loan called on a contract for deed

11 Replies

I bought a property from another investor as a contract for deed AKA Lease to purchase. i bought this about 4 months ago and planned to refinance within a year. She was using private money to fund this deal and i was making the mortgage payments for her while i fixed it up ($2800/mo) got it rented and refinanced it etc. 

         she called me this morning saying that the private money lenders want $12,500 in order to continue the loan (I was not aware that the loan had to be extended when i signed the contract). the contract doesn't say anything about me paying extra points or anything. she called me and wanted me to pay an extra $12,500 and she will take it off the principal of the loan when i refinance. With all the renovations i'm doing i don't have enough to pay that extra $12,500. it also seems like she doesn't have the money to extend the loan and the $12,500 is due in 20 days.

        Am i obligated to pay the extra $12,500

  If she was default on her private money loan, what would that mean for me? would i lose the property?

HELP!

          

Yep, that’s the risk with a contract for deed Or a lease purchase, which are Not the same things. If the payment is required, and not made, yes the lender can foreclose, then you get to try and sue the seller.....fun stuff. 

@Dillon Dull NEVER renovate a property you don't own!

I seriously doubt this extension thing exists. She's probably planning on scamming you out of the money and work you did on the property.

I suggest you get your own private money or transactional funding to carry you over until the reno is complete and demand title be transferred to you immediately.

@Dillon Dull

So she never owned the property outright? She bought the property with someone else's money, and you were making those payments in her stead right? My thoughts are before she agreed on a contract for deed with you, what were her original intentions. Sounds like she wasn't upfront with you concerning the situation with the property. Am I right or wrong?

But do you know for a fact, that she actually paid her lender or if she maybe pocketed the funds and the 12K are necessary to catch up?

@Michaela G. Thats a good point, that could be the case, either way though the agreement on the contract for deed said to pay $2800 for 12 months or until the refinance, i never checked with her private money lenders to make sure that it was the right amount.

Originally posted by @Doug Pretorius :

@Dillon Dull NEVER renovate a property you don't own!

I seriously doubt this extension thing exists. She's probably planning on scamming you out of the money and work you did on the property.

I suggest you get your own private money or transactional funding to carry you over until the reno is complete and demand title be transferred to you immediately.

Doug while I agree with 2 of your 3 points you made I don't think this is probably a scam and a call to the HML would flush it out.

the reality is he does not have to do anything as long as he can get the property in a condition to refi before the HML forecloses.

now if the HML starts a foreclosure action.. and its in his loan docs IE in the note.. that he/she can charge these extra fee's then that will be added to the minimum bid to cure.. and taken from the Sellers equity as long as the seller has equity to give..

I am with you.. renovating someone elses house is not advisable in most instances.. like 98% of instances.

Originally posted by @Michaela G. :

But do you know for a fact, that she actually paid her lender or if she maybe pocketed the funds and the 12K are necessary to catch up?

good point the seller maybe in default right now by not making the payments on the underlying contract this is why sub too and lease options are very tricky to down right super risky.  

@Dillon Dull ,

Seems like you already got a lot of advise here.  In the future make sure that you are using the proper documents and that you have an attorney in your corner a deal goes sideways on you.  We close all of our deals with an attorney and our tenant/buyers sign their lease purchase in front of an attorney.  This protects you on both ends.

Hope that helps,

Chris Pre