I am in a bit of a situation and really looking for some help. The property in question is in Florida.
Here is the situation:
- Fix & flipper (Borrower) pitched me on 09/2017 for a property acquired for $72,000 off market for a fix and flip
- He had a first lien holder that paid the $72,000 as primary lien holder
- I was to provide the rehab loan of $10,000 and would be the second lien holder via a mortgage note. The structure was a $10k principal payment, and I would receive a fee of $1,000 after completion. This should have been paid out 11/2017
- The primary lien holder is frustrated due to long delays (so am I) and has issued a Default Letter to the borrower that he wants to foreclose
- Borrower has said he is willing to do a quit claim deed on the property to relinquish rights
- Primary lien holder is now reaching out to me to ask me to do a quit claim deed and he would pay me $1,000 for that
- Primary lien holder is saying that if he does the foreclosure process, I will be left with nothing since he has precedence
- What can I do in this situation? I just would like the best way to get my $10k back. If I do not do the quit claim deed, it will go to foreclosure. If I do the quit claim deed, I get $1,000. Seems like I can just let it go to foreclosure and hope it gets higher than $72,000 so I get paid something.
- If it goes to foreclosure and I do not get anything or part of my investment, can I sue the borrower since the second lien was with him?
- Any other ideas?
I really appreciate any advice! I have the PDF documents that I can share if anyone here is a lawyer and can advise.
@Mushfiq S. "I was to provide the rehab loan of $10,000 and would be the second lien holder via a mortgage note."
Make sure that you have your 2nd mortgage recorded at the county. If you want to protect your lien, you either need to negotiate with the 1st lien holder or buy him off. For example you can acquire the quit claim deed from the borrower yourself, then rent the property and promise the lien holder that you will pay him enough each month from the rents to cover the loan payments plus a little extra. Or you can acquire the quit claim and tell the lender that if he doesn't work with you, then you'll be forced to declare bankruptcy and lock up the property in court proceedings for a year or two. You can also arrange for a short term hard money loan to buy off the first lien holder. Then wholesale the property.
@Mr Davido should have mentioned. I did this agreement via my Solo 401k. I cannot buy the property myself due to lack of funds.
Any other ideas?
If you want your money back then forget about what you "cannot" do. You can be sure your lien/2nd mortgage is recorded. Is it? You can tell the fix and flipper borrower that he should sign the quit claim deed over to you instead of to his lender. That should cost you the same nothing that it will cost the lender. Tell the fix and flip borrower that by signing the deed to you, the lender will get paid and once you can get your money back, you'll make sure there is some money that goes to your borrower buddy.
If there is equity in the property (should be at least your $10,000 worth) then you can get a hard money loan to buy out the 1st mortgage at or before foreclosure. You just need to work fast to exit or refinance the property once you take hard money. There are options. They are up to you.