I am renting and my LL is in foreclosure... How do I buy?

Question

Hello!

I am renting a townhome in Southern California and I keep getting notice do default letters.( our land lord has not changed his mailing address) I have approached my land lord about it and he said not to worry and that he was out of the country and is now caught up...... not sure I am buying that... someone has been in the county cashing my rent checks :)

We like where we live and would consider buying it at a discount. How do we go about that? If it is in pre foreclosure can we purchase it? if it goes to full foreclosure can we purchase it? Since we have been renting the prop do we have some sort of first right or refusal?

I have checked with the county and the property taxes are current so we cannot get a tax lien on it...

Looking for some thoughts and ideas.

Thank you!

Elijah F. · Answer

If you're information is accurate and complete, sounds like it could be a good deal. Here are some things to consider: is the foreclosing lien the senior lien; is the mortgage assumable; is this a judicial or non-judicial foreclosure; and are there any other liens on the property? Knowing answers to these questions will get you closer to knowing if this plan will work.

Chris Martin · Answer

Assuming (or taking Subject To) an 11% loan doesn't sound like something I'd do, but more power to you. Yes, your scenario is possible. All the details of the case are in the special proceedings case file at the courthouse, so not sure what "much research" consists of. In my world, I'd have a quick chat with my attorney and let him know what I'm doing, then have him quickly review the "standard" form draft an Offer to Purchase that I would have. One hour investment in legal work, then I'd just give the LL the offer. Have a deadline in it... like a week.  He can take it or leave it.

Sharon Barros · Answer

@Chris Purcell

@Michael Randle

@Elijah F.

Sharon Barros · Answer

Thank you Guys for the input!

@Chris Martin Thank you for the steps. FYI we are getting the LL's Mail not addressed to us. We don't open it but the outside had big red "notice of default" and "final notice".  We are also getting yellow letter mailers form investors I recognize those since I have sent them.

I have considered the eviction yes.... We are talking to a friend of ours who is an attorney.

After much research I have found out the loan balance consists of two loans totaling $356K and the estimated property value is $510k. The fees from what I can see my LL is behind is $24k. The mortgage looks like the rate went from 6%~ to 11%~ since 2007. Original purchase price was $450k. He has 27 days to come up with the money or it goes to auction.

Is this Scenario Possible? ( I am just spitballing here) Could I sign a contract with the seller that I agree to get him current on his payments (24K~) And for doing so he would agree to sell the property to me for what is left on the loan (356k) and then I have equity in the prop? estimated value (510k)   .......... so 510k - 356k -24k= 130K equity. He gets saved from foreclosure and can walk away? I can then refi in 6 months and take my money back out.

Is that too simple? am I missing something?

Chris Purcell · Answer

Have you addressed the fact that you’ll probably be evicted in the near future?

Elijah F. · Answer

The lender or foreclosing attorney won't give you any details because you are not on the promissory note. You have only two options: work with the landlord to purchase the  property from him; or bid at auction. Your options with the landlord would be to assume the mortgage (if allowed) or buy it outright (either via a short sale or by paying off the mortgage). If you bid at auction, you need to figure out your max bid amount and you need cash.

Chris Martin · Answer

California is a trustee state. If you are serious about buying, get qualified and give him an offer to purchase drafted on a "standard" state form that brokers use. Just that simple. Make the earnest money deposit substantial ($10,000) and that will get LL attention.

Otherwise...

Step #1. Find out if the letters (apparently addressed to you, the tenant) are "real". How do they (the trustees) have your name? As part of step #1, you can check county records for court actions against the owner.

My first thought is that most of what you post is not adding up. "I keep getting notice do default letters.( our land lord has not changed his mailing address)..."  Do you mean Notice of Default? Why is a trustee interfacing with a tenant? Doesn't happen where I am, but CA is a foreign county to most of the rest of us 49, so maybe this is natural. Regarding "I have approached my land lord about it and he said not to worry and that he was out of the country and is now caught up...." Non-owner occupied loans generally have no right to reinstate per Fannie Mae NOO underwriting, so LL is probably not truthful.

County taxes are irrelevant in a first position (or any position) D-T default.

Step #2. If you are going to buy at the courthouse steps, you need cash. So get that.

Step #3. Regarding "...would consider buying it at a discount" well, there is no foreclosure discount in this market, rather you will probably pay more than the balance, so get more cash.

When LL doesn't respond to your offer to purchase, sue for emotional pain and suffering.

Michael Randle · Answer

I know when the foreclosure paperwork is filed in court there should be a number (mortgage $ amount) on the court documents which state how much is still owed to the bank (along with other fees).

The trick is to find what court the foreclosure process is taking place in (google), and then it is a matter of pulling the public records for your land lord and reading the documents. This usually means physically heading to the court, talking with a clerk, and paying some cash.

If you plan on truly heading down this path you might want to get per-approved ASAP with a lender, that way if the numbers match up you can go to the landlord for a quick sale, or if need be go to the bank to take over his mortgage.

Sharon Barros · Answer

@Chris Purcell

I told him if you ever need to sell or if you are in a bind please let us know first because we are interested in purchasing the unit. (that is when I got the "OK Thanks" answer)

I suppose I need to be more direct.... I was trying to be sensitive about him being potentially in financial trouble.

I have since confirmed the prop is in the foreclosure process and he purchased in 2007.... my guess is he is underwater.

Is there any way to find out how much he owes? I tried calling the company in charge of the foreclosure process and they wouldn't give me any details.

Chris Purcell · Answer

I meant did you ask him if you could buy it from him

I am renting and my LL is in foreclosure... How do I buy?

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