newbie in north carolina with pre-foreclosure and foreclosure questions

14 Replies

I just started in the real estate industry in july. I still work a full time job but have recently taken action in real estate by enlisting the help of a bird dog. He brought me about 6 properties that he found at the court house. The houses are in various stages of foreclosure or pre-foreclosure. I believe they are mostly vacant. 

What do I do with these leads or any vacant property that I come across for that matter?  I mostly want to wholesale to raise some capital and I also would like to hold properties to rent out. I also want to eventually do at least one fix and flip.

On a personal note, my wife and I went through foreclosure a few years ago (We do want our own home again, btw. At discount would be great) so I want to help other people before they get to foreclosure.

 If they want to stay in their house how do I help them do that? Are there any resources I can refer them to?

Also, the house that we lost would have retailed for about 110k to 120k after repair. I looked at the public records recently and a man got it for about 54k. I wanna know how he did it!

@Chris Purvis  Just a couple of clarifying points...

The options/solutions offered by real estate investors generally don't help people stay in their houses.  We help them avoid foreclosure.  They are still going to move out of their property, in some cases they may even have a short sale on their credit report, but we're going to help them not have a foreclosure on their report.

Bird dogs...I don't know many wholesalers using bird dogs.  As a wholesaler you're looking at making your money as the middle man on a transaction.  Using a bird dog further dilutes any profit you're going to be able to squeeze out of those deals.  Just sayin'

Finally, what you do with your leads is contact the property owner.  With the people in foreclosure, you're going to try to figure out what they need, what kind of equity there is in the property, how delinquent they are on their mortgage, etc.  There are a lot of things you need to know, before you know what kind of solution you can offer to them.  If you're looking at a vacant property, it's a lot the same thing.  You have to find out why the property is vacant.  What's the situation?  What is the owner's pain point on that property and how can you address that pain point.  You still need to know whether there is equity, are the payments/taxes current, etc.

If you haven't already, read the Ultimate Beginners Guide to Real Estate Investing, available for free right here on Bigger Pockets! 

Thank you @Hattie Dizmond  for your input. You have answered questions I've had on another post as well. The person from that post has already moved out of the property but doesn't have any equity. She may have to go for a short sale.

As far as being a wholesaler using a bird dog, I still work a full time job and have limited time to drive for dollars myself. I felt it's a small price to pay to multiply my efforts as wholesaling is going slow in this small town of 57000 people. Since I'm a beginner, I thought the idea was to take action and learn this industry as I go.

As long as you have a clear reason for utilizing the bird dog, it's personal preference.  I work a full-time job as well, just leverage direct mail.  Of course, I live in a much larger area!

In the situation where the person has moved out, you could look into negotiating a short sale or you could look at possibly doing a Subject To transaction.  Depending on how far behind the loan is, it may be possible to get the lender to cancel the late fees and penalties, with you bringing the note current.  Sometimes the terms and monthly payments are good enough to create monthly cash flow.  You'll need to gather all the details about the property, but there could be the possibility for some creative deal making.

Thanks for that. A few questions.

Who do you target in your direct mail? I know what the gurus say but I don't know if they still actively invest in real estate or make their money off newbies like me. I want to hear it from an investor who is actually doing it.

Do you ever us any private hard money lending? or Do you have real cash buyers for wholesale deals?

You want to Wholesale a NC foreclosure. Well, whatever floats your boat. The trustee will require 5% of your winning bid on the day of the trustee sale. You will then be under the gun to get your bid assigned. You will most likely need a cash buyer, and expect to receive the trustee demand letter in less than a week. It's not that you can't do it, assignments happen every day. But the entity doing the assigning is generally (99%+) the lienholder assigning through MERS to HUD (or other guarantor) as part of a mortgage insurance claim. For a new wholesaler, trustee sale assignments/wholesaling is tricky and risky, IMO.

Regarding your house... if you are going to try to replicate the "how he did it" guy with pre-foreclosures, keep in mind the equation: $54K/$120K < 50%.

