All Forum Posts by: Dion DePaoli

"Is your contract enforceable?" Yes.

First right of refusal does not make your contract unenforceable. Having a enforceable contract is not the same as being able to purchase the property though. Even though, we understand what you are really asking.

In most cases, you signed not only the purchase contract with the bank but a contract addendum as well. Usually that gives the bank the right to cancel the contract at any time for any reasons.

That is important because again, your contract is "enforceable". You made an offer and it was accepted and the contract was executed. Can you enforce "Specific Performance" on the contract? Meaning, can you force the bank to sell to you, essentially ignoring the associations first right of refusal. No.

In the event you have suffered damages, such as paying for inspections and other expenses based on thinking you are in a contract and purchasing the property, you may be able to seek reimbursement for those expenses from the bank. The bank had the responsibility to allow the right of refusal to be processed, if they did not, that is their fault. You will not have damages above your expenses in most, if not all, cases.

This is pretty standard stuff. Accidents/errors happen not much you can do.

Why bother trying to figure it out if it is the first notice. Make one letter and copy it three times and hand it to all the tenants. That way the one culprit will also know his/her two neighbors are aware that notice was given and they may report the next incident back to you. Put it in the letter even. Smarter not harder.

If you are going to pay cash for the rentals and finance the primary residence, I would suggest you do the financed property first and the cash properties second. When the lender underwrites you, the cash you hold, which you later will spend on a rental property, will support you qualifying for the loan.

In regards to how many properties one can own in regards to being on title to. The number is infinite. There is a limitation on how many properties that are financed which conventional financing will allow and still finance a new loan, which might be what caused your question or confused you. That is seperate from ownership.

You can put as many properties you want in your name or in the name of the LLC you open. There is no limitation to that. There may be tax and liability reasons in some instances which influence how many you group into the LLC or personal name but that is about it. There is no legal restriction on how much you or your company can own.

No question is 'dumb' here. No worries, if you don't know, just ask. The beauty of BP.

When someone buys a property with financing, they have to put up a down payment. So generally speaking, loans are not 100% of the purchase price, they are less. Down payment requirements can range from 2.5% to 35%, depending on the Mortgagee (lender) and the loan product/program. Conventional loans require less down payment than most hard money loans or private loans. As loans are made and time occurs, borrowers make payments which may lower the principal balance of the loan. So the using the term "Purchase Price" is not really the accurate terminology. A borrower may purchase a property for $100 by putting a down payment of $10 and borrowing $90. Then over time the borrower may have paid the principal balance of the loan down from $90 to say $70. The Mortgagee is only due the principal balance of the loan, plus any fees and advances made plus accrued interest. So if $5 was owed in interest and fees, the Mortgagee is ONLY entitled to collect the $75 total. Any bid above the $75 will have the excess funds go to junior lien holders in succession then the the actual borrower who was foreclosed.

The notice you read clearly states the Lender (Mortgagee) has received a deed on the home. So it is not a new third party investor who owns it, it is indeed the lender. When an asset goes to auction, the Mortgagee is enforcing remedy from the security interest (Deed of Trust / Mortgage) that liens the property. The Mortgage is owed what ever the remaining Unpaid Principal Balance of the loan is plus any fees and advances plus interest arrears. It is not uncommon for the sum of those parts to exceed the value of the home or exceed what the property may get at auction. The Mortgagee can set a minimal bid for the auction, where if the bid amounts at auction do not meet or exceed that number, there will be no sale of the property at auction to a new investor. That amount can be set under the value, at the value or over the value of the property up for auction. Some local regulations will govern the amount in percent of total due that a Mortgagee is required to set for auction. That is called the minimal bid. Other local areas do not have a minimal bid. The asset then reverts back to the Mortgagee as REO. The loan is extinguished per the foreclosure process and a deed is given to the Mortgagee. If a bidder at auction gives a bid which is above the minimal bid for auction, they they will be awarded the home, provided they pay at auction.

So using the $75 example above. The Mortgagee can set mimimal bid at say $55. So any bid above the $55 means a new investor will take ownership. The Mortgagee will be entitled to up to $75, since that is what they are totally owed. If the buyer bids $65, then the Mortgagee will get paid $65 after the auction finalises. If the bid at auction is $45, then no sale will take place, since the minmal bid of $55 was not met or exceeded. A bid of $85 would pay in full the Mortgagee and the $10 overage would pay any junior lien holder (like a second mortgage or a mechanics lien) and if none are present, the money goes to the borrower.

In most cases, the original lender is not the investor who owns the loan right now. From time to time, this is the case but most of the time it is a new "investor" who owns the loan. Loans trade (bought and sold) in a secondary market for investment purposes. The common public still tries to refer in layman's terms to the investor as the Lender, but the investor is not likely the entity who funded the loan. So, your question asking about going back to the "Original Lender" is not a true statement. The loan, if not sold at auction, will revert back to the Mortgagee (Investor) which may or may not (most likely) be the "Original Lender".

When the Mortgagee takes possession of the deed, they are now the formal owner and they can rent the property or sell the property or do what ever they deem fit. They are the legal owner.

