seller screwed by investor - Posted by LES

Posted by LES on October 03, 2003 at 12:17:04:

Thank you for your thoughtful comments.
The seller called me after their daughter received one of my postcards. In the beginning she was telling me that she entrusted her house to a “friend” that really messed things up. After doing some investigative questioning, I found out that this “friend” was an “investor” she found from a “We buy Houses” ad in the newspaper. She was going through a divorce at the time and was a typical “motivated” seller. She now claims that she didn’t really understand what she signed. I think she did understand, but at the time didn’t care because doing so made her pain go away…till now.
She said that she spoke to the mortgage company and they are aware of the situation and willing to work with her, to what extent I do not know.

Now…let’s say that I have my friend (a local attorney and judge) help out with the legal aspect of this and the “investor” does indeed deed the house back to her. In that case what we have is a typical house in pre-foreclosure right? Is there anyway for me to profit? (not sure she would go for another subto deal! :slight_smile:

Thanks again.

seller screwed by investor - Posted by LES

Posted by LES on October 03, 2003 at 04:50:01:

Greetings all,

A desperate seller called me yesterday regarding her house. It was purchased “sub2” one year ago by an “investor”, there is a warranty deed to trustee. I have not gotten all the details yet, but she did fax me the paperwork she signed, which included the investor CYA addendum that basically says that she understood that the mortgage had a due on sale clause and that the loan would stay in her name until it was paid of by a new buyer, that the investor and / or new buyer would be held harmless in the event the loan is called due OR goes into default for ANY reason.

Well, the house is now in pre-foreclosure because this “investor” is not paying the mortgage and has not been paying for a few months. She found out because she received the lis pendens notice.

The house was listed through a realtor by the “investor” as far as I can tell, but the real estate co is now not willing to sell it because of (what there attorney calls) an illegality. (Yes I know it is not illegal so no comments necc.) (getting details on that today)

Is there anything she can do?
One problem I have with the seller is that she is now saying that “she didn’t know what she was signing and she was distressed yada yada yada” Which is BS as far as I am concerned BUT…if this “investor” had an OUNCE of ethics they should deed the house back to her immediately. and let her take care of it.

Your thoughts are welcome.


Re: seller screwed by investor - Posted by Hank FL

Posted by Hank FL on October 04, 2003 at 15:26:15:

This investor should have gone to an investor meeting and offered a partial intrest (or a peeled off benefit like depreciation) in the property in exchange for a mortgage payment(s).

Then it’s just a matter of negotiation, or should I rather say, getting your head handed to you.

Of course if it’a a really cr_ppy deal that nobody would want to touch with a 10 foot pole that’s another story.

Re: seller screwed by investor - Posted by JohnB_NJ

Posted by JohnB_NJ on October 04, 2003 at 09:30:01:


I agree that the investor should be making those payments and taking care of the obligations he/she took on when he purchased the house subject to.
I do not agree that you should be involved here. As soon as you found out the house could not be deeded to you then you should bow out and find another deal to work. Don’t spin your wheels here. Move on. The seller of the property knew what she was doing and the investor might have a plan he/she is working to fix the problem.
So, basically, I would leave it alone. Give them some advice and move on.

Re: seller screwed by investor - Posted by Randy

Posted by Randy on October 03, 2003 at 10:21:45:

The CYA addendum is only as good as the attorney defending it. She would have a good case to demand the investor to immediately deed the property back to her or face civil litigation for failure to perform on the contract; she needs to get the meanest S.O.B. attorney in the area and go after the ?investor?. The next question is ?what is she going to do with it when she gets it back??

Re: seller screwed by investor - Posted by eric-fl

Posted by eric-fl on October 03, 2003 at 10:18:31:

Les, I noticed you didn’t directly ask a question here, but rather just asked for thoughts on the matter. So then, going to that, my first thought is that I’m not sure what any of this has to do with you. I’m sure you sympathize with seller’s plight, but I still don’t understand how that makes you involved. Why did the seller call you? Do you know them personally, or were they just responding to your marketing, trying to get another investor’s take on the situation? It would be helpful if you could clarify this. If you’re trying to find out how you could potentially profit from it, I don’t see how. After all, the thing is in foreclosure, and she doesn’t even have the deed. It’s a mess to be sure.

If you’re just wondering aloud if there’s anything you can do to help the seller, whether there’s anything in it for you or not, I’d venture to say “not much”, other than offer advice. That doesn’t mean there isn’t a lot SHE can do, of course. The first, and fairly obvious thing it would seem to me, for her to do, is contact an attorney.

The bottom line here, is that the investor is committing fraud, a practice called “equity skimming”, wherein you promise to make underlying loan payments, and don’t, all the while collecting rents. Unless, of course, they’re not collecting rents, in which case they’re just incompetent, and on the hook for culpable negligence.

As far as the CYA disclosure wherein the investor is to be “held harmless” for “ANY” reason, any competent attorney is going to steamroll over that in about 4 seconds. There are 4 elements to a contract:

  1. Meeting of the minds
  2. Competent parties
  3. Consideration
  4. Legal subject matter

The thing that’s missing here is #4. If we were to take this to it’s logical extreme, the investor could set fire to the house, collect insurance money, and there’s nothing the seller could do. Well, obviously, that’s ARSON, which is inherently illegal, and so therefore that stipulation of the contract is unenforcable. Ditto for something less dramatic, like loan fraud.

As far as your last statement, I completely agree. They should deed the house back to her immediately, and should have several months ago, when they stopped making payment. It’s not just the ethical thing to do, it’s also the practical thing, too. If you find yourself upside down on a property, then really you should take responsibility and eat it, which is why you should always buy right in the first place. But if you’re not going to do that, you should at least have the temerity to recuse yourself if you know you’re not going to be able to handle it. Of course, we’re talking about the behavior of OTHER people here, and trying to amend that is always a lost cause.