Zombie Title With Squater

10 Replies

Ok Bigger Pockets, Got a Doozy of puzzle for y'all. Any help or ideas would be appreciated. So here is the situation: Guy dies (in 2010) with 2 properties under water with the mortgage companies by a fair amount. No will. Kid inherits properties and 'Abandons' them in probate, allowing for the banks to proceed with foreclosure. BUT the Banks never did! Title never changed and no deeds were ever recorded at the county clerks. (The banks, however have been paying the property taxes and HOA fees.) So the heir of the estate (who doesn't think/ isn't aware he still owns the properties and wants nothing to do with them) is presumably holding title, and while the banks have valid liens in place, they have not done anything with the properties. Meanwhile, one sits derelict and abandoned, and the other has a "tenant" that was there before the owner died. He hasn't had anyone to pay rent to for over TWO YEARS! This 'tenant' would love to give his money to someone and/or outright buy the property, but he can't figure out who to talk to. It would be a great deal if I could find a way to get the deed to the property either from the bank, at auction, or from the old owner's estate. Any thoughts?

@Robert Martin

I don't believe that recording a deed in Texas is a legal requirement and I'm sure there is a reason that the Banks are proceeding as they are. I have no idea how probate works intestate, so hopefully someone else does. I would recommend that you call the banks in question and speak to the REO department. They would probably be able to explain the delay and what their plans are.

-Christopher

A recorded deed is absolutely required in Texas, in order for the title to be vested. @Robert Martin I would talk to the banks as well.  They have been paying taxes, hoa fees, and still have a lien on the property.  Even if you got an affidavit of heirship(from disinterested party) and a deed (from the heir), the banks still have a valid lien on the properties that needs to be dealt with. 

Hello Robert,

Get a quit claim deed from the heir(s) and record it. Collect rents due  from the tenant. Wait out the statute of limitations on the mortgage debt.  File a quiet title suit to clear all mortgages and debt liens.  Own and enjoy your new property. 

Texas has a statute of limitations on collecting past due debts.  Once that period is past, the debt becomes unenforceable and you can quiet (clear) the title in your name. For most debt, the Texas statute is 4 years, for deficiency judgements it is only 2 years. Texas Property Code Section 51.003 Contact your attorney.

Until you are certain you'll get title only pay the minimum property tax to prevent property tax foreclosure. And do the minimum maintenance to preserve the property. From what you've written, you may have a winner.  I've done several of these, a headache for some, but I found my niche.  It was pleasant work.  Be aware that mortgage holder, and or other investors who may acquire the debt could foreclose at anytime until the statute of limitations runs out.

Wow, this is something I never personally heard of before.

I genuinely feel smarter having read @Mr Davido comments. Thanks for posting that.

@Mr Davido Great response! Very good information to know.

Thank you all for your help, especially your advice Davido.  I am currently trying to reach out to the lawyer who handled the probate (the heir/son is in Cali and wants nothing to do with his dead dad or property) to pass along to the heir the message that he needs to sign a deed over to me.  

On the issue of getting quite title: The owner died in 2010, and no payments have been made to the banks since then and at least for two years, but the probate wasn't finalized and closed until July of last year.  In probate courty the banks were able to get an order from the court acknowledging their debt and attaching their liens to the property.  So when does the "clock start" if you will for these loans? 

Sorry Robert, on those facts a Texas lawyer specializing in probate law will have the best answer as to when the statute of limitations clock starts.  I'm in Washington and from this distance would GUESS that the statute of limitations clock started anew on the date that the Judge signed the order acknowledging the banks interest in the debt.  However other possibilities abound and are beyond my expertise.  For example it is also possible that the judges order did not change the clock at all, or that the clock did not begin again until the probate was complete.  Law can be fickle. 

