Forclosure Pending, 2nd Owner on Title out of Country

21 Replies

Got a call from an owner of a note on a property headed for foreclosure. He lives in the house with one of the owners on title and they have about 45 days before the house is set for auction.

There is a second owner on title who has been out of the country since January and is unreachable. If the 1st owner and note holder agree to a SubTo before forclosure, is this at all possible with no contact with the 2nd owner out-of-country owner?

He's foreclosing on himself?  That doesn't make sense.  Could do it, but that's cutting off your nose to spite your face.  There's more going on here than you know.

Everyone on title has to agree to sell a property.  A quiet title law suite would be needed to override the missing owner.

The former owner signed the title over to his (then) girlfriend and mutual friend and kept his name on the note. Now the girlfriend has stopped working, the 2nd owner is no where to be found, and he has been served a NOD, is coming up on 4 months behind on mortgage and is all for a SubTo. I know we would have to get the former girlfriend (1st owner on title) on board, I just wasn't sure if it was possible since no one has been in contact with the 2nd owner on title for 7 months now. I'll look into quiet title law suite, thanks @Jon Holdman  

Any idea if the second owner is in the military? If so, you could buy some more time by invoking the SCRA.

I'm having trouble understanding the scenario.  :(  I have confusion about the term "note holder".  "Note holder" means lender.  Is that what you mean?  When you say one of the occupants is the note holder, did you mean to say he is the borrower on the mortgage?  If so, who is the lender?

Is this the scenario: A guy bought a house and got a mortgage.  Then he deeded it to his girlfriend and a friend.  The guy remained on the mortgage. The girlfriend lives in the house with the former owner and borrower.  The friend is out of the country. Nobody is paying the mortgage. Now the lender is foreclosing.

Is that what is happening?

I'm pretty sure you're confusing terms here.  As @Account Closed says, the "note holder" is the lender, not the borrower.  The former owner is the borrower, not the note holder.

I think what has happened here is the former owner sold this house with a subject to transaction.  The buyers, the ex girlfriend and other friend, stopped making payments.  So the lender is foreclosing.  This "sale" may have not involved any money changing hands (you say he just signed it over), but it is nevertheless a sale. The keyword here is "former".  The former owner does not own the house and cannot sell it.  Further,  the former owner does not have any security interest in the house and so cannot foreclose on his buyers.  He's screwed.  He really has two bad options.  One is to bring the mortgage current and start making the payments. That avoids the foreclosure, but he's paying a mortgage on a house he does not own.  The other option is to sue the buyers and try to get some resolution from a judge.  I don't think he would get the house back out of that, but he might get a money judgment.  But that's really pretty useless because one of the defendants has disappeared and the other isn't paying the mortgage.

A quite title lawsuit might be used to get the property transferred back to him without the missing owner.  Not sure that could be done before the lender completes the foreclosure.  He needs to consult with a RE attorney about his options.

Yes @Jon Holdman @K. Marie Poe I meant the borrower, sorry. And that is exactly what is happening. So if the house gets foreclosed on, how does this effect the two owners on title rights to the house?

They get wiped out if it forecloses, as they should.

After the foreclosure auction someone else will own the property.  Either the foreclosing lender or the winner at the auction.  The former owners (girlfriend and friend) will lose the house.  The current occupants will have to leave and will be evicted if they don't do so voluntarily.  The former owner will have a foreclosure on their credit record.  The missed payments will have already wrecked this persons credit.  The foreclosure will make it even worse. 

 ,     vh                                               aw jza 3         Originally posted by @J H.:

Yes @Jon Holdman @K. Marie Poe I meant the borrower, sorry. And that is exactly what is happening. So if the house gets foreclosed on, how does this effect the two owners on title rights to the house?

Is there any equity in the property?  Is there only one mortgage? 

