All Forum Posts by: Justin Abdilla

If you have a purchase and sale agreement that's duly executed, I think you could sue for specific performance to complete the transaction.  When you file the suit, you can file a court lien against the property notifying subsequent purchasers that it is currently bogged down in litigation.  This probably protects you from a future purchaser coming in and buying it out from under you.

Specific performance is how the court forces the sale, and courts will do this in real estate transactions.

A mutual release actually nullifies your purchase agreement, because it's a mutual release of contract and waiver. That would get your EMD back, but it won't stop the seller from selling it out to someone else.

You're at the point where you need to hire a lawyer for your next steps.  I would call around in your jurisdiction because it will get hairy from this point on.

@Jim Jaworowicz I don't see any reason to be wary of it, but I would acknowledge that it's a strong factor in my decision.  Tenancy is such a state-by-state issue, but in Illinois normally we're happy when we see tenant occupation if the tenant is current. @Sarah Lewis's practice is pretty good, because having an attorney send an onboarding letter tells us about anything that might be anticipated to go wrong so we can budget that into the transaction.

This is the exact business model of Wilmington Savings Fund Society, Deutsche Bank, and the former business model of Morgan Stanley Home Mortgage.

Originally posted by @Bob Jaeger:

I’ve done a little additional research and learned that FHA has a program to reduce the principal owed on a mortgage. That combined with the notion that the mortgage is likely to be assumable is what makes me ponder the idea of stepping into that seat to try negotiating an assumption and reduction at the same time.

I’m thinking that the cost to me might be the amount paid to the owner to quit claim but I’m not sure of the impact to me for being the owner (not the borrower) on a home that might ultimately end in foreclosure if I am unable to get the lender to approve the assumption/reduction. Sounds like a stretch I know but I’m trying to problem solve.

I wouldn't. If you assume the mortgage, you become the person the bank is foreclosing on in 90 days. It's so risky, and you said yourself that the condition of the property is "train-wreck." What about this house is worth the aggravation for this business opportunity? Why wouldn't you just buy a similarly situated non-FHA property at sheriff's sale?

I see that you've targeted this property, but I just can't wrap my head around why you'd assume someone else's loan *above market rate* with the intention to negotiate it down.  What incentive does the bank have to reduce the principal?  You're a liquid, solvent person who is willingly entering into this unprofitable transaction, asking the bank to make it profitable for you.  I've done probably 400 foreclosures and I think we've achieved principle reduction on the basis of hardship on fewer than a dozen loans.  This feels like a moonshot.

If you want to take over some foreclosures, just hire an attorney to represent you at the sheriff's auctions in Kane, Will and DuPage Counties, or go to the private auctions in Cook.  An attorney can get you a list of ~250 properties that are motivated sales within a day.  I think this deal is just sunk, my friend.

Have the real estate attorney write the letter.  I don't just say this because I am one, I say it because the bylaws for these HoAs are often hundreds of pages long and use 18th century language to set out the rights and responsibilities of the homeowners and the board.  I'm currently involved in some HoA litigation about improper reserve funds, and I can tell you that this area of law is very muddy and attracts stubborn people.  If you spent $2,000 on an attorney, you would make that money back in 1-2 years and it would almost certainly be tax deductible for this investment property.

@Kevin Dougherty has a wonderful answer here.

I just want to expand that the private lenders I know would rather take the preferred distributions.  Taking the $50,000 with 8% guaranteed return example, it is true that a preferred lender has the right to get 8% guaranteed return before anyone else (basically taking $50,000 to give a $54,000 lien), but we commonly do see a structure where they have a buyout option at a future date.  I've seen and written buyouts where the preferred lenders can exercise an option to cash their stake after 90 or 180 days to get out of the property.  I personally find those very appealing to the private equity lenders, because they're both guaranteed to get paid and guaranteed to get out.

Planning is key.  If you have no money to invest in something, then find a small project that can be financed by one or two private investors.  Figure out how you create value to their money.  If you're just buying the property with their money, well dang, anyone can do that.  What do you do that's different than what they can do with their money?  How are you the best steward of this $100,000 or $300,000 or whatever.  I think you could really profit from circling back and doing a business plan of how you plan on acquiring, rehabbing and liquidating your target properties so you can figure out what your competitive advantage is.

I'm sure this is just the first step to you making a mint of money, and I hope to see your deal diary in an upcoming post a few months from now.  Best of luck!

