How do you negotiate bank mortgage liens
Hello all
I have a scenario i need advice on. I found an abandoned property while driving for dollars. I was able to get in touch with the owner and they are willing to sign it over for $1000. The catch is that there are two liens on the property. Mortgage one for $122K, mortgage two for $38K plus they are behind on hoa dues, The property has been abandoned for 8 or 9 years and they havent been paid in that long. The first bank started a forclosure years ago , then canceled the lis pendens. The second bank started a forclosure 3 years ago and then never finished the process. The hoa never put a lien on the property. The property needs about 11k worth of rehab. My question is, is it possible to negotiate with the banks to get the liens taken off ? I spoke to a couple of real estate attorneys and they seemed to indicate that the route to go would be to negotiate a short sale. I dont want to go that route, I want to know if its possible to have an attorney negotiate with the banks directly and offer them an amount ( 16K, for example), to just remove the liens. Has anyone ever done this?
Thanks!
Martha
#2 Foreclosures Contributor
- Paradise, CA
The short answer is no. You have no relationship with the bank. Yeah...lots of people try to negotiate with the bank but the bank isn't the owner of the property and has no authority to work with you. The best you can hope for is for them to sell you the notes. That's the only thing they own.
You can't negotiate a short sale on a property you don't own. Assuming you could get the borrower to cooperate, they aren't going to short sale a property to you without it being listed on the MLS and being exposed to the market first to maximize their recovery.
I'm sure there are a thousand exceptions and that many people have successfully navigated through similar scenarios but cancelled lawsuits, incomplete foreclosures, property abandonment, absentee owners/borrowers and assignments of deed just complicate an already complicated process even more.
You have two liens totaling $170M and deferred maintenance totaling another $11M. What you don't have is the cost of 9 years of HOA dues and interest, and late fees, and probably taxes and insurance advanced by the lender to factor in. Unless that property is worth millions, I wouldn't waste my time on it. But that's just me.
The seller is eager to sign it over for $1000 , because of all these issues. But, no, the property is only worth like 80 or 90k. So what will happen to it? Stay vacant like that till one of the two banks finishes the forclosure process? The owner told me hes active military and thats why the banks havent forclosed. I dont want to go the short sale route, although the owner would just sell it to me, i dont think the banks would take 16k on a 17Ok note.
#2 Foreclosures Contributor
- Paradise, CA
Originally posted by @Martha Daisley:
The seller is eager to sign it over for $1000 , because of all these issues. But, no, the property is only worth like 80 or 90k. So what will happen to it? Stay vacant like that till one of the two banks finishes the forclosure process? The owner told me hes active military and thats why the banks havent forclosed. I dont want to go the short sale route, although the owner would just sell it to me, i dont think the banks would take 16k on a 17Ok note.
The short sale route is your only option unless you keep an eye out on it for when they finally go to foreclosure sale. I'm oversimplifying a highly complex legal issue (I'm not an attorney and this is not legal advice) but, active military duty might have an impact but its time definite and depends on when he went active duty/when he took the loan out. Most SCRA protections are afforded to members who take out the loan before going on active duty. The bank can get a court order to approve the foreclosure even with SCRA protection in some circumstances. The SCRA protection only lasts for for one year after active duty and in January, that gets reduced to 90 days. There is probably more going on than active duty.
The seller has no motivation NOT to take your grand. He has nothing to lose. You on the other hand risk a grand and whatever you put into it when the bank finally forecloses. One thing that will make that foreclosure happen faster is if they (When) find out he's transferred it to you. They will have not only a monetary default but not a material breach of the loan covenants to not transfer/sell/assign the property to someone else.
You could attempt to do a 1st and 2nd lien settlement but it's a long shot. This should be going the short sale route if you want to settle the debt and get title in your name in a potential equitable position.