://www.kandvinvesting.com
Invested in the Bluegrass!


SFR Investor · Wheat Ridge, Colorado


The debt is still the responsibility of the estate. Because there was real estate involved, this may be a probate situation. Or, may not, if there is other ownership of the property. In any case, your claim against the property (which is properly recorded, right?) is still in effect. Your lawyer should continue with the foreclosure. He or she should know how to handle this situation.


Jon Holdman, Flying Phoenix LLC


Rehabber · Santa Clarita, California


Jon said it, your note (so long as properly recorded) is still in full force and effect. It may go to probate or if the decesaed had a proper structure, to a trust account in which the debts to the estate are paid and any proceeds remaining go to the heirs.


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Real Estate Investor · Naples, Florida


Yes, it is recorded. I received a letter from the attorney handling his estate. I called them but didn't get a return call yet. The property is assessed at 95K. I hope to get it for around 40K. That would give me plenty of room to flip or rehab and then flip. I dont know, I might even want to hold it, but I am getting way ahead of myself. First, I need to find out what the estate wants to do with it. I already had an attorney hired, so I would guess that legal process is underway to foreclose. Out of about ten hard money loans I did last year, two defaulted. One just paid up 3 days before sale, and this one. That seems like a pretty high rate --20% of my loans! Most are at 15%, with about 20% LTV...and all first position.

Thanks for the advice...got a call in to the attorney....will wait and see what happens. I do hope I get the house!!

MGJohn



Real Estate Investor · Wofford Heights, California


What LTV are your lending at?



Real Estate Investor · Naples, Florida


Almost all my loans are at 15% with an average LTV of 20% or less. I had four pay me off last year. Still have the rest of them. I am doing those with my Solo 401K and hold real estate outside my 401K.

thanks
MGJohn



· West Palm Beach, Florida


I hope this doesn't double post.
If you take it back through foreclosure, I believe you are Only entitled to what you are owed. Even after repairs/resale, any overage from your "basis" would go the estate, assuming no other liens.
If however, the estate gives you a deed in lieu, I believe you are entitled to the full value/equity in the property. Just my opinion, ain't no lawyer.



Real Estate Investor · Central Valley, California


As the lender, you can only foreclose for the amount owed (plus late fees, attorney fees, etc.). If it's offered at foreclosure sale, the starting bid would be that amount. You would only get the property back if no one else bid. Or if you were the highest bidder. If it's really worth $95K, and your loan is small and in first position, there will be lots of interested buyers bidding at sale. IMO it is unlikely that you would get the property for $40K.

Other options include settling with the estate by offering to buy out their equity and getting the deed. Since the estate has an attorney, my experience says they will act to preserve the asset and equity. They may even have the funds to bring the loan current (or could do so by finding a lender willing to do loan in jr. position or refi and pay you off entirely. I would find out the estate's intentions asap if it were me.



· West Palm Beach, Florida


Forgot to mention, @K. Marie Poe is probably right. I bought a couple of properties a few years ago at the Lee county auctions, before the competition heated up. I looked at Collier county recently and it seems quite competitive. I doubt you'd get it at a price you want, even though you can't "keep the difference" anyway.



Real Estate Investor · Central Valley, California


Originally posted by Wayne Brooks:
I hope this doesn't double post.
If you take it back through foreclosure, I believe you are Only entitled to what you are owed. Even after repairs/resale, any overage from your "basis" would go the estate, assuming no other liens.
If however, the estate gives you a deed in lieu, I believe you are entitled to the full value/equity in the property. Just my opinion, ain't no lawyer.

Wayne: this post didn't make any sense to me. If you take property back at sale, you get collateral instead of getting paid off. A lender can do anything they want with a property after they take it back, regardless of basis. Does it work differently in FL? Are you saying the lenders selling REOS can't sell for more than what they are owed?



Real Estate Investor · Naples, Florida


Thanks. I have a call in to the attorneys office. I would like the property. IF they want to sell it, the the only question is how much. I left a message with my attorney stating the same thing. Now, I guess I wait while the two firms talk back for 3.00 per minute. You know, I just realized something! Those phone you know what sites charge maybe $3.00 a minute. The attorney charges $3.00 a minute. Notice how the similarity is to getting scr****? LOL!

Thanks!
MGJohn



Landlord · Phoenix, Arizona


Whoa really? They charge by the minute? I have never encountered that. Most detailed I have seen from attorneys or CPAs has always been at least rounded to the nearest 1/4 hour. Strange.



Real Estate Investor · Audubon, Pennsylvania


Originally posted by @K. Marie Poe:
Originally posted by Wayne Brooks:
I hope this doesn't double post.
If you take it back through foreclosure, I believe you are Only entitled to what you are owed. Even after repairs/resale, any overage from your "basis" would go the estate, assuming no other liens.
If however, the estate gives you a deed in lieu, I believe you are entitled to the full value/equity in the property. Just my opinion, ain't no lawyer.

