Help: Underwater Flip, Quitclaim Issues, and Foreclosure Risk

[Alycia Scantland]

Hi everyone,

I’m hoping to get advice from anyone experienced with hard-money lending, distressed projects, or investor defaults.

In December 2023, I invested a $80k with a small local investment group for two fix-and-flip projects.

I was given a promissory note stating a 3 month turnaround, a 15% fixed return, and additional compensation if the project ran late.

They finally contacted me in October 2024 saying the projects had been mismanaged and they were unable to sell both of the properties as planned.

They asked me to release my original liens so they could attempt a short sale, and moved my liens onto a different property in Wheat Ridge, near the Denver market for two $49k liens (original loan plus interest incurred)

One month later, they informed me they had not started and would not be finishing the project, were considering bankruptcy, and that the property would likely go into foreclosure.

They told me the only way I could recover my investment was to take over the project myself.

In December 2024, before I ever agreed, they recorded a quitclaim deed transferring the property to me and listed the sale amount as $98k, which was my lien amount on the property, though I never agreed to release those.

In March of 2024 I did agree to take on the project months, but then I discovered unpaid taxes, undisclosed city issues, and several liens I was never told about.

To prevent immediate foreclosure, I’ve been making the interest-only payments on the hard-money loan for 8 months while renovating.

The property recently appraised below the loan balance, and the lender is refusing my offer to refinance/payoff at a lower amount.

They also suggested they may “wait years” to foreclose, which has left me unsure of my rights since title is now in my name.

Meanwhile, the original investor appears to be moving personal assets out of their name despite previously giving personal guarantees.

My questions for the community:

What realistic options exist when a hard-money loan exceeds the property’s value but the investor has abandoned the project?

Can a lender delay foreclosure indefinitely if the borrower of record is gone but title is in someone else’s name?

Does a quitclaim deed filed without the grantee’s consent (and with inaccurate consideration) create legal issues?

Has anyone here taken over a distressed project mid-stream after an investor walked away?

Are there any strategies for preventing foreclosure when the payoff exceeds the appraisal?

Any insights, similar experiences, or recommended paths forward would be greatly appreciated.

This has become a very complicated situation, and I’m trying to figure out the smartest and most realistic next steps.

Thank you in advance.

[Stephanie Medellin]

I think the most important thing to look at, before sinking too much more money into the property, is how much will you be able to sell the property for if you can finish the renovation.  Is it worth spending more money and holding costs on the project, and how quickly will you be able to sell it?  

Also, assuming the loan is delinquent even though you've been making payments, how much is the additional money you've put into the property at risk? If you increase the value of the property enough and they are able to foreclose (especially since the previous owners may have triggered due on sale clause when they transferred the property to you), they may be more inclined to do so if they see the value increasing due to your efforts. 

If the ARV is high enough, there could still be an opportunity to refinance out of that hard money loan and get into a more stable situation.