Sold a house on contract and now buyer isn't making payments

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Sold a house on contract and now buyer isn't making payments

Holli Phillips
Residential Real Estate Broker · Westfield, IN · Member since 2014 · 24 posts · 6 votes

This past August I sold an investment property to a lady and gave her 2 months before she had to start making payments.  She put $1200 down and have only received one monthly payment of $600.  As of Jan.1, she will owe $1800.  I told her that I needed her to move her stuff out and that I was going to be selling the house if she did not catch up by January 1st.  What would be the best and easiest way to go about getting her out?  I do not have keys to this house because she replaced doors when she bought it.

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
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Wow.  Well, step one is to ditch this "mentor".  I'm guessing they didn't mention Dodd-Frank or using an RMLO to set this up, either, did he or she?  They may have been doing this for 14 years, but a LOT has changed in the last few.  What worked five year ago doesn't work now.

One option would be to offer to give this person their money back if they leave peacefully.  That's likely to be cheaper than a foreclosure, and a LOT quicker.

If you don't want to do that or the buyer won't go for it, you definitely need to see a knowledgeable attorney.

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  • Arlan Potter
    Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
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    eviction is your only option. It appears she made no down payment so she has no equity. Evict her tomorrow.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
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    @Holli Phillips When you say "sold house on contract" what Exactly does that mean, and what kind of agreements were executed?  Contract for deed, sale with a mortgage, etc.?

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  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    11y

    Eviction would be the WAY easier choice but it appears that you gave this person OWNERSHIP  rights for a mere $1,200 over FIVE months time.  What could you have rented it for?  FORECLOSURE! 

    Why rent when you can own at a third of the costs?

    Oh, sorry for your loss.

    2Reply
  • Dan G.
    Real estate investor · Porter County, IN · Member since 2013 · 64 posts · 13 votes
    11y

    Foreclosure proceedings or eviction. Check local and state laws. If unsure hire an attorney

    1Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    What you can do next depends on what you've already done.  You can't evict someone out of a house you've sold them.  You will have to foreclose.  That would apply if you've done a straight sale with seller financing.  OTOH, if you did a well-written lease option, you may well be able to evict.   If you did a land contract, I'm not sure.  Varies by state.

    Was this properly originated with a RMLO and in accordance with Dodd-Frank and other regulations?  That may come into play if she fights you and you didn't do the loan properly from the start.

    5Reply
  • Jeremy Tillotson
    Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
    11y

    @Holli Phillips U need to call a local lawyer. Foreclosure will need to start asap as it will be time consuming and the buyer may be a professional tenant who may know more of the laws than you think. Its a common thing to put down a large payment and nothing else, most the time these people are judgment proof meaning good luck collecting. If I can help let me know, no legal advice as not a lawyer.

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  • Holli Phillips
    OP
    Residential Real Estate Broker · Westfield, IN · Member since 2014 · 24 posts · 6 votes
    11y

    We did a contract for deed sale.  (Seller financing)  I need to get this recorded before I can start the foreclosure process correct?

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  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    11y
    Originally posted by @Holli Phillips:

    We did a contract for deed sale.  (Seller financing)  I need to get this recorded before I can start the foreclosure process correct?

    Git a lawyer before you record anything.

    2Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y
    Originally posted by @Account Closed:
    Originally posted by @Holli Phillips:

    We did a contract for deed sale.  (Seller financing)  I need to get this recorded before I can start the foreclosure process correct?

    Git a lawyer before you record anything.

     Absolutely.  This should have been recorded at the closing.  Was this a DIY closing or was it done at a title company?  Did you use a RMLO to set this up?   I suspect was just a DIY closing (or else the title company would have recorded this).  You need to see an attorney before you do anything more at this point.

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  • Brandon Hicks
    Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
    11y
    Talk to an attorney. It depends on the state as others have said, whether you'll need to evict or foreclose. In Indiana the "buyer" wouldn't have hit an "equitable interest" level with the little amount of equity in the property and an eviction would take care of it.
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  • Jeremy Tillotson
    Investor · Fort Wayne, IN · Member since 2014 · 1k+ posts · 515 votes
    11y

    @Brandon Hicks that's going to depend on the local court. Seen it go both ways. 

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  • Holli Phillips
    OP
    Residential Real Estate Broker · Westfield, IN · Member since 2014 · 24 posts · 6 votes
    11y

    a so called "mentor"  who got us into this whole land contract thing has been doing this for 14yrs and has 30 some properties on contract.  It was not done at a title company and didn't not have a closing.  She signed the contract stating what she owes for how long and for how much.  We are the bank financing the purchase for her.  The mentor that got us into this said it did not need to be recorded.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    11y

    Wow.  Well, step one is to ditch this "mentor".  I'm guessing they didn't mention Dodd-Frank or using an RMLO to set this up, either, did he or she?  They may have been doing this for 14 years, but a LOT has changed in the last few.  What worked five year ago doesn't work now.

    One option would be to offer to give this person their money back if they leave peacefully.  That's likely to be cheaper than a foreclosure, and a LOT quicker.

    If you don't want to do that or the buyer won't go for it, you definitely need to see a knowledgeable attorney.

    8Reply
  • Mitch Coluzzi
    Investor · Des Moines, IA · Member since 2014 · 238 posts · 230 votes
    11y

    I will echo what the others are saying.   In this case, ignorance is your worst enemy. Get an attorney involved immediately...

    We have several land contracts (many to other investors to avoid consumer right laws).  In 2014, the requirements for lending to individuals as a primary residence got a bit more complicated.  At a bare minimum there are some record keeping activities and ability to repay criteria that need to be met.  Equally important, land contracts and options MUST be recorded (at least in IA and IN).  Regardless of equitable interest levels or what state you are in, a proper eviction process will need to be executed.

