Can lender force me into foreclosure if I can't repay at maturity
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesDiane you need a commercial banker who understands your situation. This is a pretty foreign concept out side of Silicon valley... are you sure your loans are not joint and several.. ??
And how much other debt is in the TIC ? whats the total debt load ?
I seriously doubt though the bank wants to own a % interest in a property.. they can't do much with that....
121 Replies
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yI've definitely seen it. If they want out of the business and your loan off their books, I would not be surprised. Best bet is to approach your partners to get the whole property refinanced. A HELOC probably won't work because the lender will want a mortgage.
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
when did you take out the Heloc with WF?
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
Group loan with other partners is NOT an option at this point... Everyone has his/her loan with his/her bank, all at different interest rates... No one wants to be bound together into one loan.....
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yDo their loans have better rates than you could get now? Have you shopped around and presented them with anything? If it would save them money, and if they understood that you do not have separate interests in the property (like you thought, so they may too), maybe they would be willing to sit down and discuss. How much time is left in their loan terms? Has it been made clear to them that once their loans expire they are going to be stuck with the same problem? What does the TIC Agreement say about one of you wanting out? Can you force a sale of the property or sell your interest without consent? (Not that you would, but your leverage changes depending on where this can go and whether it can impact your partners at all) What is the remedy under your agreement if you do run into an issue? Is there any possibility that you could convince your partners to allow you to place a mortgage on the property just for your portion that is maturing? You would have to agree to amend the TIC agreement to provide that you indemnify them from any and all damages that may result from a default on the mortgage, you should also agree that if there was ever a foreclosure started, they would have the immediate right to recapture your interest and pay off the lien, or sell your interest and pay the mortgage off with the proceeds. Also it would obviously have to say something to the effect that if/when the property is sold, the mortgage would be paid off out of your portion of the proceeds, not off the top. It is far more realistic for you to get a loan at all, let alone a decent rate, if you are able to offer the actual real property as collateral. Especially with that kind of LTV. Now, to be honest, if I was your TIC partner approached with this (or his or her attorney) I would want some compensation for the added risk, so you may have to part with some interest or a few bucks to get cooperation. The only other alternatives I can think of, as others have suggested above, would be taking money out of another property that you own by yourself, or quickly finding a hard money lender to refinance. Whatever it is that you decide, again, I STRONGLY suggest that you consult an attorney regarding the terms of your TIC Agreement and your options in connection with the financing asap, before your loan matures. Best of luck!
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
yes, their rates are all better than today's rate... Also, they won't have the same problem that I have now as they are all owner occupied and bank renew those loans... Mine is a rental and that makes all the difference.... Also, no issues with sales... Unit above mine just sold for 2.995M a little while ago....that is the upside of individual loans... No body, I mean no body, wants a group loan these days...
I might be in denial, but I still put my biggest hope on trying to work it out with my current lender, as I just can't see how kicking me into foreclosure will benefit them, when they can just sit back and collect 5.25% interest?? Am I being naive?
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yYes you are, and what your saying still makes no sense. How are they selling these units if you own them as TICs? That's not how this works. Does the TIC Agreement say you each have the right to control a physical unit? Because that makes sense, but you could never transfer a deed to a buyer, and there is typically a right of first offer or refusal with TIC owned property anyway. Is this being managed more like a coop? Even then... it just doesn't add up. What you still don't seem to understand is that NONE of these are owner occupied. The OWNERS of every single one of the units are ALL of you. Don't quote me on this, but if a TIC owner occupies a TIC property, I believe they can get tax benefits, but financing is completely separate. Again, you are all co-owners of every unit no matter where anyone lives. And they will still have the same issue because whether they are owner occupied or occupied by aliens, these people cannot put actual liens on the TIC property and lenders do not want to lend without hard collateral anymore. To be completely candid, it sounds like neither you or your TIC partners understand what your legal structure is, and I wish for your sake that the bank would agree to just keep this loan going forever, but unfortunately, you will be back on this forum talking about the consequences if you don't take action quickly instead of hoping for a miracle. Call an attorney tomorrow.
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
TIC units gets sold individually all over the city of San Francisco, every single day....I am guess 20% of all condo sales in San Francisco are TIC units.... Extremely common here.....
