All Forum Posts by: Curtis H.

@Joaquin K.

I agree that settling for the $200K is the easiest and least messy way to get out of this for sure. But the "Be Thankful" part is where I struggle. I just don't get what he's supposed to be so thankful for. Had he known her intentions up front, he would have never agreed to the deal. Only a fool would. He would have simply waited two years, got his credit together, watched the crash happen, and buy a house of his choosing at the bottom of the market. Also, when the market crashed, and the house was upside down he could have simply stop making payments like everyone else did, saved all those payments, and walked away trashing her credit. But he chose to do the honorable thing and make sky high payments on a house that was upside down. Simply to keep his word. Maybe I'm truly missing something here, but I just don't get it. He was just robbed of his life's savings for the last 10 years, since he put everything he had into that house. Now he's supposed to "be thankful" that he's getting $200K and has to move his family out of the city he was raised in since he can no longer afford to buy there? And commute 1.5 hours a day to work one way? Yikes. That's asking someone to be a robot, not human. 

He's not an investor, and there is no "next deal, lesson learned" like it would be for us. That's probably why I feel so bad for him. It's not as easy as finding another deal. This is where he lays his head. These reminders are good for everyone that hears this story. Even I get weak and think of all the ways I could help out siblings with what I know, etc. This is a reminder to avoid money situations with extended family at all cost, and if you must, GET IT IN WRITING.

@Bill F.

There is no agreement in place to speak of (in writing at least) other than the tenant landlord agreement put in place just 6 months ago. I agree with everyone here that the juice isn't worth the squeeze once you run the numbers. BEST case scenario is a 50/50 split in court. With you there. 

@Cara Lonsdale

Yep, he is kicking himself for not getting her out two years into the agreement. He tried, and she insisted that she's fien with things as they are, and like most non investor minded people, he opted for the path of least resistance. It's important to note too that prior to this incident, this woman was indeed practically a saint. Seriously. Nobody saw this coming. So while he seems naive now, I don't blame him a bit for trusting her. No reason not to other than not trusting anyone when it comes to money, which has always been my approach. Get it in writing. 

@Joe Splitrock

I gotta say I like the points you bring up as vindictive as it reads. When I spoke to him, my advice was very similar to this approach. Talk to a lawyer first to see where you stand in a case like this. I told him probably not good. What I reiterated to him was I would bet that she isn't callous enough to see this all the way through if you make her life a living hell. Turn the mom against her, turn the nieces and nephews against her, turn the church against her. Shame her, because what she is doing is shameful. If you throw your hands up, that's the easy way out for a person who cares what people think of them. 

Joe you have given more detail to my thoughts, and these are things he can put into action. I know she claimed the interest on her taxes for certain, but I'm almost certain she didn't claim the monthly rent. This could be the smoking gun that makes her rethink her tactics. 

@Curtis Bidwell

I hear ya, I really do. But I have to disagree. The equity is great because of how much money he put into the property (extra payments, etc), as well as appreciation. And if working 16 hour days to do that isn't "effort" I'm not sure what is. The family member used their credit, not their money. Call me greedy, call me crazy, but no way do I think using someone's credit is worth $300K of a $500K pot. If they used their credit as well as funds, yes a case can be made for 50/50 of course. Trust me, I've run this through with all feelings aside and the "you wouldn't be in this situation if it weren't for me" scenario still doesn't pan out to me. He would have been BETTER OFF actually because two years later when he qualified for the loan was post crash and homes were cheaper than when he bought it with her credit. She wasn't asking for money after the crash when they were upside down and still making sky high payments on time to maintain her credit. She wasn't asking for money when things turned around and there was only $50K equity in the house. No, she waited until he payed down the principal significantly and appreciation accelerated the equity position, and now she wants out all of a sudden before the bubble burst again. She's no dummy, she played them like a fiddle. Well played too I might add. 

@Tom Gimer

You are right on the money sir, as that is exactly what I told him to do is be prepared to lawyer up. I told him maybe you don't have a case, but the fact that you have 10 years worth of proof of you writing checks from your account directly to the mortgage company, as well as property taxes and insurance, in addition with no landlord/tenant agreement in place during that time, may get you something in court. She has no proof of ANY money into the property. There were witnesses to not only the initial verbal agreement of not wanting anything in return, but also a couple years later when she INSISTED they not get her off the mortgage since it wasn't damaging her credit. So they continued on when they could have easily qualified for the loan at that point. Which in hindsight they should have. I still think there is a glimmer of hope that with all the facts and proof, they can make a case that $300K is too high of a price. Do I think they would win? No honestly. I just think they were too trusting of a family member's word. Me personally, I would be wiling to move on with a 50/50 split. I would try everything in my power not to let it get to that number, but internally I would be willing to end the madness at that number, and simply never talk to that individual again.

@Russell Brazil

If he feels like she won't come down on what she is asking, that may not be a bad strategy. He could probably skip about 3 payments before they had to leave. I think their payments are over $4K a month. Problem is, if they did that they all but sealed their fate to get NO equity at all. So you only go this route if you already feel she is going to take you for everything. She said she would give them a little less than half already. But that's not in writing so here we go again!

@Chris Mason

Thanks for the insight. To my knowledge there was nothing signed at closing by my friend about a down payment, but could be possible. This was basically a Sub2 deal where my friend didn't get the deed. That was his mistake. After all this happened and he sunk in excess of $40K a year into the home, he could have gotten the deed at least. Obviously he is not an investor and wouldn't think this way. Plus it was the sister of his wife, where their family is so close the mom lives next door. So nobody saw this coming from the sister. Like I said, nicest person ever, church every week, always helping others, etc. This is going to be tragic.

