All Forum Posts by: Account Closed

Thank you all for your suggestions. Tom, I like your suggestion. And it would certainly be worth it if I had a reasonable assurance that Citimortgage will not or would not pursue foreclosure for the next 5 to 10 years. However, I don't want to pay the taxes, insurance and put 15K into the property (which will rent, when all is said and done, for about $500 a month) if Citimortgage can come in at any time and foreclose. I am afraid that their asking price at that point would be much higher than I am willing to spend. Right now, the property is full of the former owners trash and the lawn is completely overgrown. From a cosmetic standpoint, it looks like a mess inside and out. I want to make my offer when the property is in that condition -- not after I put on new siding, a new front porch, new flooring and probably update the kitchen and bathroom.

I am going to do what Mike and Nathan suggested. I have a pretty good relationship with the realtor (who also invests in rentals). Though she mainly lists properties from residential sellers, I am sure that she would be happy to steer me to the right listing agent. And Nathan, I don't want to give the impression that the current owners are cranky old bitter people who blame the bank because they can't pay their mortgage. These are just 2 basic, midwestern folks who were allowed to take more "equity" out of the house than what ever really truly existed. Then, the husband becomes disabled, but they inherit this other perfectly nice house with no payment and they pick up and move. They are very friendly to me (perhaps because I am also just a simple midwestern folk myself) and I get the feeling they will help me out because they know I will help their old neighborhood.

And Divina, I will definitely give you a call at some point. It appears that the East Central Indiana contingency is pretty sparse on BP. So, it would be nice to make contact with someone from this area. 

Thanks again for all of your help and suggestions. I now have a game plan and know my next steps. I will keep the forum updated as to it all works out.

Thank your for the advice about a short sale. I agree that I would be in a better position if the owners would agree to a short sale. There is one realtor in particular that I have worked with when we purchased our first 2 rentals. Perhaps it is worth giving her a call.

However, when approached by Citimortgage about doing a short sale a year and a half ago, the owners were offended that Citimortgage wanted all of this financial information from them to see if they qualified for a short sale. At that point, they would not cooperate with Citimortgage or provide them with any of their financial information. They just wanted Citimortgage to take the property and could not (and probably still cannot) understand why the mortgage company doesn't just take back the property.

So, I don't know if I (or a listing agent) could convince them that it is in their best interest to do the short sale. Perhaps if I or a listing agent explain to them the benefit to them of a short sale (the same benefits that they would have with a DIL),they may be more cooperative. They have zero interest in helping out the mortgage company, but they may have slightly more interest in helping me out -- and in turn, helping out a neighborhood where they lived for 27 years. I guess it is worth a try before I go the Deed In Lieu route.

HOW I AM GOING TO PROCEED:

Talking to my attorney friend was very useful. He pointed out a couple of very valid points that I heretofore had not considred. One, he pointed out that the mortgage company may be able to get an in personam judgment against the current owners, making them personally liable for the unsecured portion of the judgment. And since the couple has another home, they could attach a lien to their current residence.

Two, he thought that just getting the owners to sell me the property (and giving me a quit claim deed) was a bad idea. The attorney pointed out that I would then be responsible for the property taxes and I would want to insure the property. Additionally, since there is still a mortgage on the property, Citimortgage could come in at any time and foreclose. So, any improvements I made to the property would go to benefit Citimortgage.

Third, the attorney thought that the best course of action for me and the current owners would be for the current owners to agree to execute a deed in lieu of foreclosure, giving all ownership back to Citimortgage. Then, I would just negotiate with Citimortgage to purchase the property. That way, the owners are completely out from under the property and would not be liable for any unsecured portion of the debt.

So, I am going to ask the current owners and mortgage holders to give me a letter of authorization which allows me to speak with Citimortgage. I will explain to them the benefit of executing a deed in lieu. I then need to find someone at Citimortgage would can (and will) agree to take a deed lin lieu. Then, if I get all of that done, I need to find out if Citimortgage will take me offer for the property.

