Title Rehab.....with Final Numbers!

23 Replies

This is a pay-it-forward post, inspired by @J Scott  On J's newest site, thescottpad.com, he says that the analysis and the numbers are some of the pages people visit most. I know this was true of me when I discovered J's flipping site, 123flip.com, a couple of years back. I studied the numbers and pictures over and over.  It helped me get over my fear of rehabbing.

So, in the spirit of detailed numbers, I'm posting a deal I completed this summer. I often find it difficult to describe what I do. And I get asked a lot!  I'm not really a wholesaler. Certainly not always a rehabber. Sometimes I buy interests in estates. Sometimes I lend. Mostly, I do a lot of problem solving. I work deals that come my way with the tools I have at the time.

The numbers below are from a deal this past summer. A 2/1 condo, in a good area. It had a few problems. The mortgage was past due about 8 months or so, but with a title flaw delaying the trustee's sale. It was tax defaulted. There were HOA liens and the seller was being sued by HOA. Property had a tenant, a family friend, that hadn't paid in many months. And wasn't going to. Seller lived out-of-area and couldn't/wouldn't deal with the tenant. And couldn't/wouldn't visit the property. She had personal property she wanted to recover from the condo.

I bought the property subject-to the existing financing, solved the problems and resold it (as-is). I've taken out the names of the parties and companies involved, but these are pretty much the exact and final numbers. Questions?

Wow you wouldn't think the lady would just let 50k in equity go that easy.

Certainly not what I think of when I think flip but sure looks a good way to do it.

Way to go, Marie! Mortgage payment $100?

But can you cook?

Originally posted by @Joseph Ball :

Way to go, Marie! Mortgage payment $100?

But can you cook?

The mortgage was $25K at 3.25%, unpaid balance of $19K.  I liked the mortgage but not the property, so it wasn't really a candidate for a long term subject-to deal.

"Cash for keys"? Do you mean you paid the evicted tenant to give you access to the property?

Also what city/state was this in? (for contextual purposes)

Originally posted by @John Whittle:

Wow you wouldn't think the lady would just let 50k in equity go that easy.

Certainly not what I think of when I think flip but sure looks a good way to do it.

There wasn't $50K in equity.....otherwise I would have made more. :)

Look at the cash required to stop the foreclosure, the HOA liens/law suit and to get rid of the tenant. What would you have done if you were the seller and you had no cash and no credit?

Originally posted by @Dave Alexander :

"Cash for keys"? Do you mean you paid the evicted tenant to give you access to the property?

Also what city/state was this in? (for contextual purposes)

I filed the eviction complaint, and I negotiated cash for keys simultaneously.  My experience with CFK is that even when people say they'll take it, they can't always move.  They have  to be able to rent something else or have someplace to go.  This tenant found someplace to go and moved more quickly to get the $500.  I have no way of predicting if the tenant will actually move, so I file the complaint regardless.  I hate the fees, but don't want to chance being put 30 days behind on getting the property back.

Property is an urban area in sunny Central Valley California.  

Way to problem solve Kristine Marie Poe !

Just out of curiosity, why did you incur a "cash for keys" cost ($500) and an "eviction" cost ($465)?  It's usually one or the other.

*EDIT: Disregard my question.  I see you answered it in the above response that you posted as I was typing.  That makes total sense. 

Originally posted by @Kyle J. :

Way to problem solve @K. Marie Poe !

Just out of curiosity, why did you incur a "cash for keys" cost ($500) and an "eviction" cost ($465)?  It's usually one or the other.

See above.  I always file the complaint in case I need it. The $465 was for service and filing only. I was refunded the amount needed for a sheriff lockout as the tenant agreed to go.  

Thanks for the 123Flip reference as well. I'm not looking to flip per say but the budget break downs on the site are great and should be helpful when I begin evaluating rehab costs for personal/rental properties. 

Originally posted by Kristine Marie Poe:
Originally posted by @John Whittle:

Wow you wouldn't think the lady would just let 50k in equity go that easy.

Certainly not what I think of when I think flip but sure looks a good way to do it.

There wasn't $50K in equity.....otherwise I would have made more. :)

Look at the cash required to stop the foreclosure, the HOA liens/law suit and to get rid of the tenant. What would you have done if you were the seller and you had no cash and no credit?

I realized I started to say 40k. If i was her I would of offered someone with good credit a third to half the money. To pull a HELOC or something along those lines.