If there is no equity, the owners on title get nothing.  They will be evicted, along with the former owner and anybody else living in the house.  If the property sells at foreclosure sale for more than what is owed, the owners on title get the excess proceeds.  A foreclosure goes on the original borrower's credit no matter what.

What are the numbers?  What's the mortgage balance, what's the property worth?  How much to reinstate?

BTW, who called you?  Former owner/borrower?  Or girlfriend on title?

Originally posted by @Jon Holdman:

A quite title lawsuit might be used to get the property transferred back to him without the missing owner.  Not sure that could be done before the lender completes the foreclosure.  He needs to consult with a RE attorney about his options.

Not sure how a quiet title could be used here.  The missing owner's interest can't just be quieted away because he's been out of the country for 6 months.  He cannot be forced to sell or transfer his interest through a quiet title action.  In order to quiet title, there has to be some flaw in the chain of title or messed up on convoluted interest.  That is not the case here.  

If the former owner/borrower had an agreement with the new owner on title, he could perhaps sue the new owner for breach of agreement (not paying the mortgage).  If the 1/2 owner remains MIA, the other 1/2 owner has the option to sue for partition.  

The OP says the original owner is living in the property with the new owner on title, who is his girlfriend.  I suspect it was just a bad DIY transfer without a real plan.  Otherwise the mortgage wouldn't be in foreclosure on a property he is living in. :)

@Jon Holdman @Wayne Woodson That's what I thought, I wasn't sure if they had any special rights since their names weren't on the mortgage.

@K. Marie ARV $388K
One Mortgage - $320K owed $8K behind needed to reinstate.
The former owner/borrower called me.

@Account Closed   you're probably correct about the quite title suit.  But what if the other owner left the country and is now dead?  How would that be resolved?

The current and former owners need to track down this other, missing owner.  That's there problem.  Without doing that this property is really stuck in limbo.

@K. Marie Poe that is Exactly what happened. He kept telling me how he didn't know what he was doing when he transferred deed, he screwed up, and now it's coming back to 'haunt' him.

The former owner/borrower needs an attorney.   He needed one when he did the transfer.  He absolutely needs one now.

Originally posted by @Jon Holdman:

@K. Marie Poe  you're probably correct about the quite title suit.  But what if the other owner left the country and is now dead?  How would that be resolved?

The current and former owners need to track down this other, missing owner.  That's there problem.  Without doing that this property is really stuck in limbo.

True, 1/2 interest in the property is in limbo regarding transferring title.  However, there is nothing preventing anyone from reinstating the loan. Nothing preventing the 1/2 owner from transferring her interest, back to the original owner or to a new sub2 borrower.  

If the missing owner is truly MIA and presumed deceased, in CA there are special probate actions for that.  You have to show the courts your efforts to find the missing decedent, including statements from the consulates where they are presumed to have last lived.

Even when quieting title using a claim of adverse possession, if the defendants are deceased you have to serve someone who is living. You have to show the courts that you made an attempt to find anyone who might still have an interest. 

As I've said before, if you could quiet title against deceased persons I would have done it already. It's just not that easy.

Originally posted by @J H.:

@K. Marie Poe that is Exactly what happened. He kept telling me how he didn't know what he was doing when he transferred deed, he screwed up, and now it's coming back to 'haunt' him.

If he is living in the property, why aren't he and his girlfriend paying the mortgage?  He's being haunted by missed mortgage payments, not the title problem.

He wants out of the property but cannot sell it since he is not on title any longer. Apparently the initial agreement (albeit verbal) was to split mortgage three ways, that agreement has obviously gone south. He can't keep up with payments alone and the owner on title living there now has been out of work for some time now.

What's the condition? How sure you are you of the numbers? If your ARV is off and there are repairs needed, there might not be any equity there to recover in a re-sale In which case, foreclosure is an OK option IMO.

What are we trying to protect? A boatload of equity? 

If not, it's an academic exercise.

The ARV is based off of MLS comps. Condition is good (Roof is recently updated, new carpet paint.)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here