Make sure you know that recent (2010-2011) legal changes regulate some "foreclosure rescue" transactions. If you say 'X' to someone in foreclosure... make sure you can back it up with a closing. If you try to wholesale and fail to get a buyer to closing, expect legal issues. 'X' may be:

I will stop your foreclosure and buy your property...
I will buy your property (that is destined for trustee sale) for cash....
etc.

Home Foreclosure Rescue Scams http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/ByArticle/Chapter_75/Article_5A.html

Section 75-121.(b)(5) and the text of 75-121.(a) states to get an appraisal. If you don't close, don't say you were not warned. The "exception out" is this clause in state law: "The provisions of this section shall not be enforceable against a bona fide purchaser for value."

If you stick to trustee sales the above rescue statute does not apply.

@Chris Martin  Thanks for the info. This is why I put North Caroline in my title in hopes to trigger keyword alerts for someone in NC since state laws are different from state to state.

@Chris Martin  If I understand you correctly, as long is I can close on a property going into foreclosure, I should be fine? 

Without having equity it doesn't look like something I should take a risk on.

Also, what is a trustee sale?

found it. trustee sale=auction at courthouse to highest bidder

@Chris Martin  Thanks for linking to that NC statute; it's something I wasn't aware of.

Based on my reading of it...

  • If I don't promise they can stay in the house or buy it on a lease option/subject-to or in some manner that they retain a beneficial interest, it's not considered a 'foreclosure rescue transaction' and this doesn't apply at all.  In that case, I imagine you can wholesale like usual without additional liabilities?
  • If I want to buy it subject-to and to buy it myself, I have to pay at least 50% of the appraised value per this statute

Is that your understanding as well?

I am not an attorney. I can read the document just like you did and come to some conclusion based on what I perceive as "applicable".

Regarding the first bullet in your post, remember that 75-5A is a single Article within the NCGS. If you were to wholesale a property in default, and the applicable requirements of 75-5A were not met, clearly you would open yourself up to liability on a few different fronts. If, as you suggest, clause 75-120.3(d) (which is seller "...retains an interest in the property conveyed...") is *not* met, then by definition your contract would not constitute a Foreclosure rescue transaction. But one day of post-closing possession... and your 75-120.3(d) "shield" is out the window. All it would take is someone (like a disgruntled owner) to bellyache to the right person to initiate a legal remedy for your alleged violation. Remember you are dealing with someone potentially facing a forced sale in a non-market based transaction. District court judges and defense attorneys know the contracts investors create are not between "ready, willing, and able" participants. This is fact and changes the equation regarding your defense, from their notarized signature (NCGS 10B-40(a2)(2)) to the possible plaintiff claim of a fraudulent transfer (NCGS 39-23.4) and what "reasonably equivalent value" and "value of the asset at the time of the transfer" mean. Attorneys for the plaintiff (who may have been recommended by HUD housing counseling per 24 CFR Part 214 http://www.hud.gov/offices/hsg/sfh/hcc/final.pdf ) may throw all kinds of stuff at you.

If you execute a contract that does *not* meet 75-5A (is not a Foreclosure rescue transaction) but you don't close and that owner ends up with a recorded foreclosure, I could also see that disgruntled owner going after you. The basis for a suit may be for specific performance or violation of 93A-2 http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_93A/GS_93A-2.html
(unlicensed brokering), which could result in a class 1 misdemeanor... meaning no jail time for a first offender, but civil penalties may apply.

My only point... I would not want to be a "wholesaler" who failed to close a contract for a disgruntled owner who was in default and facing foreclosure. Disclosure: I don't 'wholesale'.

As for the second bullet, if you buy "subject to" then "the transferor retains an interest in the property..." because the mortgage remains, and you are subject to the provisions of 75-5A. So, yes, the provisions for an appraisal and 75-121(a) would apply. 

This post is for entertainment purposes only and not to be construed as legal advice applicable under NCGS 84-2.1 Seek legal help for your particular case.

@Chris Martin , I love how you end with "This post is for entertainment purposes only..."  Funny!

I also appreciate you directing folks to your various and informative posts from other threads.  Thanks!

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