Need Advice/Help on a pre-foreclosure deal... - Posted by Courtney

Posted by JT-IN on January 07, 2003 at 19:22:32:

Hank:

Buying notes and mtgs is a numbers game. It is also a test of persistence. I have been told NO a number of times only to later be told “send the check”.

You approach many, and get few, but when you get them, you profit well. It is simply a matter of laying out the case that they do not intend to defend (bid on) the property at the foreclosure sale, and maybe you do, and for this advantage that this lien may give me in this case, I will pay you 1K… (or whatever your offer is). Lots better than the proverbial nothing that you will/may otherwise get. This works especially well with private lenders, or mechanics liens, etc… that are not in the collection business, as a rule. Banks can be tougher, but not always. Offer and be prepared to re-offer and re-offer, called negotiations.

Just the way that I view things…

JT-IN

Need Advice/Help on a pre-foreclosure deal… - Posted by Courtney

Posted by Courtney on January 07, 2003 at 08:49:59:

I have come across a possible deal on a condominium. The property with minor fix-ups is worth approx. $130,0000. There is a current owner of the condo with a mortgage of $78,000. This mortgage was financed by the first owner of the condo, since the current owner lacks the credit to get bank financed. The current owner has not made a payment on the property in 4 months and the original owner/mortgage holder is starting the foreclosure process on the property shortly. The original owner of the property is interested in getting the property out of her life forever, since she has been dealing with this situation for a long time. The current owner/tenant has $40,000 in liens on the property from misc. defaults.

My question is, this looks like a good deal if a few things can be resolved that I am not totally sure about. If I make an offer to the original owner of the property and they accept; can the mortgage they financed with the current owner be dissolved if it is less than the $78,000? Also if I do purchase the property and get the current owner/tenant out, what happens to the liens that they have gotten themselves into on the property? Are there any other hurdles in this situation that you see??

I would like to make an offer somewhere between $60-$70,000 to the original owner for the property. I am just a little unsure on how to proceed with current owner/tenants in the property.

Thanks for any assistance,
Courtney

One post two BIG brains - Posted by TC

Posted by TC on January 07, 2003 at 15:30:48:

There you go, you got both JT and Ron’s attention, these guys have forgotten more about creative real estate than most of us will ever know. Good luck Courtney, knock this one out of the park, then come back and tell us about it.

Re: Need Advice/Help on a pre-foreclosure deal… - Posted by JT-IN

Posted by JT-IN on January 07, 2003 at 12:37:27:

Courtney:

You thoughts of making the former owner/note holder an offer, seem to be the best approach. However, if you would happen to be successful you DO NOT want to release (dissolve) that mortgage, otherwise the other liens will move up in priority, and you will have no interest in the property whatsoever. This would be a bad move.

So proceed ahead offering to purchase the note and mtg from the current mtg holder, using an assignment of mtg form. You will need to get some professional advice on this since you seem somewhat shaky on the subject, as one mistake here could cost you big time.

Once the lien holder has agreed to sell you the note and mtg then you simply step into their/her shoes, and finish the foreclosure. The other liens that have attached to the property will be served notice of the foreclosure and they will then need to defend their position, or be wiped out.

Once the foreclosure moves along to that point, you could contact some of the junior lien holders and negotiate to buy their lien for pennies on the dollar, much the same as buying the 1st mtg. Acquiring these liens will further insulate you from buyers bidding the property up at auction, allowing you maintain control.

Hope this helps your thinking…

JT-IN

Re: Need Advice/Help on a pre-foreclosure deal… - Posted by TC

Posted by TC on January 07, 2003 at 09:36:09:

I’m no expert, but this sounds like a situation where you might be able to buy the note, hopefully at a steep discount, from the original owner and move forward with the foreclosure action. This should remedy the majority of the liens against the property, but you’ll need to understand the foreclosure process in your state, you didn’t mention what state you’re in. You might want to bring this post to the attention of Ron Starr or JT-IN, both of these guys are real sharp and will help if you provide some detail behind the deal. Sounds like you might have a winner, you just need to figure out how to bring the deal to fruition.

Good luck.

The reason we have forgotten so much - Posted by JT-IN

Posted by JT-IN on January 07, 2003 at 19:14:31:

is b/c we are a combined age of 120 years old.

Of course I am 35 and Starr is 80 something… LOL

JT-IN

Re: Need Advice/Help on a pre-foreclosure deal… - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on January 07, 2003 at 14:52:57:

JT–(IN)----------

Oh-oh, I guess I’ll have to take down that big sign I have in my home office that says “MR. KNOW-IT-ALL.”

I never thought of buying out threatened juniors if I were to hold the senior loan that is foreclosing. But, I think you are right. As the holder of more than one lien, I’d be able to put in credit bids and go up higher. Either I get the property or, if somebody else gets the property, I’d get a profit from the money going to the juniors which will be more than the purchase price.

Oh-oh, wait a minute. Hmmm. If I buy the juniors and get the property for the amount of the senior, without competitive bidding, I would have paid more than necessry, wouldn’t I. Hmmm. Seems that I need to think about this one more.

Well, now that I know this non-obvious technique, can I leave my sign up? Or are you going to spring some other neat idea I never thought of?

Good Investing and Good PostingRon Starr****

The state is UTAH - Posted by Courtney

Posted by Courtney on January 07, 2003 at 09:49:42:

If this helps provide clarification at all.
Thanks

Leave the Sign UP… - Posted by JT-IN

Posted by JT-IN on January 07, 2003 at 16:24:22:

Ronald:

Your HALO is untarnished IMHO… not to worry!

Many times I will attempt to buy out Jr liens when I do not own the 1st lien, of course for peanuts on the dollar. It then works as you suggested, that the bidding goes on, and whenever I decide that the lien has yielded almost as much as owning the proeprty in fee simple, then I get real quite… shhhh. This rarely happens, but just one more strategy in the bag of tricks.

As to paying too much, I simply factor in what would be a real good price on the property and attempt to keep my total number under that. As for paying too much for a lien, these would be on properties that the 1st mtg will certainly be outbid by investors. It works like this…

JT’s Estimated FMV: $ 150,000

1st mtg judgment and bid: $ 90,000

2nd, 3rd & 4th liens: $ 50,000 (for which I may have paid 10K)

Now, I can bid all day long… up to 140K, and my bid is not in excess of $ 100K. Now, if the bidding stopped at 95K, (not likely) then your concern would be validated, but in most if not all cases, these bids will approach 125 to 135K, and in that case I can choose to be either a buyer (at 100K), or a Secured creditor and cash in the chips, if I stop bidding. Most times I will end up buying the property.

So get out the furniture polish and put another coat of wax on the sign, that says “Mr. Know-IT-All”, as you still qualify… Hope the new Year is treating you fantastic!

Just the way that I view things…

JT-IN

Re: The state is UTAH - Posted by TC

Posted by TC on January 07, 2003 at 11:41:49:

I’m not familiar with the UTAH foreclosure process. The first thing you’ll need to do is find out if UTAH is a judicial foreclosure or non-judicial foreclosure state. Once you have that information, take a few minutes and put together a detailed post and see if you can get some more experienced investors to help you out. This definitely seems to be a situation where a little “creative” thinking could bring you a payday. Be persistent and go for it, if nothing else it will be a great learning experience.

Re: Leave the Sign UP… - Posted by Hank

Posted by Hank on January 07, 2003 at 19:05:43:

The few times I’ve offered to buy junior mortgages, I get the old, “why do you want to buy it if it’s so worthless” reply.

How do you sell the benefits to the jr. mortgagee?