Foreclosure or Deed in Lieu

12 Replies

Please I’m desperate for guidance on this matter. 

The balloon payment due to me as a private lender has not been paid. At the first of May The borrower asked for a one year extension. I agreed to a one year extension with the agreement the borrower pay attorney fees for document preparation, late payments and late fees brought current. I have reached out to borrower but to date there has been no reply. The rental house they purchased is vacant, the area is undesirable and home needs repairs. Homes in this area are selling on the high end 30K to low 40K and low end 15-20k. I loaned to much money for this  property (my bad) and have only received $15K. Attorney fees for foreclosure or deed in lieu plus repairs will put me further in the hole. Please any suggestions are greatly appreciated!

Belinda,

When you say you agreed to the extension, was this agreement made verbally, or in writing (and signed by both parties)? If it wasn't agreed to in writing, I'd probably inform the borrower you intend to move forward with foreclosure if they do not agree to your terms. 

A deed in lieu would make sense if the borrower is willing to communicate and negotiate a solution. But if this person is not willing to return your phone calls or stay in contact, you should start the process of reclaiming your asset sooner rather than later. At least then you'd be in a position to unload it to a local wholesaler off market and recoup some of your funds down the line. Just my 2 cents though.

I would start forclosure proceedings on the home and reach out to negotiate with them. By starting the process you will force them to make a decision and respond to you. They haven't acted probably because they feel you don't want to evict them.

depends what city and state.. we need to know that to advise on best course of action..

A deed in lieu will be cheaper and easier than a foreclosure.  But requires cooperation from the borrower.  The cost of doing this is pretty minimal.  Basically just title and attorney work.  A foreclosure will be much more expensive, but can be done even if the borrower is uncooperative.  If the borrower is still in compliance with the extension you granted (or did you?) then you may not have ground to foreclose.  I would contact them and offer deed in lieu.

In your shoes, and I have been there, I would try to do the deed in lieu first, then sell it as-is.  In my case, we finished the rehab and sold it, which took money and time.  I think we would have been just as well off to have sold as-is, like banks do.  

Originally posted by @Belinda Steinwachs-Dicus :

Thank you Jay. 

The property is in St Louis, Mo. North side. Close to Ferguson.

 mortgage state or deed of trust.... deed of trust foreclosure goes fast and you can be a little more hard nosed mortgage takes a long time and in that area if the house is vacant you could easily end up with wholesaler bait.. I know I have one a wholesaler offered me 2k at first then up to 8k  I dislike doing business with wholesalers for that reason.

So mortgage state go for the deed in lui... for sure.  but I suspect this is going to be a big loser any way you cut it.. I will never ever do business in the C class areas of St. Luis or ferguson.. its tough stuff.

For what it is worth Belinda, I might be able buy it from you once the process is finished. I moved out of those areas a while ago, but I still have some investors clamoring to buy in those areas. I don’t wholesale, I rehab and flip. Let me know if that will help you.