Borrower default

5 Replies

Hello BP members,

Thanks in advance for reading this post.  I am writing this to seek support, advise and referral.

I am a private lender and loaned hard money to a flipper with a signed promissory note secured by deed of trust (for the property that he is planning to flip) along with a personal guaranty.  Flipper purchased the subject property from a wholesaler and also took on the existing loan.  When purchasing, flipper (borrower) borrowed second to cover his down payment along with other expense.  I am in third in line.  About a month ago I've received a notice of default on the property as the flipper did not pay down some of the dues to the first.  There is a 90 day waiting period after the default letter is issue for the lender to start the foreclosure; however the due date for my loan is coming up soon and the flipper is fumbling to finish the project as he under budgeted the project.  I would like to reach out to fellow BPers and experts to seek advise.  I do have an attorney that's engaged but would be ideal to get into legal action.  Again, this for reading and any expert advise would be appreciated if you could message me.

Thank  you!

Obviously, this is a problem with being third in line.  You need to look closely at the value after renovation is completed, and Exactly how much is owed ahead of you.  You may have to actually front some more money, to get it finished and sold, protecting yourself.  Then again, that could be throwing good money after bad, you'll have to evaluate.

@Wayne Brooks

 Agreed and that was discussed; however did not want to put in more into an another wrong budget.  I should have mentioned, but the current home value (if sold as is) appears less than the total to be paid before me, which is why I am greatly concerned.  One thing I don't know is how much the flipper put down (how much equity there is on the subject property).  I am starting to look at the personal guaranty.  

Further advise would be appreciated!

It doesn't really matter how much/if the rehabber put any money down.  If the 1st and 2nd loans are more than the property is worth, there is no equity, and you will see nothing if the 1st or 2nd forecloses.   The personal guarantee will likely be useless, since the borrower had no money to put into this, but maybe you'll get lucky with some other assets/income.

@Wayne Brooks

 Thanks for your response. By any chance could you tell me the process of suing the borrower using the personal guaranty?  Also, do you have any reference in LA area?

Thanks!

D

It's a regular law suit, just like for a credit card or anything else.  Not to our salt on the wound, but.....lending in third (or even second) position on a flip, out of state, where the flipper put no money down.....crazy.

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