Strange Deal- Is this a Short Sale or???

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Strange Deal- Is this a Short Sale or???

Jeff L.
Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes

This would be my first deal and I think this is the correct place to post, if not can the mods please move?

I need to know if this should be approached as a short sale or approach in another direction. Here is the situation:

There is a boarded up home in my neighborhood that Ive had my eye on for 2 years, long before I found BP. There are stickers in the window from a Mortgage Preservation Service which, from my limited experience meant it was an REO. After asking around the neighborhood with no luck I hit the courthouse and found it in fact was NOT bank owned. After having no luck getting the owners phone number I drove to Chapel Hill and knocked on his door.

He and I hit it off and he invted me in and we spoke for over an hour! And this is what I found:

- He is 73 and in deteriorating health.

- He is willing and motivated to sell. In his own words, he said "**** Chase, I'm not going to be around much longer."

- He said the property went to auction in April 2013 but had no bids. Here is the strange part, instead of it reverting to an REO, he said the bank withdrew the foreclosure and its still in his name! Im a newbie but Ive never heard of this happening. Can anyone shed some light on what might be going on?

-He said he liked me and would do whatever he could to help in the sale of the property but He said he is NOT willing to speak with Chase Mortgage (im still not sure why).

-He gave be a statement from Chase showing the loan balance to be around $100,000. This statement was over 3 years ago.

-He said he thinks the payoff would be around $125,000 now.

- According to my limited experience and research I think the ARV should be around $168,000 conservatively and would need about $25k in repairs.

Whats my next step? Find a RE Agent to call Chase? Make an offer to owner and then give to chase?

The owner will be leaving this Wednesday for California for 2 weeks so Id like to act quickly!!!

ANY help is much appreciated!!

Thanks all,
Jeff

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Wayne Brooks:
It will be a short sale. If the owner won't cooperate (doesn't necessarily have to talk to Chase) by providing tax returns, bank statements, financial statements, etc. then a short sale can Not be accomplished.
If what you say is true about the auction, but Chase not taking title, there might be something. I assume they didn't take title (here they would have to pay a doc stamp fee to take title) because they saw little value, and didn't want the liability....Maybe. I'd get the 3rd party authorization, available online at their website, and open up dialogue. Thisis definitely a long shot and I've never seen it successfully done, but if they simply didn't want the property, maybe they're willing to do something without going the REO route.

Wayne, Wayne, Wayne. I did a short sale without the participation of the borrower last December. No tax returns, no income verification, no hardship qualification. And everyone here on BP said it couldn't be done. The agents who work short sales were especially vehement in their insistence that it couldn't be done. :)

I got the deed and an authorization to release from the owner for $250. Then, as the owner, I worked with HSBC to discount the payoff from $275 to $80K. I'm sending out paperwork to an owner on another one today. Pretty much exactly the same situation as the last one. Owner files BK, moves out and then finds out 2 years later they still own the property. Not saying it can be done in the OP's situation, but it's an angle to consider when the borrower won't/can't cooperate on a short sale.

Jeff Lee IMO, you need a title report before you go any further. You need to know if there are any other liens and debts are against the property and the owner. And you need to make sure of that the borrower is legal owner of record. It could be that the debt against the property was the reason Chase didn't take title. Do you know if the borrower filed bankruptcy?

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  • Roy Schauer
    Problem Solver / Investor · Anchorage, AK · Member since 2012 · 118 posts · 34 votes
    13y

    One way I find that is easy to get information from banks is to get an Authirzation to Release Information signed by the owner that states the address, loan #, and your name that is signed by the owner and faxed to the bank. Once this is on file, it allows you to call and check on the status and get any information about the loan. If they ask what you are, just say your working with the owner to resolve the situation. You'll typically need the last 4 of the owners social also because its used as verification.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    It will be a short sale. If the owner won't cooperate (doesn't necessarily have to talk to Chase) by providing tax returns, bank statements, financial statements, etc. then a short sale can Not be accomplished.
    If what you say is true about the auction, but Chase not taking title, there might be something. I assume they didn't take title (here they would have to pay a doc stamp fee to take title) because they saw little value, and didn't want the liability....Maybe. I'd get the 3rd party authorization, available online at their website, and open up dialogue. Thisis definitely a long shot and I've never seen it successfully done, but if they simply didn't want the property, maybe they're willing to do something without going the REO route.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y
    Originally posted by Wayne Brooks:
    It will be a short sale. If the owner won't cooperate (doesn't necessarily have to talk to Chase) by providing tax returns, bank statements, financial statements, etc. then a short sale can Not be accomplished.
    If what you say is true about the auction, but Chase not taking title, there might be something. I assume they didn't take title (here they would have to pay a doc stamp fee to take title) because they saw little value, and didn't want the liability....Maybe. I'd get the 3rd party authorization, available online at their website, and open up dialogue. Thisis definitely a long shot and I've never seen it successfully done, but if they simply didn't want the property, maybe they're willing to do something without going the REO route.

