All Forum Posts by: John Slater

The only addition to Chris's note would be that if and when the property is going to foreclosure sale, the lender posts an opening bid which will give you an idea as to what is owed on that loan, not 100)% accurate, but close enough to put your numbers together.  Only the borrower and the lender have access to the exact amounts. 

assuming its a mortgage foreclosure sale (not tax or HOA) there is zero right of redemption after a foreclosure sale. so by 'moot', just means it doesn't matter. I believe it's the same as california where I am. In essence, once the foreclosure sale goes through, the borrower, homeowner, homeowners relatives (with probate) would have absolutely no right to come back for the property.

Do however get title checked for any additional liens that might show up, just in case, but if numbers make sense there's no reason not to bid and no worry about chain in title.

Quote from @Joseph Hernandez:

@John Slater. I see. In foreclosure deals, do you suggest that I only work with cash buyers? Since time is of the essence, if an investor is taking out a hard money loan to finance the purchase, the lender may delay funding, and the seller's lender may foreclose. Thanks John.

Depends on how much time there is before sale date.

Quote from @Alicia Sierra:

"We are experiencing an unusually high volume of 90-day defaults and are expecting a significant release of properties...."

I am an investor agent in St Louis and a Chase referral agent -- they are soliciting REO agents - -

I started selling at the top of the 2008 crash.  This is a strange combination as inventory is low in the starter home space so I do not see prices bottoming out in our market, but there may be opportunities for both edged out owner occupant buyers AND landlords and flippers. 

How can I get in with chase?? or other lenders for the REO side. I've handled foreclosures for 10 years as a flipper and now agent/broker...

That being said, if anything it will be area specific. Homes in California have too much equity right now. We still have super low inventory, still a few more buyers than sellers so the market price is still wrong. People will still go into foreclosure process, I've been saying this for last two years... but... with so much equity at the very least people will sell to avoid foreclosure so REO's won't be as big of a deal..

All day long I would do it... and here's my opinion why - (based on california)

I'd have the seller sign a grant deed, the day after an uninsured grant deed doc, then I'd pay the loan to bring it current and get it out of foreclosure. It's 7.7k. at that time the house is still in the sellers name as far as the bank is concened. Take over payments on the house, set up direct deposit to pay the loan each month, lenders haven't usually cared as long as they are getting paid, then create and LLC or a trust (name it whatever the street address is), then open escrow, have escrow handle the 2 transactions, one being the seller to you, the second being you to the LLC. at the end of the day, the property will show as owned in the name of an LLC at the street address. Now even if someone at the bank looks at the transfer doc in 4 months, they are unlikely to do anything as the original borrower may have just transferred to an LLC.... they wouldnt know. Now you rehab the property, try not to spend $80k because thats a lot, rent it, and expect to hold it for a long time... thats how you'll make your money eventually...

You get into a property for $7.7k plus a rehab

Seller avoids foreclosures and their credit repairs while you pay down the mortgage

If by some miraculous reason the lender called the note due, sell the house for $200k and you'll at least break even on those numbers... It's not a flip right now to make profit, this is a longer game rental. 

All the above is based on doing it before, more than once, and the last rental we did we sold after 5 years of subject too with a 1st lender issuing the foreclosure and a second lender which was silent and hadn't been paid for 7 years... yes its possible, at least where I am, but we dont have to deal with attorneys either :)

Quote from @Joseph Hernandez:

@JohnSlater. I think there's a misunderstanding. The homeowner will not also be the borrower. I'm the wholesaler. The homeowner is in foreclosure. He has nothing to do with borrowing. He's at the NOS stage. He's desperate to sell his property. I'll use best efforts to find him an investor that can close in time, but I include a clause in the wholesale purchase agreement that I can't guarantee that the buyer will close in time, because obviously I have no control over the buyer's ability and intention to close. I plan to have my attorney create both the wholesale purchase agreement and the assignment contract. So, how can I be held liable if the deal doesn't close? 

I'm assuming the homeowner, is also the person (i.e. borrower) who has the loan in his name, that is being foreclosed on.....so he's the borrower and homeowner... which isn't always the case. For example, I had a foreclosure where the daughter owned the house, but the father was the borrower and was deceased.  He was a previous owner but took himself off title before dying, but kept the loan in place.  9times out of 10, the homeowner/borrower are same person, thats what I meant.  hope that makes more sense now.

Quote from @Christopher Schray:

Quote from @Tom Gimer:

@Christopher Schray Your main question is not based in fact… the mortgage is still backed by the property. It remains a lien that can be foreclosed regardless of the fact that ownership of the land has changed.

Why would a lender not call the loan and/or foreclose under these circumstances? Because there is no guarantee that the lender would be made whole by doing so. Getting a payoff via refi or resale without the distress element may be a better course of action.

 Thank you everyone for the response.  I have some follow up questions. 

So if I stopped paying, they will foreclose on me and not the seller?

Also, do I pay the lender directly or do I pay the seller and the seller pays the lender? If so, what happens if the seller stops paying?

Pretty much everyone I talked to said the loan has to be assumed. If I don't qualify for the loan, the bank will call the loan. 

Is that true??

Thank you

The lender forecloses, it affects the borrowers credit, not your, but you would lose the house.  So it affects both of you.

You need to get access to the online payment account for the mortgage so you can put in your bank details for direct deposit.  If you pay the seller, what if they don't pay the loan?  sure its in his interest to not go into foreclosure, but you need to pay it yourself.  People who say you "have to assume" are not wrong from a legal stand point, but that doesn't help.  the whole idea of subject too is to NOT use your credit... assuming the loan can make sense if the interest rate is awesome compared to what we see today, but doesn't always work, that's a different scenario though. 

Quote from @Joseph Hernandez:

@John Slater You said "hurt the borrower", do you mean hurt the seller? Yes, I am in California. How can I be in trouble if I don't close in time? If the buyer takes out a HML, and ultimately doesn't get funded, it's not my fault. I was hoping to get an answer to on average, who pays more for a SFR property, a cash buyer or a buyer taking out a hard money loan. Thanks.

Assuming borrower and homeowner being same person. 
We live in the most litigious state, you are signing a contract with a promise to pay, promise to buy, and by trying to wholesale if the owner/borrower ended up being foreclosed on because you didn’t perform in time, per the contract, then yes I’ve seen someone get sued for the same thing. 
you’ve been in previous posts about wholesaling and the grey line it creates.  Not saying it will always happen, but worth remembering to stay out of trouble. 

Quote from @Joseph Hernandez:

Hello. 

I'm a newbie wholesaler. If I have a pre-foreclosure deal and the seller is in NOS stage, do I have to find a cash buyer for the deal, or can I assign the contract to a HML buyer by delaying the foreclosure, since time is of the essence? I prefer a HML buyer because I think (I may be wrong) a HML buyer will pay more for the property, hence, my assignment fee will be higher. Based on your experience, am I correct?

 Whoever will close before the sale date.  Worst case scenario you don't find a buyer and you hurt the borrower by not closing in time and they end up losing it in foreclosure because they trusted you.  Not sure where you are based but in California you could expect to be in trouble if that was to happen.  

Quote from @David Paull:

Listen to the podcast episode with Pace Morby. He answers your questions.

 uggh... it isn't as easy as its made out to be..  I've done 3 subject too in 10 years, never came close to note being called due, if the lender is being paid, they didn't care who was paying it each month.  I had my bank account set up for auto payments for 5 years on a rental we had subject too, no issues.  Not saying they couldn't, but we didn't.  Biggest challenge/reservation I've seen (from seller) "what if I want to buy another house in 2 years and my current mortgage is still outstanding on a house a don't own"....