The fact that the banks appeared at probate, prepared an order acknowledging their debt, and that the bank(s) have been paying the property taxes and HOA dues, all indicate that they intend to preserve their interest. I suspect a bank foreclosure is coming. Confirm with an attorney when the clock started. Based on what you learn you may want to contact the bank with a pre-prepared assignment of interest and a amount in mind for what you're prepared to pay. It is possible that the bank will be willing to wash their hands of the problem by selling their interest at a significant discount. A banks willingness to sell/assign their interest can be encouraged if the bank has reason to believe that their attempt to foreclose would be met with knowledgeable resistance and/or repeated delays.

Before or after the bank is willing to assign their interest, you could proceed to acquire a quit claim from the heirs.  If you get a deed you can hold and rent properties, or proceed to quiet title, or still foreclose -depending on your goals.

An assignment of interest is simple and cheap to prepare. It would grant you all the rights the bank has. The sample assignment below was obtained for approximately 14% of the amount owed because the well on that property had problems.   The property would have been condemned without the defect cured.

General info on Statute of Limitations Clock from Nolo 

http://www.nolo.com/legal-encyclopedia/the-statute-limitations-foreclosure-actions.html

When Does the Clock Start Running for the Statute of Limitations?

The statute of limitations clock for a mortgage foreclosure usually starts when the default occurred. (The “default” is, for example, when you stopped making mortgage payments.) It is usually calculated from the date of the last payment or from the due date of the first missed mortgage payment.

To learn more, see When Does the Clock Start Ticking for the Statute of Limitations?

Stopping a Foreclosure

If the foreclosure starts foreclosure proceedings after the statute of limitations has expired, the lender’s claim is invalid and the lender is not entitled to foreclose.

The Statute of Limitations Is an Affirmative Defense

The statute of limitations is an affirmative defense to foreclosure. This means it is the homeowner's duty to raise the issue in the foreclosure. If the homeowner does not raise the statute of limitations defense, then the defense is waived and the lender can continue with the foreclosure.

What If the Statute of Limitations Runs Out During the Foreclosure?

If the statute of limitations runs out during the foreclosure, then it is not a defense to the foreclosure. This means that even if a foreclosure takes years to complete, which often occurs in some states like New York where the average foreclosure takes about three years, it is not a defense to the foreclosure.

Example. Say your lender files a foreclosure lawsuit in June 2012, but the statute of limitations runs out in December 2012 while the foreclosure is pending. In this scenario, a statute of limitations defense is not available. To be in compliance with a statute of limitations, the lender only needs to start the foreclosure before the time limit expires.

What If the Lender Cancels or Dismisses the Foreclosure?

If the lender stops the foreclosure action, which often happens if the lender discovers a procedural error, and then refiles the case, the homeowner can use the statute of limitations defense. If the lender restarts the case, it must do so within the time period provided by the statute of limitations.

Example. In the example above, if the lender dismisses the foreclosure in October 2012, the lender would need to restart the foreclosure prior to December 2012 to meet the statute of limitations. However, if the homeowner were to you make a payment in the interim, this will usually reset the statute of limitations.

The Statute of Limitations in the Current Real Estate Market

Most lenders currently have a backlog of delinquent loans for which they have not yet filed foreclosure actions. It may be months or even years between the time that the borrower stops making payments and the lender initiates the foreclosure process. This means that it's important for borrowers to be aware of the statute of limitations for their particular state. It may become a valid defense in a foreclosure action

As all the other posters have been alluding to, you need an attorney to help you close this deal. There are any number of local laws that can impact equitable and real interests to this property. The wrong step could lose you the deal. Having an attorney help you navigate the complex maze of laws related to property interests will allow you to avoid pitfalls of foreclosure and having to bid in the open sale. Consider reaching out to a Real Estate attorney in your state for guidance.

While the statute of limitations definition from Nolo is interesting, it can be totally irrelevant, depending upon the state. Here in FL for example, the "clock" doesn't start with missed payments, only once the loan is accelerated by the lender. Also, surpassing the 5 year timeline doesn't prevent the lender from foreclosing, they simply can't collect on interest/fees older than the 5 years.

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