    Wayne, Wayne, Wayne. I did a short sale without the participation of the borrower last December. No tax returns, no income verification, no hardship qualification. And everyone here on BP said it couldn't be done. The agents who work short sales were especially vehement in their insistence that it couldn't be done. :)

    I got the deed and an authorization to release from the owner for $250. Then, as the owner, I worked with HSBC to discount the payoff from $275 to $80K. I'm sending out paperwork to an owner on another one today. Pretty much exactly the same situation as the last one. Owner files BK, moves out and then finds out 2 years later they still own the property. Not saying it can be done in the OP's situation, but it's an angle to consider when the borrower won't/can't cooperate on a short sale.

    Jeff Lee IMO, you need a title report before you go any further. You need to know if there are any other liens and debts are against the property and the owner. And you need to make sure of that the borrower is legal owner of record. It could be that the debt against the property was the reason Chase didn't take title. Do you know if the borrower filed bankruptcy?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    I bow to K Marie. Yes with a deed, you'd have a better shot. But, just because You could get it done, doesn't mean most mere mortals could!

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  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    13y

    73 year old guy in bad health, who is not talking to the Mortgage company says it went to auction in April 2013, there were no bids, and then the Bank withdrew the foreclosure. Could of happened, but not likely. More probably something far more prosaic happened such as a postponement of the sale. You need to read the Court file for the foreclosure to see what really happened. This sounds like a waste of time, and I personally would not bother, but the process might be educational for you.
    eta: If the balance was $100,000 three years ago, my guess is it is $135,000 with late fees, foreclosure fees, interest, taxes, insurance.

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  • Wendell De Guzman
    Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
    13y

    K. Marie Poe, I like your approach and I learned something new here today. Thanks! I will start implementing that with my shortsales from now on. My question there though is: can the lien holders come after you now that you are the new owner (because you have the deed)?

    Can Jeff Lee utilize your technique? If so, what are the watchouts other than the lien holders coming after you?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Wendell, many have tried K. Maries's approach, and failed. Many here bought the HOA auction properties, thinking "the bank will have to deal with me now"... Not true. Usually, the bank looks at a deal more suspiciously when there has been a deed transfer. I'm not sure what the trigger is for making this more feasible. If the seller previously BK'ed the debt, that would make sense.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y
    Originally posted by Wendell De Guzman:
    K. Marie Poe, I like your approach and I learned something new here today. Thanks! I will start implementing that with my shortsales from now on. My question there though is: can the lien holders come after you now that you are the new owner (because you have the deed)?

    Can Jeff Lee utilize your technique? If so, what are the watchouts other than the lien holders coming after you?

    Wendell: don't take this the wrong way, but you've got A LOT to learn if you're asking "can the lien holders come after you". I suggest not go about getting any deeds until you know more about how subject-to transactions work. In addition to understanding how liens and title work, you need the right purchase agreement with the seller that includes disclaimers about what happens if the lender refuses to accept a payoff. You're inserting yourself into the lender's loss and the seller's future financial picture.

    I'm a mere mortal, but I'm geeky about RE transactions. If that's not you, don't attempt this at home.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Jeff are you trying to assign this, hold as a rental, or rehab and resale to a home buyer??

    When you get an ATR make sure not only the lender is listed but legal counsel, junior lien holders etc.

    This way you are not getting a new ATR every time you want to talk to someone. You just resend the one with everyone on it.

    You can try the deed approach K.Marie was talking about. You can also try buying the note for a discount and then now the seller is dealing with you. Makes it much easier to get a deal done.