Originally posted by @John Whittle:
Originally posted by @K. Marie Poe:
Originally posted by @John Whittle:

Wow you wouldn't think the lady would just let 50k in equity go that easy.

Certainly not what I think of when I think flip but sure looks a good way to do it.

There wasn't $50K in equity.....otherwise I would have made more. :)

Look at the cash required to stop the foreclosure, the HOA liens/law suit and to get rid of the tenant. What would you have done if you were the seller and you had no cash and no credit?

I realized I started to say 40k. If i was her I would of offered someone with good credit a third to half the money. To pull a HELOC or something along those lines.

I ask because I'm curious how people see problem solving when it's not their problem. You and I know how we would deal with it. But it's not always that easy, even with money. Aside from the needed cash, the lender, the foreclosing trustee, HOA and the HOA attorney all had to be settled with. Lots of moving parts and paperwork. Even if the seller had good credit and income, she couldn't pull any money out as there was a title problem....the lender made the loan to the seller and to another party not on title. And one of the owners was deceased when they made the loan. Until that was resolved the property couldn't be sold or refinanced. Then there was dealing with the tenant.

Thanks for sharing this, I really enjoy these types of deals, you helped several people solve several problems and made a decent profit at the same time. In my mind you did a service to the HOA, Bank and seller, good job.

Just curious, how did you find such a distressed situation? I imagine the seller was probably at the end of their rope and really needed someone like you to step in, and the numbers all seem to work, but the mechanics of the deal are intriguing to me, you must have made a lot of phone calls.

Again thanks for sharing this information, I really like it when a complicated situation is solved and there are several winners.

Originally posted by @Rick Bradd :

Thanks for sharing this, I really enjoy these types of deals, you helped several people solve several problems and made a decent profit at the same time. In my mind you did a service to the HOA, Bank and seller, good job.

Just curious, how did you find such a distressed situation? I imagine the seller was probably at the end of their rope and really needed someone like you to step in, and the numbers all seem to work, but the mechanics of the deal are intriguing to me, you must have made a lot of phone calls.

Again thanks for sharing this information, I really like it when a complicated situation is solved and there are several winners.

Hi Rick. To clarify, I didn't see this deal as doing anybody any favors. The HOA collection attorney is very aggressive and would have been happy to foreclose on the judgment had he gotten that far. He does it quite frequently. The bank was in a bit of bind because they didn't have access to what they needed to correct the title flaw. It would have helped if they or the foreclosing trustee had used a lawyer in CA. Instead they used a WA lawyer who didn't know how to properly execute certain recorded docs in CA. So the foreclosing trustee wouldn't go forward with the title problem. That gave us more time to deal with everything else.

This deal was an HOA lien lead. The seller wasn't even aware of the foreclosure or the HOA lawsuit until she contacted me. She stopped paying the mortgage when her tenant stopped paying her, but moved out of area and never received any mail or information about the property after that. Her ex-husband got one of my letters. I purposely sent it to him at his address hoping that he would open it and have her call me. But the reason she called me was because she had a non-paying tenant. Took me a few weeks to get all the details about the foreclosure and the law suit and the title details. Then I tackled them one by one.

Thanks for paying it forward.  The numbers are very helpful as well as the explanations.  

Kristine Marie Poe 

Very nice deal.

I'm assuming that when you use the terms "seller" and "owner" in the following sentences they are one and the same.  "the lender made the loan to the seller and to another party not on title. And one of the owners was deceased when they made the loan."

I may be missing something here, but I wouldn't have thought that making a loan to the owner and another party not on title created a title issue.  I would have thought that the lender could foreclose the party on title.  The other party had a loan obligation but not an interest that needed to be foreclosed.  Am I wrong on this?

As far as the deceased owner, wouldn't that simply have needed a certified death certificate.

$30K profit on a $70K sale....nice.  

Originally posted by @Jim Piper :

@K. Marie Poe 

Very nice deal.

I'm assuming that when you use the terms "seller" and "owner" in the following sentences they are one and the same.  "the lender made the loan to the seller and to another party not on title. And one of the owners was deceased when they made the loan."

I may be missing something here, but I wouldn't have thought that making a loan to the owner and another party not on title created a title issue.  I would have thought that the lender could foreclose the party on title.  The other party had a loan obligation but not an interest that needed to be foreclosed.  Am I wrong on this?

As far as the deceased owner, wouldn't that simply have needed a certified death certificate.

$30K profit on a $70K sale....nice.  

