Buying a property on verge of foreclosure

4 Replies

I'm wanting to put an offer in on an on-frame modular in North Carolina. The owner has missed mortgage payments for about 3 mos. If I move fast, shorten due diligence and pay cash to close in say 3 weeks, can the bank come back and contest my rightful ownership? What if they issue a lis pendens or Notice of Default before the closing? Other risks? I'm pretty sure I'll lose the property if I wait out the foreclosure process. Thanks!

A property on the "verge" of foreclosure closes no differently than any other on market transaction. Make an offer, get it into escrow, get a payoff demand, close, enjoy your new property.

Thanks for the reply Ron. What is a payoff demand? Is that an assurance that the funds I deliver will go toward paying off the mortgage balance? And if those funds are insufficient, then what?

Originally posted by @Mark Bondurant :

Thanks for the reply Ron. What is a payoff demand? Is that an assurance that the funds I deliver will go toward paying off the mortgage balance? And if those funds are insufficient, then what?

 Is the property underwater i.e. is the amount owed greater than the property value? If not, then there's equity and you can go into contract and buy the property like any other. The lender is only entitled to the total amount that's owed. Use a closing attorney or title company and close as you would a normal transaction

Originally posted by @Mark Bondurant :

Thanks for the reply Ron. What is a payoff demand? Is that an assurance that the funds I deliver will go toward paying off the mortgage balance? And if those funds are insufficient, then what?

 A payoff demand is a written (must be written) request to the lender/servicer to provide the amount necessary to pay and close the loan in full where upon receipt of valid funds, title is reconveyed and liens are released. The demand request must be accompanied with the appropriate written authorization (permission) from the owner/borrower. It is not assurance but rather, it is the requirement of the amount due to assure that when received, the servicer/lender will release their interest. The recipient of a qualified demand request has seven days by federal law or shorter, if any state law is shorter, to return the demand to the requestor.

If funds are insufficient, they won't be accepted and will be returned to the sender (Assuming funds are sent). If the demand provided to the requestor shows that upon executing the sale, funds delivered won't be sufficient, then someone has to come up with the difference. Some states cannot require (or even ask) for those funds to come from the seller (California is one of those states). This is common in a short sale situation. One shouldn't be asking for a payoff demand on a short sale unless that have a good indication that they are in a short sale situation to begin with and if they are, there is a whole lot more that goes on before a demand is issued. primarily, that a short sale is being considered and approved.