I have recently found an owner who is willing to quit claim her deeds on 4 properties to me for free. The catch is that they are all financed and defaulted for over 4years. The banks have never foreclosed and she believes that some or all of the noted were sold but has no clue who now owns the note. She is not in the least worried about her credit, she just wants out. I took a look at the properties and all but one are severely distressed. Also, the taxes are current on all but one. I'm not sure what to do. I want the one house, but I'm not sure what my liability will be if I get them rehab and rent. Can the note owner come back and take the properties? Am I am yo do a quiet title action? Or has enough time passed for me to claim a clear title?
The mortgage is still on the property. It's doubtful, but possible, some statute could prevent the mortgagee from foreclosing. But generally, yes the bank can foreclose since the note is in default. You wouldn't have any liability for the loan, but would lose whatever money you put into it. Without knowing Exactly the amount of all liens on a property it's to pick a strategy. The Quiet Title route is way over hyped as a solution, usually to issues like this where it doesn't apply. Start with a title search.
Place yourself in the position of the lenders or note holder(s). What would you do then?
You'd have like been paying the property taxes because the record owner has not. You'd have been advancing money to insure these properties since they are higher risk. And your investment has not produced cash flow for years.
Would you just be delighted if someone fixed up the properties securing your loans?
Then you could foreclose and get the most money for your notes.
As @Wayne Brooks suggests, do a title search.
Find out who currently holds the lien on the property. In this case, do not try to keep the financial institution in the dark about the process. Get the owner to sign a release of information, allowing you to talk to the lien holder directly. Call them and find out exactly what it will take to bring the notes current. Explain you want to rehab the properties, which will secure the value of the properties and that you will be making payments on time. I can't stress this enough, banks are in the money business, not the property management business. The bank would rather see those notes turned back into performing assets than to foreclose on the property, even if you increase the value of the property. By the time they can get to the auction point, they will have spent more money than they will profit. They don't want to own more property than they already do.
Also, check with your local taxing authority to get a number on any back taxes currently owed. The bank probably hasn't paid any taxes on the property.
Don't forgo the basics of deal analysis just because the properties are "free". There is a cost, and there is risk. You need to make sure the numbers support both.
@Markeilsha R. You should call John Nacca's law office in Rochester. PM me and Ill give you their number.
@Markeilsha R. I agree with others that you definitely do not want to be putting money into these properties that can be taken from you.
All the back taxes paid by the bank as well as the principal and interest will need to be settled. After four years this is likely way over what the properties are worth. You could attempt to pursue a short sale but I've found 90% do not work out because the bank wants too much money.
I know it is hard to hear when you get excited about a property but this is probably not going to be a deal. There will be others.
thank you everyone. I've tried to get more info from the owner to find out who holds the note, but she claims not to know anything after being notified that BOA sold it. She said that they've tried to get her to make a payment plan but she has not. Theses are distressed low income houses, so the not holder probably didn't pay much but I font want to rehabbing and having it taken. I think I will take a pass on this deal. Thanks again everyone!
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