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yAnd just so you might understand that your "nobody" comment is inaccurate, I've probably closed 10-12 loans for TICs this year alone, and plenty of real estate lawyers do a lot more of that work than I do. A lot of my clients own properties as TICs for 1031 exchange purposes, but they still finance collectively. The loans have no prepay penalties or due on sale clauses so the property remains collateral when the individuals sell their interests. Again, please just call a lawyer. You make it seem far more simplistic than it is. Lenders are not kicking back and collecting your money every month. That's not even sort of how this works. Especially not a conventional lender. They have annual requirements to comply with including number of loans on their books, regulations to follow, and boards to answer to. They need the money back to lend to someone else, especially if they are out of this type of lending now. What you are saying is just so illogical. If that was the way things worked, why would any lender ever put a maturity date in a note? Pay me back when you feel like it, as long as you pay me the same small monthly interest. I'll just sit back til then... come on. Don't let this result in a very costly lesson. Plan ahead!
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
@Diane G. You asked again and I do not think anyone has made it perfectly clear.
If you do not make balloon payment you will be in default on your mortgage.
The bank will most likely report it to the credit bureau.
The bank will start adding fees and charges very rapidly.
After a few months they will either foreclose or perhaps find a buyer for your note in the secondary market.
One way or the other someone will start foreclosure.
Since you have a large amount of equity they will probably not do any of the fancy things they can do to get their money back. They will simply push the foreclosure.
If @Jay Hinrichs says it you can believe it.
It is EXTREMELY unlikely your current lender will offer you a new loan.
Most likely they have it setup where they will make the most money by foreclosing on your loan.
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yOh boy... you can't sell a TIC unit. That's what the letters mean.. TENANTS IN COMMOM. All. of. you. on. one. deed. You said most condos sell that way. Seriously?? CONDOS! The word condo means it is not a TIC. They are legal words that conflict. I give up. I hate to sound mean here, but if you have any sense you will recognize that you don't really grasp what is happening here on the legal side, which is really all that matters in this case, talk to a lawyer...then decide what to do. Every single person who responded here, including lawyers, lenders, brokers and other investors gave the SAME advice, that sitting around hoping is just stupidity and it puts all of your hard earned investment on the line. But for some reason you don't seem to want to hear it. By all means, take the chance, but I can nearly guaranty you, it is a mistake.
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
I appreciate your time and inputs, Jessica, but TIC unit sell individually every single day in the city.....If you care to go to MLS listing for SF, TIC listed there all the time... The unit above mine just sold last month for $2.995M...
maybe TIC in NJ is diff from SF.. Below is a link I randomly picked up just now...
www.sanfranciscomodern.com/tic-listings.php
San Francisco TICs for Sale | Tenancy in Common Listings in SF
..
- Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes9yThey are going to take your property, and sell it. Beat them to it and sell it first
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
I applied for a hard money from BP, I reached out to WellsFargo for a HELOC, trying to cash out on my other properties... Ask for a F2F meeting with my current lender on TIC after the holidays.. So will see..... Selling this TIC is my last choice for now... Lol
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yIt's not a state specific issue, it's probably the most basic, property law 101 concept. Go read a definition of what a tenant in common is. What you are talking about and what is listed in that link are not a condos, that is the sale of an interest in a piece of a larger property, not the actual apartment listed. Even if there are 3 TIC owners and 3 units in a building, each owner still owns 1/3 (or whatever your TIC % is) of ALL THREE UNITS. When you buy a condo, you own 100% of your unit and a percentage of the common area and you are a member of an association that governs. When you buy a coop, the coop owns the whole building and you only own a piece of the company and you basically lease back your unit from the company. These are different forms of legal ownership. When you buy a condo, you get a deed from the seller, to you. When you buy a coop you buy stock in the owner entity. With TIC interest, you are buying just that, a fractional interest, NOT the apartment unit. Lenders aren't giving fractional loans as easily because foreclosure is on the interest in the property, and they can't take the actual real property. They have NO MORTGAGE. If it was that simple, with that fantastic of an LTV, just being a rental wouldn't make all of these lenders turn you down. You're just simply wrong, but I can't have this discussion anymore because it's getting redundant and a bit frustrating. The units most likely don't even have separate blocks and lots, but in any event, go check your deed from when you purchased and let me know if you actually own your apartment entirely, and if you do, I'll find someone right away to take a mortgage on your apartment and pay off your loan. Until then, do yourself a big favor and call a lawyer.