@Thomas S.

He would not have been paying rent somewhere else very long. He qualified for a loan just two years after getting the house. In fact it would have been cheaper because he bought right before the crash. My friend is not financially strapped, he runs his own successful security business, but had no credit. He simply used the sister's credit, not her funds. So she is literally asking for $300K for the privilege of using her credit score. That's pretty much it. So I think this is a bit more than lesson learned. Poor guy worked 16 hour days to make sure he made all payments on time and kept her credit pristine. I feel terrible for the guy, I just don't think there is anything he can do about it, unless there is maybe a landlord tenant loophole since they can prove my friend made all payments to the mortgage company. I doubt it. She could technically sell and take ALL the equity and leave him with nothing. Which at this point seems possible if the rift between the family gets big enough. Yikes. 

Not sure what forum this goes in but I have an interesting question. This doesn't involve me, but a childhood friend. I'm not sure what to tell him. Here is the scenario as simply as I can put it.

* Used family member's credit to get into a house roughly 10 years ago. House is in the family member's name. Mortgage is in the family member's name. I think you know where this is going...

* Friend put up down payment money, pays half the property tax, and ALL of the mortgage payment every month on time for 10 years. 

* Family member uses the tax savings by writing off the interest and using the money to pay the other half of the yearly taxes

* There was no written agreement in place for the 10 years my friend was living in the house and paying the mortgage directly to the lender under his name. There was a verbal agreement there were witnesses for that the family member wanted NOTHING in return for using their credit. It was a favor. Asked about it a few years later, family member re-iterated everything was all good and since they make payments on time every month, it actually helps them, not hurts them. 

* Fast forward to today, there is $500K equity in the house (Bay Area) and the family member has gone Tony Montana on my friend. Made them sign a tenant and landlord agreement 6 months ago and basically said they want $300K in equity and will give the rest to my friend. End of story. No negotiation. They have put less than $40K into this house total, where my friend has put in almost half a million. Yet the family member wants over half the equity. This family member was the closest thing to Mother Theresa I had ever seen previous to this incident. Everyone is floored, but half a million can make anyone go nuts apparently. 

Is my friend screwed if this goes to court? Not much he can do now as everything is in the family member's name. 

Thanks!

@Jeremy Baker

I too love Kihei/Maui area and was curious how you found your properties? I am not looking to be competition with 10 units, I just want to buy one unit, let the short term income pay for the unit in 15 years, and then have a place to vacation for weeks at a time and book out the rest. We have family members willing to give us the time share in Maui, but 1 week isn't enough for me. I want to be there for 3-6 weeks at a time, and this seems like a great way to get there. I plan on retiring from my 9-5 in 12-15 years, and it would be my dream to have a paid off (or nearly paid off) place in Hawaii to go to any time I wanted. 

I feel the market is too hot now, but when the next downturn comes I want to pounce on it. Or if a pretty distressed unit comes along in the meantime I can jump on that too. 

Thanks!

@Jay Hinrichs

Ha ha yes I was talking to my wife about Judge Judy and this situation today and we were laughing about it. Thank God we don't NEED it, but with the taxes due, now we have to pay it out of our pockets and that is what the escrow money was for. I also told her the chances of getting that money back is zilch even if we win in court. They will just tell us to get in line. 

So I'll try the 1-2K money to get them to sign the checks over, and if they don't lesson learned. I should have refinanced three weeks later and the taxes would have been payed and escrow depleted. I would have also lost my rate lock which is why I didn't postpone the closing, as rates rose right after closing.

@Jay Hinrichs

@Mindy Jensen

@Chris Mason

Hi all, 

The thread that just keeps on giving I guess. I am smack dab in the middle of the escrow conundrum and wanted to provide feedback to help others. Whatever happens, I am good as I am using this as a learning experience and taking notes. 

Refinance is complete and there was a check for about $2500 that I was able to get the mortgage company to send to my address, and then the big escrow check for $3500 was coming to me as well a couple weeks later. I would call in every week to check to make sure the address on file had not been changed. Well, sure enough the one week I didn't check, the old owner switched to his current address and the mortgage company sent out the $3500 check, and ALSO put a request to void the $2500 check I have in my possession and have it reissued and sent to their address. Let the games begin. 

My initial thought is to simply contact the owner, tell him I know he is trying to collect the checks, and if he cashes them without signing them over to me, then he'll get a letter from my attorney and I will take him to court and get the money back anyway. If he signs them over to me, I will give him $1K to say thanks for everything and goodbye. So either get $1K to sign them over, or ultimately end up in court. If they call my bluff, call it the cost of doing business and move on. $6K is not anything to sneeze at, especially since they are essentially stealing my money and they know it, but I have more than made that up in appreciation and they just plain need it more than I do. It's just now that they are trying to be slick I'm a little pissed naturally. Plus dude still comes around to the neighbors and he is creepy as all hell. Makes the wife very uncomfortable so I'd rather not start a war over $6K.

Lesson here is plan your exit where you refi AFTER the taxes are paid so the escrow account is depleted. I can see this being a problem every time you do a Sub2 transaction. Now on $150K homes who cares, but when you are talking half a million and up like here in Socal, escrow can get ugly fast.

@Brent Coombs

Good question. I won't be using that strategy on all the properties, just some of them. My W2 income should be good enough for me to handle down payments on the properties in the Midwest. It's the Socal properties I'll need help with using the BRRR strategy.