So, that is the game plan at this point. I very well could do all of this work and not end up with the property. I really don't want someone next to us that will just buy the property and put a tenant in there without improving the property. But I guess that is the risk I have to take at this point.

If anyone has any other suggestions on how to proceed, I would love to hear them.

Thanks for all your help.

Jennifer --

I think Marcia brings up some very valid points. Something just doesn't add up. My guess (and it is only a guess) is that there is a second or a home equity line somewhere.

I appreciate that you are trying to help out the current homeowners. But I think that in order to be in a position to help, you need to dig into how and why they got into this position. I personally have a situation where I have to go back to owners and get some additional information. It is kind of uncomfortable for me, but if I am going to help them out, I am going to need additional information from them.

Good luck.

The only problem is that I don't want to assume the mortgage. The mortgage is severely under water -- probably to the point that if I fully rehabbed the property putting in 15-20K, the property could be sold for approximately half of the amount currently owed on the mortgage.

I want the property, but without the mortgage. The problem is that if I just buy the property from the owners, there is still this big, underwater mortgage on the property. But maybe you are onto something. At least at that point I could try to force them to either release the mortgage lien or foreclose. What I don't want to do is to go to all of the work and expense to rehab the property and then have the mortgage company foreclose.

UPDATE:

I went down to the Recorder's Office and found out some interesting information. Citimortgage has never recorded an interest or a lien on the property. The last mortgage recorded was in November 2005 by ABN AMRO. I don't know if Citimortgage purchased the loan or is doing the servicing of the loan. But according to our County records, Citimortgage does not have a recorded interest in the property.

I also talked with one of the clerks at the Recorders Office. She said that sometimes, a mortgage company will not foreclose because they know that it will cost more than they will recoup from the property and then let the property get sold in the tax sale (property taxes are at least 1 payment in arrears at this point -- with the second payment due in November, I believe).

I have a call into a local attorney who is very knowledgable concerning real estate (at least when it comes to tax sales). I want to ask him his opinion on how I should or could proceed.

If anyone else has some suggestions, I would love to hear them. Thanks.

Thank you for your responses. I will try to answer your questions the best that I can. 1) We are fundamentally interested in cash flow at a discount. We are looking to buy and hold this property, rent it out, and have positive cash flow. This is not really a property where a flip makes sense.

I don't know how much is owed on the property. But I can almost guarantee you that the property has 0 equity and I am guessing the loan is under water by the tune of at least $25,000 (though I will know more once I get an authorization letter).

This couple, since we have a bit of a prior relationship, would probably give me a quit claim deed. The only thing they want is to be out from under the property. I am wondering if I did get a quit claim deed, I would at least be in the position where I could force Citi's hand by bringing an action to quiet title. Then, I guess I could force Citi to officially foreclose on the property. And I could probably get them to open up the property.

The only other thing I thought about before going to sleep is that I wonder why Citi did not pursue a deed in lieu of foreclosure. Certainly this couple would have been fine with just signing the property back over to the bank.

I am probably going to do a basic title search this week and try to get a letter of authorization from the mortgage holders. I am open to any other suggestions. Thanks again for your help. I appreciate it.

I am a relatively new real estate investor, having purchased my first rental property last year and my second property this year -- both HUD foreclosures which we spent approximately 15K each to rehab. Now, I am looking for some advice or suggestions on haw I should proceed with the property next to our first rental home.

I recently learned that the property next to our first rental is vacant and has been since just after we got done rehabbing our place. So, for approximately one and a half years, the property has been vacant.

I tracked down the previous (or current?) owners of the property. They saw what we did to the house next to their house, so they know that we are investing in the neighborhood and not just slum lords. Hence, they are very friendly to me. This is a couple in their mid-60's, working class, and solid blue collar folks (that is the neighborhood's reputation). The wife's mother died about 2 years ago and she inherited her house. So, they moved into that house and essentially walked away from the property next to ours. 

