Property I Want In Pre-Foreclosure

8 Replies

Hello BP Community, could use some help, any feedback is appreciated! Here goes..

A few months ago I bought a townhouse that is part of a 3 unit building here in the suburbs of Chicago. Without going into too much detail, the family I bought it from were very tough to work with and their business ethics are non-existent to say the least. After a few tough months of back and forth, and them playing hardball, I discovered they haven't paid their mortgage in months and was able to use that leverage to get this deal closed at a favorable price (my first future rental property). The week I moved in the mother of the woman I bought it from knocked on my door and asked me if I would be interested in buying the place downstairs as well. I was shocked to hear that they were the owners and investors of the townhouse downstairs considering they weren't paying the mortgage on the unit I bought upstairs. I said I'd think about it if the current tenant living there would let me check the place out. I met the tenant, discovered she is on hospice, and was one of the nicest ladies i've ever met. The unit would be cash flow great, but I didn't agree with the price they wanted to sell it to me for so negotiations continued. Two weeks ago a private investigator for the bank shows up trying to serve a notice to these owners saying they have ignored all notices to pay their rent for over six months and foreclosure proceedings have begun. After I find out they have been collecting this poor lady's rent all this time and not paying their mortgage I reach out to their daughter who I purchased my house from (the downstairs unit is in the mother's name), and ask if your situation is dire, why won't you accept my offer for the home? She tells me that the father's grand plan is to let this house go into foreclosure (in his wife's name), have his wife declare bankruptcy, then get a short sale and buy it back from themselves for pennies on the dollar in some LLC. Like I said, these people have no ethics to say the last, and frankly, aren't that intelligent; this is mortgage fraud on the highest level. I gave up on buying it because I don't want to deal with these people, but then they show up and give a 30 day notice to vacate to their tenant who is on hospice (month to month lease) even though told they would let her die peacefully there. I'd like to add that I did find her a tenants rights attorney so she has good representation but it got me thinking what these people are up to that they are all of a sudden trying to kick her out with no remorse.

WHICH BRINGS ME TO MY QUESTION... today for the first time on Zillow i was able to see that this property is officially in Pre-Foreclosure for $36,000 less than what they bought it for in 2016. Not only is it a great deal for me, but I can do right by this dying woman and let her live out her last days without having to worry about some scumbags evicting her. SO HOW CAN I PUT AN OFFER ON THIS PROPERTY? I asked my realtor, he said he couldn't find anything but that was like two weeks ago. When I click the "get more info" link on zillow it directs me to a directory of foreclosures specialists. 

Do I have to find a specialized agent for this?
Is there a way I can get a hold of the bank and work with them directly?
I'm still very new to this business, and I know once the banks get involved it becomes a pain in the ***, but this is one deal that would kill me to slip away, both professionally and personally. Is there a way to avoid this going to some REO auction, where there's 100 flippers looking at this place at the same time?

ANY feedback is appreciated. If you have any other questions about the situation I will be happy to answer.

That's terrible ethics on the parents. 

You should find a short sale/foreclosure agent whos done multiple deals with banks to help you out with this. You could purchase it through a short sale before it goes to auction but I believe you need to get the current owners to agree to the sale before you start negotiations with the bank. The bank won't talk to you unless if the owners give permission. 

Ideally, it's in the banks best interest to sell it before going into foreclosure as it costs them time and money so they won't be too much of a pain but they are only willing to write off so much of the loan on their books so make sure your offer price isn't ridiculously low

@Ashraf Spahi They purchased at $170,000, I offered them $182,500. They haven't put a dime into the place, it needs work, and they wanted $200k. Wouldn't budge, even though they were going to save 6% not having to pay a realtor. 

From what I have gathered, they are trying to evict their dying tenant, so they can say they occupy the residence, and then short sale it to themselves to themselves; whether that be an LLC, their trucking business, etc. One of my attorney's said there's no way the bank would be fooled that easily, and if they were it would be mortgage fraud. I'm pretty sure not paying your mortgage and collecting rent has to be breaking some sort of law as well? Who knows.

If they wouldn't agree to sell to me before, I don't think they will now. They clearly do not care about their credit, they already told me so when they said they will declare bankruptcy after the home is foreclosed on. Baffles me.

If any agents that specialize in short sales or foreclosures see this post, please reach out to me.

Not much you can do here.

A couple of points:

No, nothing illegal about collecting rent and not paying the mtg.

They can try the short sale fraud game, probably won’t work, but you can’t stop them.  The bank will likely see through it, and they may not qualify on the initial hardship application.

Besides, to qualify for a short sale a property must be worth less, in the Lender’s opinion, than the mtg balance.

BK for the short sale is not necessary.  BK doesn’t stop a foreclosure, just delays it a few months.

They totally control the situation and there is nothing anyone can do with the bank, other than them.

Originally posted by @Anthony Fecarotta :

@Ashraf Spahi They purchased at $170,000, I offered them $182,500. They haven't put a dime into the place, it needs work, and they wanted $200k. Wouldn't budge, even though they were going to save 6% not having to pay a realtor. 

From what I have gathered, they are trying to evict their dying tenant, so they can say they occupy the residence, and then short sale it to themselves to themselves; whether that be an LLC, their trucking business, etc. One of my attorney's said there's no way the bank would be fooled that easily, and if they were it would be mortgage fraud. I'm pretty sure not paying your mortgage and collecting rent has to be breaking some sort of law as well? Who knows.

If they wouldn't agree to sell to me before, I don't think they will now. They clearly do not care about their credit, they already told me so when they said they will declare bankruptcy after the home is foreclosed on. Baffles me.

If any agents that specialize in short sales or foreclosures see this post, please reach out to me.

@Wayne Brooks is right regarding the short sale and illegality of collecting rent and not paying mortgage, it happens all the time. 

Sometimes crazy people can't be convinced and they think they can get away with it. You could let them know that to purchase from foreclosure they would have to
1. Have the money to pay it all upfront which they clearly don't if they haven't been paying their mortgage. 
2. They could get a hard money loan but they would still need to put up a large sum for the deposit, pay high-interest fees and then get a balloon payment after the agreed upon years which is typically 1-2 years, maybe 5. 
3. The purchase has to be at arms-length meaning the buyer cannot be related or affiliated with the foreclosed person. Not sure what happens exactly if they find out but my guess is a lot of lawsuits which I doubt they can afford a lawyer to represent them

Plan B for you would be to keep your eye on the foreclosure process, find out when the sale date is set and be the first person there to bid. 

Best of luck!

@Ashraf Spahi @Wayne Brooks Thanks for the feedback guys. I may come off totally naive, but is it completely unheard of for someone in my situation who is well aware of what is going on with my neighbor, to get a hold of the bank and let them know I will buy it at a reasonable price, therefore making their lives a lot easier and saving them money in the process.

@Anthony Fecarotta No. The bank can not sell you the property because they don’t own it. The owner had control of the title up until a foreclosure auction. 

@Wayne Brooks you may not know the answer to this question, but how can I follow the proceedings on the foreclosure. I'm assuming this is going to take a long time with a hospice tenant living there who has been paying their rent on time.

@Anthony Fecarotta I don’t know your access to court documents on line there....here we can see all court docs online. I don’t even know if your foreclosures are judicial or not. The tenant has no affect on the foreclosure process. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here