Verge of Foreclosure, transfer deed and take over payments?
Rental Property Investor · Louisville, KY · Member since 2008 · 342 posts · 123 votes
I know there is a term for this but can't think of it at the moment.
Basically I have been watching a house listed as a short sale and I think it might be on the verge of foreclosure.
If I talk to the owner and they agree is there a way I can safely transfer the deed to my name and take over the payments?
How would I transfer the deed and make sure there are no liens against the house, would a title company be able to do that for this type of transaction?
I would also want to refinance as soon as I could, what kind of requirements would a standard refi have lke LTV and if the mortgage was in someone elses name but I have the deed would that make it harder to refi?
Michael, perhaps you could first go to the county recorder's web site in the county that the property is located in. Search the property records to see who filed the Lis Pendens (the document filed to start the foreclosure process). Start by reaching out to the lender to see if you can purchase the mortgage directly from the lender. They may sell it to you at a discount from the property value. If that doesn't work, reach out to the attorney that filed the Lis Pendens. They may grease the skids. Before you do that, check title and taxes to see if there are other liens against the property, judgements, IRS tax liens agains the owner, or back real estate taxes. I wouldn't reach out to the current owner directly before you go through this process. It is likely that the owner owes more than the property is worth. It is also likely that the mortgage is severely delinquent. A short sale is probably the way you will need to purchase the property, but there is a good chance that you can get the property for considerably less if you can get the mortgage rather than do a short sale. No guaranty, but if you do some due diligence up front, you might find a nice deal.
Michael, perhaps you could first go to the county recorder's web site in the county that the property is located in. Search the property records to see who filed the Lis Pendens (the document filed to start the foreclosure process). Start by reaching out to the lender to see if you can purchase the mortgage directly from the lender. They may sell it to you at a discount from the property value. If that doesn't work, reach out to the attorney that filed the Lis Pendens. They may grease the skids. Before you do that, check title and taxes to see if there are other liens against the property, judgements, IRS tax liens agains the owner, or back real estate taxes. I wouldn't reach out to the current owner directly before you go through this process. It is likely that the owner owes more than the property is worth. It is also likely that the mortgage is severely delinquent. A short sale is probably the way you will need to purchase the property, but there is a good chance that you can get the property for considerably less if you can get the mortgage rather than do a short sale. No guaranty, but if you do some due diligence up front, you might find a nice deal.
Basically I have been watching a house listed as a short sale and I think it might be on the verge of foreclosure.
If I talk to the owner and they agree is there a way I can safely transfer the deed to my name and take over the payments?
How would I transfer the deed and make sure there are no liens against the house, would a title company be able to do that for this type of transaction?
I would also want to refinance as soon as I could, what kind of requirements would a standard refi have lke LTV and if the mortgage was in someone elses name but I have the deed would that make it harder to refi?
Pre-Foreclosure?
The deed transfer will be subject to the mortgage unless the mortgagee allows you to assume (formal permission and approval required) the loan. Most loans are not assumable. 'Subject To' will mean your interests are inferior to the Mortgagee's interest (Lender). They can foreclose over top of you.
Taking the property Subject To and bring the account current or reinstating the borrower's account could stay the foreclosure. You may have to pay a large sum of money to do so if not the entire amount due under the note. The borrower can inquire with the Mortgagee to find out what it would take and could also ask about assumption.
You did not mention if the home has equity or not. If the home has equity, then simply purchase the home outright. Throwing money at the mortgagee may not serve you well. If the home does not have equity, meaning the borrower owes more than the home is worth then you will need permission from the mortgagee for them to take less than the total amount due in consideration for their debt. That is a short sale. You mention early on, the home is listed for a short sale, so it seems that is the case.
If you do a Subject To on a property with negative equity, you will have to more than likely wait a fair amount of time until your payments or appreciation earn equity again. A short sale would mean a short refinance, any short requires the lender's approval. Be careful not to get into a property with debt that you can not get out from under.
A title company can produce a title search for you usually for around $100 to $150. The property does have a lien right now that we know of, the mortgage. A title company could also help you with the preparation and execution of deeds to do the transfer so could a RE attorney. You still want a contract to purchase the property not just deeds.
You should go search on Due on Sale in BP forums as that idea will relate to your plan.
Refinancing may have it's barriers. The first is the amount of or lack of equity in the property. As mentioned, if the home is up for a short sale, it is upside down. You will not be able to refinance a home for more than it is worth. The current lender has to be paid in full or they get last word on whether they take less than the total due. So, in this case, it doesn't sound like you would be refinancing any time soon.
Additionally, lender's are wise to title seasoning (the amount of time you have been the titled owner). Conventional loans have restrictions on how short the time is. Needless to say, I would not call it quick. Private money or hard money may have more of a relaxed approach but you may have to put more money down.
No, there isn't a safe way to do that. If a notice of FC has been made and you interfere by pulling some deed transfer that fails to provide a payoff you could be looking at violating fed law. If it's listed you'll have to get past the gatekeeper agent. If it's a FSBO and you approach a seller who is in foreclosure, even if they don't disclose the situation, you can get nailed. Might be a good idea to ask about that status. If the issue doesn't exist, you can take your chances.
Understand too that a lender might allow a loan to be brought current and proceed with some short term plan to dispose of a home. Such properties are already on the lender's radar screen, sneaking around is usually not a good idea. Always have an exit, sell it or refinance it. :)
Thanks for the tips. I need to do some more research on this property. The bank hasn't filed foreclosure yet but I am sure it is getting closer to that point.
It looks like they are relisting the home so I will have to make a short sale offer.
The way it stands now they listed for 190k and comps in the area are at about 235k.
I should fine out soon if there are any problems. The listing said excellent condition but sold as is like a lot of short sales are so I anticipate some work being needed. Its a newer home and from the outside it looks fine but don't really know until I can look at it and get an inspection.