Recently, I found out about a house in Houston that was flooded and the seller wanted to ditch it. We spoke about the property and I found out there are some nuances that are going to require some time and work before I can actually close on the deal. Here's a brief history of what's happened, and I'm hoping that some other people may have some advice on how to proceed. If you happen to be an attorney with direct experience with this matter, I would particularly like to speak with you.
The seller for this house is the executor of her father's estate, and they had an owner finance agreement with the previous occupants. Once Harvey hit, these occupants left the house, and then did not continue to pay on the owner financing lease. For those not familiar, an owner financing agreement is like getting a loan through the bank in that the title is now in your name. Therefore, this house title is in the name of the previous occupants and NOT in the name of the seller who provided the owner financing.
In a nutshell, I understand that they will need to go through the proper legal avenues of notification of violation of the owner finance agreement and essential foreclose on the house to take ownership back. My question is if others have experienced this, and what is the best and fastest way to make this process happen? Do you know any attorneys with experience in this situation that I could work with to help this seller get all the documentation straightened out?
Seems like there could be a few options, depending on the answer to some clarifying questions.
- Did the Father (F) have an underlying mortgage to a bank? Did F buy on owner financing (not clear exactly)?
- Did Executor (E) go through probate? If so, what result? How long ago did F pass? Was there a will? What is the value of the estate at time of passing?
- How was the Owner Finance Agreement (OFA)? Is it like a lease/option? "rent-to-own"? Contract for deed? Wrap? Was there a note/deed of trust, or vendor's lien in deed (if there was a deed)?
- Are the Owners (O) who walked away still available or communicative?
The easy way: O conveys to E via deed in lieu.
The not-so-easy way: judicial or non-judicial foreclosure, depending on what the underlying docs were.
The hard way: declatory judgement in district court.
The really hard way: declatory judgement in probate courts, with a side of procedure to determine heirship.
There may be other options, depending on what other facts are relevant, but this is a sampler of what it takes to clean up issues. I doubt a title company will insure title without involving an attorney.
- The father owned the property free and clear. He then made an owner financed deal with the previous occupants. So now the title is not in the father's name, but the previous occupants' names.
- Yes, the daughter of the father is now the executor and has gone through the official proceedings to be recognized as such.
- Not sure on the full details of the owner financing agreement, but the father essentially would have been the lender for the property.
- I have not attempted to contact the previous occupants who walked out. I have asked the daughter if she would prefer to handle this or ask for my help to deal with the title.
I am not an attorney, but I have been through this type of situation before. The daughter is going to have to be recognized first by the court to be executor of the estate. Probate the will. Once she can speak for her deceased father, then she can start the foreclosure process. YES, foreclose on the mortgage that her dad had. Once she forecloses, she can sell the property, sign it over to her name individualy, or whatever her fathers wishes were.
Just for clarification, there was not owner financing lease, it was transfer of ownership, NOT a lease, right?
Once she has possession of the property and title, she can sell it, lease it whatever. If there was no loan on the house with dad, she can turn around and owner finance the property again with someone else or sell it for cash. Lots of options. Good luck.
You are correct, it was a transfer of ownership and not a lease as you said. I was hoping it wouldn't have to go through the foreclosure process and there would be something quicker like a few signed documents from the previous occupants and we'd be off to the races. That would have been too easy!
Thanks for the feedback and guidance. I'm going to give her a call this evening and see what her plan is.
The current owners/borrowers can sign a Deed In Lieu, giving the title back to the daughter/estate.
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