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
While I appreciate your time and effort here as I am not sure if I can be this patient with a total stranger, I agree we should stop this discussion here as things just seem so different...I am very familiar with what you mean by % of interest, as opposed to the whole building... I was simply trying to point out the fact that TIC sells individually all the time in SF... And group loan is a thing of the past in SF too, like more than 10+ years ago.... Individual financing was created about 10 years ago to allow for individual sales of the units... As a matter of fact, I don't even think that group loan is still available in today's market in SF...
Also in SF, even thru all 5 units on one parcel with city, tax are assessed separately ... And this particular TIC is en route to condo convert in 2019 when it will acquire its individual parcel number...Again, appreciation for your time and insights...
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yOk, no they can't be taxed separately. It's not legal. You're one parcel and taxed as one parcel. You just divide up taxes amongst yourselves based on your interests. If the city is doing it another way, I would love to see the tax bill, if you don't mind sharing. That would be very interesting. If you are converting the TIC to condo interest (which last I heard is nearly impossible last few years even if the units are 100% owner occupied and fewer units, see link below which brochure was recently created by lawyers very experienced with SF TICs) then financing is a way bigger issue than you even let on. You are very stubborn, and that won't help you out in this situation, but I do wish you the best of luck. http://www.g3mh.com/wp-content/uploads/2016-TIC-Brochure.pdf
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
I don't know what else to tell you when these things are happening everyday in SF, and you simply dismissed them as wrong or impossible.......On conversion, every year hundreds of TIC got converted, and my building is scheduled for 2019... Andy Sirkin is the most prodominant lawyer on TIC and check his website on condo conversion....And no, you dont need 100% owner occupancy...
On tax bill, I can't show you the actual bill as it is with the HOA treasuer now, but they do exist... If you go on SF tax collector site, you can see for yourself that city now offers individual assessment on TIC units free of charge as a service to TIC owners... Simply telling me that something does not exist when I can see it in black and white is not very convincing... Lol
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
I just looked at the link that you pasted... Yes, that is a very good law firm on TIC in SF, I would say maybe the 2nd best right after Andy Sirkin... But everything it said in the link aligned with what I was trying to tell you...
Since 2014, SF has rolled out new conversion laws, and hundreds of TIC are converting each year....For 5 unit building like mine, need 3 owner occupancy out of 5.... Please don't tell me i am stubborn as that is a fact... We retained Andy Sirkin already on the conversion...
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9yI'd love to see it. Please email me a copy.
- Real Estate Investor · Tacoma, WA · Member since 2013 · 87 posts · 55 votes9yDiane G. Your bank has no recourse, if you default on the loan, against the building in question. They can only go after your personal assets. This is why banks are divesting from these products. A fractional interest in a tenancy in common is basically worthless as collateral. What you have, pretty much, is a 10-year personal loan. You may be right in saying that TIC sales happen all the time in SF, but that doesn't make them the same as a property sale. There is no sale of any property in a TIC sale.
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9y
Why would the HOA have your tax bill if you are sent individual tax bills for your apartment? Everything you say contradicts itself. SF will give you their determination of market value for the individual address but the TIC is taxed 100% as a whole, one tax parcel, one tax bill. The SF tax assessor's website says exactly that about as clear as possible.
@Jim Y. is exactly right!
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
@Jessica Zolotorofe - lets make this the end of this discussion please... It is going nowhere.. The link below is SF website where you CAN request individual assessment for TIC units... what else do I need to say? Lets just end it here please...thanks
http://www.sfassessor.org/search/site/TIC%20tax
- Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes9y
Yes, exactly what I just said. You read selectively. How about this part?
- 9yDiane G.CA · Member since 2016 · 1k+ posts · 1k+ votesOP
Look i dont wish to engage on this anymore...Thank you
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