Wayne: this post didn't make any sense to me. If you take property back at sale, you get collateral instead of getting paid off. A lender can do anything they want with a property after they take it back, regardless of basis. Does it work differently in FL? Are you saying the lenders selling REOS can't sell for more than what they are owed?

K. Marie Poe - I concur. But what Wayne Brooks has posted is reminiscent of some of @Bill Gulley's posts, so maybe somebody will step up and explain (now that I've mentioned all of them).


Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


SFR Investor · Wheat Ridge, Colorado


There are several possible outcomes:

1) The estate sells the property and pays off your note. You will get the principal, interest and any other charges you're owed. If the estate gets more than enough on the sale to pay you off, they keep the excess. If not, they come out of pocket to pay you off. They cannot sell without paying you off unless you agree to a short sale.

2) The estate gives you a deed in lieu. You get the property. You wouldn't pay anyone anything. I've done this with a defaulting borrower on a hard money loan.

3) The estate refuses to give you a deed in lieu or sell. You foreclose. Around here you start the bidding at what you're owed OR LESS. I see lender start the bidding lower and file a judgment for the shortage. You could do that if you think the estate has assets.

3a) Nobody bids. You get the property. You don't owe anyone anything.

3b) You start the bidding at what you're owed and someone else wins. You get what you're owed and the estate gets the excess (after fees.) If the winning bid is below what you're owed, you might be able to go after the estate for the shortage.

3c) You keep bidding and win. I don't see this happen here, but perhaps its allowed in your area. You would pay the foreclosure trustee the full amount and get the property. The amount you're owed would come back to you and the excess would go to the estate. So, you would be out of pocket, on net, the amount of the excess. If the winning bid is below what you're owed, you might be able to go after the estate for the shortage.

You're lawyer is charging you $180 an hour. That's a pretty typical rate.


Jon Holdman, Flying Phoenix LLC


Real Estate Investor · All 58 Counties of California, California


My 35 cents* worth: Been making mortgages to probate estates and trusts forever.

@John Thedford - The basics have been covered here. Although your borrower pledged the real estate as collateral, it's unlikely that you will become the owner. You do have the right to continue pursuing foreclosure of the security instrument (mortgage) however at a 40% LTV there are likely to be other bidders.

As for someone else giving you a deed-in-lieu, well, that probably won't happen either. In order to pass marketable title, that person will need capacity, powers and authority to transfer, as typically provide via probate. Why would anyone open probate in order to give you the property? More likely, someone will open probate in order to devise a plan to either save the property from (your) foreclosure and sell it or distribute it to heirs or beneficiaries.

That's not to say that there are no profitable plays for you (I consider myself a master at these) however you'll be in an adversarial position with the estate and not held in high regard by the judge who will be asking why you're not just happy to get your investment back. Not my position, mind you, but how unsympathetic a court will look at your actions.

Good luck. Do the right thing. You'll get richer in the long run.

*Used to be 25 cents, but due to inflation...


Small_rtpg-logo-drop-shadowRick Harmon, The Suburban Group
Website: http://RickTheProbateGuy.com
Deceased & missing owner property experts. Get my free newsletter: "The Prospector"


Real Estate Investor · Central Valley, California


It sounds like the OP has a first position lien at 20% or less of value. Unless there are other issues with the property, the estate has no reason to let the equity go. It would be a pretty clueless lawyer and exec/admin that couldn't figure out how to either bring the loan current or refi and payoff the OP. With that kind of equity, even if the estate has no cash on hand, there are plenty of short term loan options.

I'm assuming the OP is aware that lending at 20% or less of value is not usually going to lead to acquisition of properties. However, if the estate/heirs need immediate cash, the OP might be their best and quickest buyer.



Private Money Lender · Los Angeles, California


I’m glad of the discussions from @K. Marie Poe and @Jon Holdman explaining where the money goes. I get so tired reading here from those who think it’s in the lenders interest to foreclose. There is no additional profit here center or unjust enrichment. If you didn't over-lend, the best you’ll generally do is come out whole. Alternately, you could end up owning a property for more than it’s worth.

I know nothing about the nuances of probate, but it wasn't mentioned that if you get a deed-in-lieu, you’ll receive the property subject to all encumbrances. It’s important to either clear these before you take ownership, or at least understand what you're getting with the property.

Originally posted by Rick Harmon:
My 35 cents* worth

*Used to be 25 cents, but due to inflation...

It used to be two cents, Rick. Talk about unjust enrichment… :-)





Sign up