Getting Down To Fundamentals

In general this can be a tough market-but it doesn’t have to be! Remember, it IS what YOU make it! With that being said, let’s focus on a couple of fundamental principles. These fundamental principals are basically a recap of things you may have already seen (or heard) but this valuable information should never be looked at as repetitive or boring. This kind of information is useful in all areas of this business.

Tabletop closings

Most people say stay away from these, because of some of the confusion they cause. The biggest question being, should this standard procedure be in a closed office? For all of you movers and shakers, you should have this in a closed office-your attorney’s closed office-not yours. Many people will think a title company is just as good, but I really recommend an attorney. And also keep in mind; if you are buying a property and you have taken it over subject-to there really is not a reason for you to buy title insurance. And let me take it a step further. If you do not buy the title insurance, your title insurance company cannot close on it anyway so it is a moot point. If this is precisely what you have been doing, then logically, you would get an Authorization to Release Information and Purchase Sale agreement. The rest can be done at the office. You can remove yourself from the rest of the paperwork. That is what you are paying your attorney for, right?

Contract for Deed

Say you are dealing with people who may not have stellar credit. You know, you may be doing a lot of lease-options and Contract for Deeds, etc. You never know what people may be hiding, or what skeletons are in their closet. Think about it-you might not know if the person has incurred liens or IRS liens. Bottom line-don’t attach it if they don’t own it. Like I always say, they are just lease-optioning it from you. Now depending upon the state, a Contract for Deed may attach depending upon if they can claim they have equity in it. And judgments against the “owner” may attach themselves to the “agreement” or Contract for Deed. I wouldn’t think of this as a deterrent rather it’s something you need to be aware of during your course of purchases. Keep in mind; it really boils down to your state laws. You should always know your state laws prior to purchase.

Redemption Periods

One of the most popular questions deals with redemption periods. When a state has a redemption period, how are investors handling it when the property is subject-to?
It’s pretty simple actually. You need to keep it in simplistic terms. When the property is subject-to and has not been sold, you cannot take over the loan. If you go into the redemption period, you must cash the property out-you will not be able to take over the loan. This is a common mistake many people make on a regular basis.

Now this may be hard to understand, but it’s pretty simple. Think of it this way. If the foreclosure has already happened, then the hammer has already fallen. You are not going to be able to get the deed and take over the loan. What does this mean for you? Basically what I am saying is that you will be in a cash deal. If you take it to subject-to, then you have no choice but to bring it current.
I know, I know. This may seem confusing but after this point there is not a redemption period because it is not in foreclosure anymore. You got it out of there-so you are not entitled to the redemption period.

And remember, you will not be able to take it subject-to after the foreclosure-it is going to have to be pre-foreclosure. Of course, you can take it subject-to, but you would have to pay that bank off ASAP. If you don’t pay off that loan right away you won’t be able to clear the title after the sale. Most people think they can get out of this by bringing the loan current.
Is this possible?

Wrong. Very wrong. The loan does not exist after the sale. Many people don’t think in those terms. Remember-if you don’t sell it and you have a promise to make the payments (and you’ve covered yourself in your CYA Letter) and for whatever reason the deal falls through, the other guy has to deal with a foreclosure, and you are out of the game. You don’t have to deal with it. Keep in mind; if you get too close to the foreclosure sale, a bank does not have to take payments. Again, it would be in your best interest to check with state laws to see what applies for you.

Do not give more advice than what is needed.

As you all know, bankruptcy laws have changed in quite a few states over the last couple of years (and are continuing to change as we speak). Maybe you have heard about these new laws and how they may or may not affect you. You may have been warned by your attorneys in regards to asking or answering questions about the new bankruptcy laws with your potential sellers. The question you need to ask yourself is should you be giving them advice in the first place?

Absolutely not!

Bankruptcy is not a minimal issue when it comes to the intricacies of the law. There are a variety of state and federal laws, and the state laws can vary depending upon your location. Will this be different for the seller? It could be. Should this be different for you? The answer to that is no. It should be no different than any other set of rules you will need to learn for your corresponding state. You should never give out any kind of advice regarding foreclosure and bankruptcy. It may even be illegal in some states. If they want you to sign a disclosure, you should not be worried about that. But as for other bankruptcy questions, leave that to the attorney. Remember, you are a foreclosure consultant and you could actually get in legal trouble for anything more than that.

Don’t lose sight of what you are doing. Stay focused. You are there to get the deed and buy the house. Nothing more, nothing less. If you find it too difficult to become uninvolved, then you should remove yourself from the situation. It is best to not be in comprising situations, and though you may tend to be of the helping kind, wanting to assist those who need your help, it is better for all involved for you to remain quiet about the situation. Again, if that is not possible, then you should exit the situation as soon as possible. Of course you are looking at the best interest of the seller, and your goal would never be to hurt anyone. But in the end, the person you could end up hurting is yourself.