Re: Owner carry back and foreclosure question - Posted by JT - IN
Posted by JT - IN on June 29, 2001 at 18:11:26:
Mike:
Your thinking on the 2nd mtg may be a little to aggressive, for the circumstances that currently exist. Meaning, they are only going to be late, 30 days, in a few days, so the owner is 29 days late, as of today ? If you put yourself in the same situation of this previous owner, and the condition of the property, etc., why would they be motivated to “throw the baby out with the bath water”, at this time ? May need to be more realistic in your approach with them. Something like a renegotiated 2nd, or a $ 10,000 discount may fly. If I were the person holding the 2nd, I wouldn’t appreciate the lack of consideration for my position. Now they may look at this entirely different, and based upon their circumstances, etc., but this wouldn’t set well with me, if I put myself in their position.
As for their protection in a Sheriff Sale situation, they will be made whole as long as there is $ 35K left over, after the Taxes are paid, the 1st is fully paid, including interest, fees and expenses. The 2nd has full rights to foreclose, just as the 1st would have. However, if they were truly facing that situation, meaning closer to that time frame and reality, then you may have more motivation for them to consider a deeper discount.
Could the 2nd buy back, subject to the 1st? Yes, if they understood that option, but realistically, how many ppl do understand that option ? Not very many, is the answer. There are RE investors that have been active for many, many years, that aren’t aware of subject-to’s. Doubtfull of this happening, and if the person holding the 2nd is that savvy here, you are toast anyway !
Could the 2nd buy back the home by paying off the 1st ? Absolutely, as long as Owner is willing to deed over the property to them, and they are willing to accept ownership.
I ahve dwelled on the 2nd pretty heavily here, because I think that this is your biggest concern. Now regarding the 1st (Bank), your question about taking home and sending to auction, isn’t quite an accurate description. What would happen is the Bank holding the 1st mtg. would file suit against the property owner, and get a judgement for outstanding mtg, then request the property be disposed of / liquidated via a Sheriff Sale. Then the priority of payment is Taxes, 1st lien, 2nd lien, and judgements against the individual, etc.
The key to the situation that you are inquiring about, is the knowledge level and motivation of the 2nd mtg. holder. However, at this time, being only 30 days late, what is their motivation? Not great today, but as time goes on, they may see the hand writing on the wall. If the 2nd motg holder would be totally adverse to the thought of getting embroiled in a foreclosure sale, as they will be sued by the Bank, as a matter of having an interest in the property, then they may be more motivated, but unlikely that they would throw away $ 30K, with the discount that you are considering.
I think that you are on the right track, with the 1st on subject-to, etc., but timing may not be entirely on your side, as the delinquincy is too new.
Let us know how you turn out on this one.
Just the way that I view things…
JT - IN