I probably get 3 calls a month of tenants who want to sue apartment companies or landlords for toxic mold exposure.  I would tell you to get a test to ascertain the level of mold in the unit now.  The tenant has already notified you she expects that there is mold in the property, and you do not admit wrongdoing by attempting to verify her claims.  You're only liable for what you know or should have known about, and you testing to verify it does not imply that you knew about the mold previously.

I would say, as well, if your property comes back with significant mold in it, call your homeowners insurance.  They may provide a lawyer for you if you're sued for defects in the property like mold.

This ultimately doesn't mean anything, as whatever offer you submit will need to be approved by the Bank *unless* you're doing a full price offer.

Does this mean there are two liens? It normally does not matter if the property is FHA or not. Foreclosures in Illinois are state-driven, not federally driven. A sale date 3 months out means it just went to a foreclosure judgment, because Illinois schedules the sales for 91 days out automatically. I would say you have approximately 7 weeks to conclude your purchase. Banks typically claim the process cannot be completed within 35 days of sale once that date occurs and withdraw approval. You should hire an attorney to represent your interests in this foreclosure now, if you plan on purchasing it.

Does she have letters of office giving her that right to sell?  Is the title on her inheritance clear?  Do you know this?

That's pretty typical.  If it's not her money at stake, most homeowners are willing to let the home slip to the bank.  Some short sale deals provide that the seller receives $X off the top of the sale (usually $3500) as part of the Bank's willingness to motivate you to prevent their total loss.  Maybe you could find that out from her listing agent to see if her contract qualifies.  $3500 is pretty decent motivation if it applies.

This means that your offer is going to need to be about 85% of that $75k number to be approved.  You can find out the final amount owed by buying a copy of the Judgment of Foreclosure and Sale from the Clerk of the Court in whichever jurisdiction the foreclosure is located.  It must include the judgment amount and per diem tolling.

The investor ultimately determines which payoff they will take. FHA loans are insured for their value by the US Department of Housing and Urban Dev (HUD). Investors won't take short payoffs usually because HUD promises to buy the property back from them at full debt value if it forecloses when its an FHA loan.

Please don't do this.  If you purchase the property from her via QCD, you will not have marketable title, and you're in an immediate position to be foreclosed upon yourself.  They will not have to make a second case, they will simply name you and join you to the original case.

They set the opening bid of the foreclosure auction via legal notice published 42 days out from the auction date.

Cash for keys is not possible.  The Bank gives cash for keys to have the homeowner relinquish possessory rights so that they can moot the foreclosure proceedings.  You, as a purchaser, do not divest the bank's foreclosed lien by giving the homeowner cash.  You simply give the homeowner cash and then step into her shoes to be foreclosed on.  Pretty awful deal.

If you were the deed holder, you could redeem the property by paying off the full amount of its debt in Illinois using the statutory right of redemption.  This is present in the law at 735 ILCS 5/15-1507 and 5/15-1603.  You can do some reading on it, but basically you pay the clerk of the court the amount in the judgment and the foreclosure is dismissed and the lien is released.

I'll favorite this post so I can respond to any questions you have, as this is my bread and butter area of law.

My client is getting sued for a disclosure right now.  I think the best thing to do is both 1) Get a real estate attorney and 2) get an expert in the mechanical disclosure that's a fault to serve you as an expert witness.  For example, if you were suing on mold that you discovered in the property, you should get a real estate attorney and have him or her prepare an affidavit that a mold remediation expert can put forward about the damages the mold caused in the property and why the previous owner knew, should have known or was deliberately unaware of the mold to your detriment.

My state also allows attorneys fees on improper disclosure, meaning you can go really hard on these sorts of actions if you're going to recover, because the attorney can get paid $10,000 of attorneys' fees even if your recovery is only $4,000, for example.  You'll have no trouble finding a good real estate attorney if you contact your local bar organization and ask for a real estate litigator.

@Kwame Banahene I think you need to look at your own limitations here and realize that you're new to this game and that paying a lawyer or a REALTOR here could save you tons of money in the long run.  I think the direct purchase route is fraught with financial peril, but perhaps if you had a guide you could avoid the pitfalls.  I would suggest contacting your local bar association for recommendations from the Real Estate Bar section.  You can usually find it by searching [County] Bar Association in google and giving them a call.  They live to refer attorneys to people like yourself.

Good luck with this transaction and I hope it's a great step in your long term goals.