Hi Jim.  I didn't explain the loan very well.  The property was owned by two joint tenants, a mother and daughter.  The mother died, but no one filed the death cert and affidavit for death of a joint tenant.  Then the loan was made to the daughter and another party (who was not on title). CA is non-judicial.  The foreclosing trustee wouldn't go forward until the the lender went back and fixed the title so that the daughter was the only owner.  The certified death cert. was the issue.  In CA only certain parties can request a certified death cert.  The WA attorney working for the lender was not able to obtain one and used a non-certified copy, which the title company and foreclosing trustee rejected. I was able to get a certified copy and submit it to escrow when needed upon my resale.  In the meantime, the foreclosure was on hold.  

Kristine Marie Poe 

Thanks for filling in the blanks.  Never gave the death certificate issue much thought.  The situations I've been involved in the title company just took care of it.  But I don't recall a seller who didn't have several of them.  But I took a look at the CA rules.  It makes sense now that I see them.  I checked MO out, same kind of rules.  Thanks for the info.  Again, great deal.

Kristine Marie Poe great post!

What many reading this thread may not recognize is that she isn't really looking for probates but rather scenarios with problems that she can use her toolbox of title and probate legal knowledge as well as her skills as a negotiator to solve problems that other people either can't, don't understand, or don't want to deal with.

And that's how money is made (and why it really isn't accurate to refer to KPM as a wholesaler). 

Originally posted by @Jim Piper :

@K. Marie Poe 

Thanks for filling in the blanks.  Never gave the death certificate issue much thought.  The situations I've been involved in the title company just took care of it.  But I don't recall a seller who didn't have several of them.  But I took a look at the CA rules.  It makes sense now that I see them.  I checked MO out, same kind of rules.  Thanks for the info.  Again, great deal.

I think the practice of restrictions on certified death certs started maybe ten years ago.  At least I don't remember any before then. Document recording used to way looser.  About the same time that CA banned online vital records (death, birth, marriage).  And when the state decided that recorded document images couldn't be made available to the public online (to protect the privacy of law enforcement and judges by not making any doc with their home address available online).  

Anyone can prepare and record the affidavit of the death of a joint tenant.  But only certain people can obtain the necessary official death cert for recording.  If you looked at the CA rules, I'm sure you can understand the challenge. The title company can't just order one.  

Originally posted by @Rick H. :

@K. Marie Poe great post!

What many reading this thread may not recognize is that she isn't really looking for probates but rather scenarios with problems that she can use her toolbox of title and probate legal knowledge as well as her skills as a negotiator to solve problems that other people either can't, don't understand, or don't want to deal with.

And that's how money is made (and why it really isn't accurate to refer to KPM as a wholesaler). 

No kidding I don't look for probates.  Probate is yucky.  I consider probate the last resort for a deal where there is no other way to profit.  

Originally posted by Kristine Marie Poe:
Originally posted by @Rick Harmon:

Kristine Marie Poe great post!

What many reading this thread may not recognize is that she isn't really looking for probates but rather scenarios with problems that she can use her toolbox of title and probate legal knowledge as well as her skills as a negotiator to solve problems that other people either can't, don't understand, or don't want to deal with.

And that's how money is made (and why it really isn't accurate to refer to KPM as a wholesaler). 

No kidding I don't look for probates.  Probate is yucky.  I consider probate the last resort for a deal where there is no other way to profit.  

 I thought the "tool of last resort" is adverse possession?

Originally posted by @Rick H. :
Originally posted by @K. Marie Poe:
Originally posted by Rick H.:

@K. Marie Poe great post!

What many reading this thread may not recognize is that she isn't really looking for probates but rather scenarios with problems that she can use her toolbox of title and probate legal knowledge as well as her skills as a negotiator to solve problems that other people either can't, don't understand, or don't want to deal with.

And that's how money is made (and why it really isn't accurate to refer to KPM as a wholesaler). 

No kidding I don't look for probates.  Probate is yucky.  I consider probate the last resort for a deal where there is no other way to profit.  

 I thought the "tool of last resort" is adverse possession?

Not to me.  The purpose of probate is to serve heirs and creditors.  So anytime I buy an interest in an estate that needs to be probated, I'm taking a risk.  With AP we don't file until we've completed the open and notorious use.  So, there is risk on the front end if something happens in the 5 years, but no so much with the filing. AP isn't last resort, but it does takes some planning and waiting to get the end.

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