    The value of the mortgage note and the value of the property you would need to get the mortgage discounted heavily from the payoff amount.

    You need to get the ATR signed and talk to the lender to see what options they will pursue.

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    First I want to say how humbled and thankful I am that you folks have taken the time to help me with this situation!

    I spoke with the HO(homeowner) today and he said he had his attorney send a letter to Chase several years ago stating that he would not be making any further payments or contact and would also be filing Bnkrptcy. As of today he has not filed Bankruptcy and is being advised by his attorney NOT to speak to Chase and NOT to sign any document that would allow me to deal with Chase.

    But the HO seems sincere and said he is pulling for me because the way he sees it he wont be around much longer. But, he really respects his attorney who is a close personal friend and is doing exactly what he suggests.

    Even though he is in poor health he would still like to see the loan cleared from his name so he wants to help me especially if any difference between sale price and total amount owed could be forgiven. He (the homeowner) suggested today that I make an all cash offer with the contigency of Deed in Lieu of foreclosure.

    Any thoughts? Again I'm so thankful for YOU ALL, especially K. Marie Poe, you seem to have the most experience in this area!!!

    Thanks again,
    Jeff

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    I meant to answer @Joel Owens. My intent is to purchase and rehab.

    Also, I meant to mention that the homeowners friend/attorney has advised him against signing a 3rd party document allowing me to speak to Chase. Its so weird because the HO wants the property sold and wants me to buy it but he is very loyal to his attorney who is advising him to sign nothing!

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    DIL the bank does not want the property. If their are extra liens the senior loan would just foreclose and wipe out instead of take a DIL.

    At this point you really would need to talk to his attorney and see exactly what he is thinking. When one person relays info they can get it messed up or not relay ALL the information that was given and the reasons why.

    Tell the attorney what you are trying to do and if the attorney doesn't want him having any part of it then you need to "let it go".

    There are deals that are hard and take out of the box thinking and then deals close to impossible. You do not want to spend a bunch of time on impossible.

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    I was thinking that because the property is so distressed the bank didnt want to pursue once it didnt sell at auction. Based on my talks with the HO, his attorney is a friend and the HO doesnt want me calling his attorney and running up his time because the attorney is doing this as a favor for the HO. Its convoluted but I really think this could be a good deal if I slowly pull these layers off without pissing anyone off. This is my first deal so I have plenty of time, even some to waste.

    Im gonna pursue til the end...whenever that may be. :)

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  • Doug Smith
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    13y

    Jeff,
    We see this a lot. We buy mortgage notes from larger servicers and, for reasons passing understanding, they will take the foreclosure process right up to the sale and then they will cancel the sale. The first thing I would do is to call the county and ask what is owed in taxes. If he's not paying the mortgage, he probably isn't paying the taxes either. Don't forget to clarify if the tax certificates have been sold. Sometimes when you call or go on line to look up the tax situation, they will not include tax certificates that have been sold and must be redeemed. That can make a HUGE difference in what you will end up paying. If you do a short sale, the bank makes sure the taxes are paid and you get clear title...unless there are subordinate liens. You'll have to look at that too.

    If this is your first transaction, I would be careful of simply quit claiming the deed over to you without addressing the mortgage or subordinate debt. We recently had someone do that in the Midwest on one of our deals. It didn't end well for him as he lost the money he paid to the borrower and we got the house.

    Some institutions are great to work with. Chase is not, however, likely to work with you. If they will let you buy the mortgage note from them and the underlying collateral is worth $140ish with a payoff of $125Kish, I wouldn't pay more than $80K or so for the note. Chase sells notes, but they sell them in pools to investors. If you approach them to buy a specific note, the price goes way up to close to par value.

    You will probably have to short-sale the house, but don't go under contract without doing a title search and a tax search. Good luck.

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    Thanks for the info Doug. From my research at the courthouse the taxes are being paid and are current. Although I am new, this seems like a strange situation based on the feedback from my local sources and folks on BP.

    The foreclosure sale wasnt cancelled it went to auction but nobody bid on it.

    The things I find most strange: There is a lock box on the door, placed there by an unknown entity. The lawn and property are being cared for by Mortgage Preservation Services out of Florida. So it LOOKS like an REO but Chase told me the owner still retains the home and only he can agree to a sale.