It seems as I suspected the guy has some deficiency judgement that the creditors are trying to enforce. Those will not affect your title, if you have a winning bid at auction. I think you getting legal counsel on this to put your mind at ease is a good idea. That counsel should not be such an amount that the bank breaks, so money well spent.

Purchasing the note is a viable option as investors invest in notes all the time. Those notes can vary in performance from performing to not performing. Non preforming loans usually end up going through the foreclosure process, unless the borrower can manage to become reinstated. If the auctions in this area do well to disposition the homes, then a Mortgagee may not consider the bid at all. However, as the thread mentioned there is a fair amount of auction 'fallout' (2/3 of the inventory) so it is something investors who own the loans think about. The key to bidding a loan this close to auction is well, paying close to the same as auction price. Based on the stream of questions around the topic from you, perhaps this is not the deal to cut your teeth on trying to learn about paper. Not trying to deny you information or education, just trying to have a practical approach. Perhaps when the dust settles you can spend a little time and look into it if it interests you. There are many threads about the topic of buying, selling, servicing and owning loans here on BP.

Now that you notice the other two properties, after you get with your attorney and understand the impact of the law suits, remember knowledge is power. Might be something to do with the other properties. Short Sale, DIL or something. You tripped over a little chest of potential deals if you work them right. Good luck.

Well, this was an exciting and interesting short exercise in REI detective work. Nice job Bill with the theories, I think you called it on both those fronts. I am taken back at the complexity and efforts this agent and husband have gone. I got to think this is not their first attempt, they have done some homework. If the agent is a REO agent for the bank or servicer who knows how many times they pulled or tried to pull this off. Somebody is going to have a field day with them.

I did not really understand why the agent and husband would first list the Sellers as a beneficiary and them moments later require assignment of the beneficial interests. Why is the beneficiary not simply the end party at step 1?

There may not be an answer here for that. Maybe it is just dumb people doing dumb things. However, it seems to me, this structure would not pass the sniff test at the bank since the Sellers are beneficiaries, even though interest are assigned either before or after the bank looks at it.

The main set of issues is all around the agent it seems. Offer not presented. Lack of disclosure. Moral turpitude.

I agree with Bill, just have the Seller's present your offer and share the issues with the agent. I would caution not to try and be the police here as it can get hairy and waste time and energy. The Seller's would be able to complain, the bank can also complain about the agent to state authorities. You have no such complaint except your offer wasn't presented but the other two parties have that idea plus the others. I suppose you could help backstop the Seller's complaint and information to the bank saying that your offer is now contingent on not having that agent or brokerage involved if it get's put into question, although I doubt it will be needed.

If I were the mortgagee, I would terminate the listing and report it once. Then move to simply enter contract with you properly. The end game for everyone is the same, sell the property. I would not be inclined to spend more than 30 mins on the bad agent.

I agree with what was said. It will boil down to your personal risk preferences. However, if I were to speculate, I am guessing a suit naming 40 LLC's is trying to charge assets owned by the one guy and sounds like the pursuit of deficiency. 40 different LLC's are trying to be pierced by some creditor. I am guessing the suit will have little to do with you upon FCL. If the deal is good, which you say it is, then I would look into it deeper. A title report will cost you $150 or so and that should also be able to get you an attorney opinion on title. You don't need two, that is a little overkill. You can easy read the suit attached and post some other information here and we can comment to see if engaging an attorney make sense or if the suit makes it a lost cause, I really doubt the latter.

In a different approach, this may be an opportunity to make a bid on the note and finish foreclosure. You could then go to auction and bid as needed or if it doesn't get bid, it will revert back to you, the worst case you get a little payday but no property. The suite might be looked at as a hassle by the mortgagee and you and a competent RE attorney could work on the asset with a little more efficiency. As Bill mentioned, if the borrower has some folks coming after him, things might get messy and he might be inclined to DIL. It all could just be a right place, right time sort of thing. I would look into it.

There is not enough information to really get specific. Many details will apply.

How is title held to the property? (joint, tenants in common, etc)

Is the partner on the mortgage to the property?
- if he is, then his liability is only extinguished if the loan is paid in full.

Does anyone have a number for the partner's share yet, what is it worth? What's the property worth?

Will your in-laws consider allowing a refinance on the property and pull cash out to pay him off?
- If you can't use the property as collateral and pull cash from it, then the cash has to come from somewhere else. Do you have other options?

Will a refinance even be able to pullout enough cash at conservative 65% LTV after paying any outstanding debt?

There are a couple different approaches that will depend on the details of the deal. If you post some of those details you will get more informative feedback.

I was going to try and sort out what day you were on in your post but it got a little confusing. Moral of the story, when the home is sold at auction, that is not the same as eviction. The occupants would need to be evicted. State specifics will come into play with rights of redemption but it doesn't sound like the occupants want to try and get it back. They can enter the property until they are kicked out or until they have completely vacated the property. As a new owner, you have to allow occupants access to remove their stuff until eviction since legally they have possession of the property. Eviction gives legal possession back to the deed owner in full. Even after eviction, you have to store their stuff for a period of time allowing them to recover it. You can charge storage fees. State and local laws will govern most of that. Based on your description of the time and efforts, they are sort of helping you out by taking all their stuff out and not waitning for an eviction notice which could cost you several additional months of time.