    This will include a pay or quit notice, followed with a quick note to your local court system and eventually the Sheriff.  Unless you are familiar with the process, get a lawyer involved.  If you skip a step or fail to follow-through timely you will have to start from the beginning again.  Chalk up the legal expense to a learning experience and take good notes throughout... Evictions are not difficult but have to be done correctly.

    0Reply
  • Guy Gimenez
    Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
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    @Holli Phillips 

    1.   Lose the number of your mentor. The 1980's is calling and wondering where he's at. 

    2.   Seek legal counsel ASAP.

    3.   Get your checkbook ready. 

    This will be a learning lesson so not all will be lost. But in all likelihood, it will be costly and you should pray the new "owner" doesn't hire her own attorney.  

    7Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Holli Phillips 

    Holli I suspect if you sold a house in INdy on contract to a home owner for 1200 down its probably not a very expensive house bordering on Ghetto style.

    I as a lender in IN  have foreclosed on about 6 borrowers.. its 3 to 4k and 12 to 14 months to take it through the system.

    Maybe you only paid 5k for the house.. got your 1200.. in that case just walk away.

    But usually in these cases when one sells a home for 1200 down its a beater.. so what is the amount your in the asset..that would play into the whole equation to see if its even worth going through the effort.

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  • Brandon Hicks
    Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
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    @Jay Hinrichs 

    A lot of assumptions. I'm closing a $80k deal tomorrow as a contract buyer with no cash down. I do this all the time....

    0Reply
  • Joseph Ball
    Residential Real Estate Agent · Groveland, FL · Member since 2012 · 504 posts · 395 votes
    11y

    Get an attorney.

    Next time, use a Land Trust and convey Beneficial Interest only. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Brandon Hicks 

      but your not buying owner occ your buying as investor I get that... My point was owner occ and 1200 down many times =  low end properties.

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  • Sheri Ulm
    Real Estate Investor · Norwalk, CA · Member since 2011 · 118 posts · 25 votes
    11y

    I closed on a house about 6 weeks ago that was bought on land contract on Ohio. I'm the buyer and we used a title company and the contract was recorded at closing. This was an investment property for me so Dodd-Frank didn't come into play.

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y
    Originally posted by @Holli Phillips:

    We did a contract for deed sale.  (Seller financing)  I need to get this recorded before I can start the foreclosure process correct?

    Bob is correct, don't do ANYTHING! Get a lawyer, sorry, but you need a lawyer.

    See if she comes up with the money, why was she late? Is this a blip or did she pull one over on you?

    You can not evict with a CFD, consult an attorney before filing any Quit Claim Deed that may have been executed in your sale. Do not just go file it. She can claim a wrongful foreclosure against you.

    In a CFD it is not customary to have an agreement like a deed of trust allowing a non-judicial foreclosure, it will be a judicial matter, going to court.

    This could work out, but sounds like she may have pulled one, or could have.

    Otherwise, make a demand for payment, in writing, follow foreclosure procedures in your state, under the direction of your attorney. :(

    :) 

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Are you certain that you executed a "contract for deed" agreement? Or was a deed signed and there is a note? Lots of confusion here when people use CFD/installment sale/seller financing as if they are interchangeable. Installment sales don't necessarily indicate a contract for deed arrangement.

    Is the buyer living in the house now?  Or renting it out? 

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Sheri Ulm:

    I closed on a house about 6 weeks ago that was bought on land contract on Ohio. I'm the buyer and we used a title company and the contract was recorded at closing. This was an investment property for me so Dodd-Frank didn't come into play.

    Curious if what you executed was indeed a "land contract"?  Was there a deed that was signed and recoded?  If not, why would you buy something without a deed? Land contracts and CFDs are such a bad idea for so many reasons,

    1Reply
  • Holli Phillips
    OP
    Residential Real Estate Broker · Westfield, IN · Member since 2014 · 24 posts · 6 votes
    11y

    Thanks for everyone's feedback.  I completely understand that this "mentor"  got me in this bad situation.  He constructed the land contract, one that he uses and charged me a fee.  This was a realtor that I had started working with on his team, so I trusted him.  I just transferred my license to a new brokerage.  I am a newer realtor learner all this investing stuff and how these things work.  I trusted him.  

    There was no deed that was signed or anything like that.  

    She is late on payments because she has so many repairs or things going wrong with the house.  This house was sold to her as-is.  The accessed value right now is at $50k.  It's off Evanston near the fairgrounds if anyone is familiar with the area.  It's actually low crime area.  I could rent this thing out in a heartbeat.  The buyer is currently living in it.

    Is there any possibility of selling the note to another investor that can financially get this turned around.  The tenant is actually a good one, but just keeps trying to push out her payments because of having so many repairs.  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Holli Phillips 

    Ok lets see if we can decipher what you actually have

    1. you paid cash for this property and own it free and clear  correct ?

    2. Mentor has you sell it on contract to home owner ( they are living in it)

    3. Your not sure if the contract was just a contract for deed or if it was a mortgage ?

    4. You did not sign a deed to here and then record your security instrument and take back a promissory note.  is this correct?

    Sounds like a contract for deed and if its not recorded then I think the local guys know what to do with that.. as there is some equity issues. but with 1200 down not likely.

    If you did not deed the home to this person and take back a mortgage and note you have nothing to sell.

    If its a Contract for deed I suppose you could sell that paper but would probably take a pretty big loss as its NP paper.

    So the thing to do is to figure out what you actually have... Maybe send some one on her off line a copy of your documents so they can tell you what you actually have..

    Or of course go see a local attorney.. that's always the default position in any RE matter.

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