    I will def do the title research suggested.

    Thanks again for all the help. Will keep you posted!

    Jeff

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  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    13y
    Originally posted by Jeff Lee:

    The things I find most strange: There is a lock box on the door, placed there by an unknown entity. The lawn and property are being cared for by Mortgage Preservation Services out of Florida. So it LOOKS like an REO but Chase told me the owner still retains the home and only he can agree to a sale.
    Jeff

    There is nothing strange about this property. Old guy in bad health gave you some misinformation regarding the sale status, nothing strange about that. Some security firm for the mortgage company rekeyed the locks, posted some notices and put a lockbox on the property, nothing strange about that. Some pin head at Chase gave you misinformation regarding who you need to talk to in order to buy the property, nothing strange about that. The property is now an REO, if you want to buy the property you will need to wait till it is listed with a Realtor.
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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Apparently, this is not an REO. Banks routinely will rekey and secure property that they know is vacant, well before they take tittle, if they ever do. They do it during a short sale process, on vacant properties, all the time. Their mortgage allows them to enter and protect their collateral at any time during the loan, if the property is abandoned.

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    Thanks Wayne and John. This IS NOT an REO. I may be new but Ive done enough due diligence to know who owns the property. I just didn t think the banks would rekey and take over a home that is still owned by the this guy. I guess once they consider it abandoned then they have the right to protect it, so now that Ive learned this info, that part isnt as strange anymore. Chase cannot list a propoerty thats not theirs, this I know.

    Thanks again for the input!

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  • John Conner
    Tampa, FL · Member since 2013 · 24 posts · 2 votes
    13y

    Jeff Lee I work for a Mortgage Servicing company in the property preservation department. Often times if there is even a hint of doubt that we are going to foreclose and it has been vacant... We will take whatever is necessary to keep the condition of the property. Includes changing locks, cutting grass, winterizing the property, etc.... I have learned that chase is very difficult to work with but you should definitely speak to the attorney and get in touch with the Asset manager managing this property to see if you can strike up a deal (of course after getting the 3rd party authorization) :)

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    Thanks John, that clears up that part!

    Getting the 3rd party authorization is the tough part. I wish this guy wasnt so loyal to the advice of his friend/attorney.

    He's going to have to understand its going to make things a lot easier if he does sign. If not, we will see.

    Will keep everyone posted.

    As always, thanks again for your valued input!

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  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    13y


    I am unable to reconcile the contradiction in these two quotes. I do not live in FL, but a five minute Bing search strongly indicated that there is no post sale redemption right for owners (please correct me if I am wrong about that). If it went to sale and nobody bid on it, the foreclosing Lender is now in Title (despite what the Assessor records say), and by definition it is an REO, even though it is not listed for sale, it is still an REO.
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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Sometimes the banks will go to foreclose and if nobody ends up for the sale to bid on the asset the bank will instruct the attorney to then cancel the sale as they do not want to own it.

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  • Jeff L.
    OP
    Investor · (Raleigh Durham area), NC · Member since 2013 · 58 posts · 5 votes
    13y

    Thats exactly what happened Joel.

    Again John, while I appreciate your input, Ive put enough hours into this to know its not an REO. I know its odd but thats why the subject of this post includes the word 'Strange!" :)

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    John, I'm in Florida, and as I said before.....if the bank is high bidder, and does Not then pay the document stamp fee 0.7%. ( yes on $100 bid this is $0.70) then a certificate of title is Not issued, and Title does Not transfer. It's nothing new here. You're correct that there is no redemption period for the owner here, but that's not relevant to this procedure.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y
    Originally posted by Jeff Lee:
    Thanks John, that clears up that part!

    Getting the 3rd party authorization is the tough part. I wish this guy wasnt so loyal to the advice of his friend/attorney.

    He's going to have to understand its going to make things a lot easier if he does sign. If not, we will see.

    Will keep everyone posted.

    As always, thanks again for your valued input!

    Might be a good idea to get clear on exactly how you are making things "easier" for the seller and what you are actually offering.

    Signing a 3rd party release does absolutely nothing for the owner. The 3rd party release is for your benefit, not his. All it will do is create more paperwork for him as most lenders will require his participation in a short sale.

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