Hi all, I've come across the following scenario which is a bit of web on a commercial property (auto related) I'm interested in.
1) Property is not currently for sale, however, the owner is in default for two years and the note broker is selling it as a non-performing note.
2) A run to the county record vault shows no Lis Pendens yet
3) records also show that the original LLC that purchased the property 2009, sold it on a deed (quit claim?) for $XX,000 plus the assumption of the mortgage in 2012.
4) it appears there was no "real" assumption at least that the bank knew about, because in 2014 when the bank sold the loan to the next note holder, the original borrower was still named in the assumption
5) regardless of the default, the mortgage sees to have had a balloon at the end and it matures next year.
So my questions start with:
A) For short sale purposes, I'm assuming the only one who can actually deal with the lender is the original borrower, correct?
B) Being there was a deeded change of ownership, hows does that complicate 1) a short sale, or 2) the loan maturity and balloon next year? Especially, since the new deeded owner appears to have paid toward the mortgage for a least 4 years before the payments stopped
C) If I chose to purchase the note and then foreclose, who am I actually foreclosing on?
D) Anyone have experience with commercial foreclosures and evictions as opposed to residential? I'm in a very tenant friendly and slow moving judicial foreclosure state, however, does that generally carry over to commercial property, or is it quicker?
I'm sure someone will advise me to speak with an attorney, which is great advice and I will certainly do so, but I'm looking for advice from someone who may have experienced a similar scenario. I know this is a complicated deal, but if I can acquire the property at a sub market price, the type of business tenant I can get, due to limited zoning and plenty of demand make it worth pursuing. My general thought is to monitor the property and find the right strategy at the right time to pursue.
Thanks in advance for any an all feedback.
You are correct, the first advice is to get in touch with an attorney. Anything I say here ain't legal advice, 'cause I ain't no attorney.
With that said,
A) Yes, or their legal representation (get in writing )
B) The sale was a SUB2 sale, and the original borrower wasn't released. It also appears that the new borrower didn't assume any liability. So, theoretically both the original borrower and everyone on the deed would need to sign off on the short sale. Doesn't affect the maturity, it ends when it ends, and someone has to cough up the cash. The recourse to not paying off is foreclosure, or a rewrite/modification of the note.
C) You are foreclosing on the original borrower (or anyone on the note). Any ownership interest on the part of the new owner is subject to the existing mortgage.
D) Varies by state. Generally commercial is easier to foreclose on than an owner occupied property.
Assuming you can purchase the mortgage at a correct discount, I would purchase the mortgage and start foreclosure. It's the easiest and cleanest way to get this done.
NJ does give the borrower lots of opportunities to redeem, but a good attorney can allow you to get control of the property as soon as possible. You can always accept a Deed in Lieu of Foreclosure, and get the property that way.
If I was going to do this, I'd purchase the mortgage at 50% or preferably less of the lower of UPB or 30 day sale value of the property (check current note sales for a closer value). I would take it into a SPE, probably an LLC. Once I bought the note, I would try to get in touch with the borrower, new owner and anyone else on the note or deed and see if they want to start paying again, or quitclaim it over. If I couldn't find them or I can find them and they are playing games, then drop the hammer and foreclose. I'd give them 10 days to figure it out if I got in touch with them.
Oh, and I'd do it soon, so you either get it going or move on to the next property.
Hope that helps.
Agree with everything James said. You would however be foreclosing on the interests of the current owner as well as they are on title.