Buying first mortgage and foreclosing others

2 Replies

There is a property I am interested in.  Because of my connections through my job at the bank, I have a representative at the other bank that has the first mortgage on the house that is prepared to sell me the note so I can become the bank.  I also have an agreement with the estate....the original owner passed away.....and I have an agreed upon price in which the estate will sell me their interest in the property.

So....through the estate, there is an unsecured creditor that appears to have filed a lien on the property, there are two small HOA liens and 1 city of Tulsa lien. That is all that I can see so far without pulling the full abstract which I am willing to do based on input from others based on the following question.

I want this property for buy and hold but obviously need to be able to sell it at some point in the future...or refinance it.  Assuming I am successful in buying the note (already agreed to by the bank) and becoming the first lender and I buy the rights to the property from the estate (already agreed to with attorney representing the sole heir), What else do I have to do?

Right now the house is in foreclosure....has been for quite a while. Can I simply buy the note and as the bank, pay the estate the agreed upon amount for a deed in lieu of foreclosure? (cash for keys) At that point, can I just cancel the foreclosure? What has to be done to resolve the other items? I don't mind paying the HOA liens and city of Tulsa liens....less than $2000 total for all them. It is the other creditor claim for $18,000 or so I need to know my options on. Quiet title suit? Just accept this as an ill liquid property I control for a while?

Do a quiet title suit to clear it all up?  Is that an option since I technically am aware of another claim due to a judgement from a previously unsecured creditor?  Do I just need to negotiate with all others to resolve the liens?  

Not sure what options are and how to do it properly while retaining as much value as possible.  Looking for input for those that deal with this type of property and can speak from experience.


First, buying a note is not buying the property, from an institutional note, you can't foreclose and move in, even if the estate attorney says they won't seek any equity, you can have title issues. That estate attorney isn't the best IMO, but.....

Get with other lien holders, come to an agreement to release the liens, in writing.

Next buy the note, then ask the estate attorney to provide a deed in lieu of foreclosure, the borrower doesn't need a good credit standing!

Then pay the other liens.

Now, you own it and can move in.

The discount you get from the note purchase will be interest income and regular income upon accepting the DIL from the estate.

Rent it and be happy! LOL

You don't want to go to foreclosure unless there are significant liens. A note buyer inherits the type of note and regulatory requirements from its making, regardless of that attorney turning a blind eye, you go to foreclosure you can only seek amounts due and costs, it could sell. After you take collateral you still need to seek indemnification for amounts due, selling the collateral, an overage goes to the estate, a deficiency is an estate liability. The attorney's agreement really isn't disposing of the property interests and can linger out there for some time.

Foreclosure may wipe out other liens, depends on what they are, some liens may have priority or they may not be expunged.

In your area, OK., you might buy the note in an LLC and then buy the property personally, or use a straw man to do one or the other, not really an arm's length transaction, but it may not be an issue and title would appear to be cleaner. Don't know how your courthouse runs down there, all RE is local, but notes aren't so much. :)

Buying the debt does not make you the bank. It makes you the note holder. 

Owning the secured debt does not bestow upon you any right of posession as you would only be a creditor, albeit a secured creditor. You might be able to secure the collateral and take steps to protect it, but occupy? No.

In essence, you would have a similar problem as a lender wishing to negotiate a deed-in-lieu (aka DIL on these forums). The challenge is that you need someone with legal power to pass title (probate administrator or ?) as opposed to gaining title via foreclosure. 

This is compounded when junior lien holders and other estate creditors have claims that must be negotiated in order to complete the transfer of title from estate to you or your entity. 

Quite a few miving parts, so make sure that you are up to the task and don't rule out the option of completing foreclosure to clear title of other creditors and claims.