They have a mortgage on the property next to ours (held by Citi). After moving, they stopped paying on the mortgage. The gentleman told me that Citi threatened to foreclose on the property. He informed them that he was willing to walk away from the property. Citi asked the gentleman if he was interested in a short sale. He said NO, because Citi wanted all of this financial information and he didn't really care (he just wanted out of the property -- he is disabled and he and his wife have a perfectly nice home at this point, mortgage free. So in their mind, they have no incentive to do anything other than to walk away at this point).

After the gentleman told Citi that he was willing to walk away from the property, Citi then changed the locks and winterized the property at that point (a year and a half ago). The owners have not had access to the property since that time. 

However, to date, Citi has not filed any foreclosure proceedings on the property. So in the mean time, title is still in the name of these owners. Property taxes haven't been paid and the property has remained vacant. So, this nice couple thought that the bank has already taken over the property and were surprised to learn that Citi has not even filed a foreclosure action yet. In the mean time, this property next to our property is vacant and becoming more and more compromised.

I am interested in purchasing the property and rehabbing it. The current owners would probably give me the property or sell it to me for a nominal fee because of our work on the property next door. Citi doesn't want the property. It would probably cost Citi more to go through foreclosure proceedings than the property could be sold for. Hence, they appear not to be actively pursing foreclosure proceedings at this time.

I am kind of at a loss on how to proceed at this point. The current owners gave me a contact number they had for Citi. And from what I can tell, I will need to get a letter of authorization from the borrowers to discuss the mortgage (which I am certain the borrowers would gladly sign). So, I plan on talking to Citi to see if I can work something out. I also thought about approaching the current owners with a Quit Claim Deed. But frankly, I really don't know what that would get me and I don't really see how that gets me closer to having free and clear title on the property.

Any suggestions that anyone has on how to proceed, I am all ears. I want this property for a couple of reasons. First, it will help the neighborhood. Second, I can get a fairly good return if I get the property cheap enough (even if I have to put in 15K in rehab costs). Third, I like the idea of owning 2 properties next to each other for convenience. And fourth, these houses, while small (2 br; appx 720 sq feet), are built to withstand a nuclear winter. The house has a poured concrete foundation and basement with a concrete first floor. They are just rock solid houses (though many, like this one, needs cosmetic work).

Thank you for any (and all) suggestions on how to proceed from here. 

First, thank you for all of your suggestions.

Second, I want to give all a quick update. I ended up doing some legal research and called both the HUD attorney who entered an appearance in the foreclosure and the attorney who handled the foreclosure. The attorney who handled the foreclosure had already been made aware of the title defect and has completed the corrected title work. According to the voice mail he left me, this should be a relatively quick fix.

While the case law I examined suggested that the mortgage would need to be reformed and that the foreclosure proceeding would have to be re-filed, if the court and the title company are satisfied with the issuance of a corrected deed, then that is good enough for me. I guess that is why I don't practice in this field of law.

Third, with regard to any extension, the title company already assured us that we would not have to pay any extension fees. Perhaps I am missing something, but if HUD took possession of a property without clean title (the HUD deed has the incorrect legal description as well), how can they request that the buyer be responsible for the extension? It just seems wrong to me. But perhaps I am missing something.

If all goes as planned, we should be able to close in relatively short fashion. My father is anxious to help us with what needs to be done (good to have a dad who is a licensed electrician and is very comfortable with plumbing). So, I am glad to give him a project to keep him busy.

I am going to talk to the clerk that handles foreclosures for this particular circuit court, just to get an idea as to how long this is going to take to resolve if I rely on HUD and the attorney for the mortgage company.

The problem is that the longer the home sits with no work done on it, the worse it is likely to get. We want to move on it -- both for the sake of the home and for the neighborhood. I think the neighbors would be happy to know that someone has purchased the property and ready to put some money into it to rehab it.

At this point, we have not been asked to agree to an extension. Once I get a better I idea as to how long this is going to take to unwind, then we will decide as to whether we agree to an extension.

To be perfectly honest, it is beginning to look like I can get the whole matter resolved quicker if I could get a quit claim deed from the previous owner and then file a suit to quiet title.