Foreclosing on a private wraparound mortgage

[Tracey Hamilton]

Getting ready to do our second "owner carry" deal where we are the sellers.  

We own the property with an existing HELOC with a balance on it against the property. No other encumbrances.

We are selling the property on an owner carry wraparound, with the details that we continue to hold title until property is paid off, and we cover property taxes and will carry landlords insurance on the property.  Buyer is coming in with a good down payment, an interest rate favorable to us, good income, and willingness to do the deal.  

We are in Oregon, and I am a licensed real estate broker with almost zero actual experience, and little contact with my office.  I only got my license to facilitate our property searches and save on sellers commissions, but this property won't be sold through the office anyways.  

If it should come to it, and the buyer fails to make payments, I am wondering what legal requirements I will have to follow to foreclose and get them physically out of the property.   I don't think that a full legal "foreclosure" would be needed, since the property is still in our name, 100%.   Typically, if a buyer fails to make 3 payments in a row, a seller can initiate foreclosure proceedings through their attorney, and the property gets sold on the courthouse steps  and seller can purchase it back for amount owed, and then title transfers back to seller.  There's also a right of redemption period on some foreclosures.   But, with title remaining in my name, even with a private contract for the wraparound sale agreement, I can't see that I would have to go through all that. 

So, any experienced "owner carry" "wraparound" "lease to buy" investors out there, who have been down this road?  

I'm going to call the lawyer in the morning, but Buyer is ready to meet and give us the down ,and we are ready to lock the deal up.  

THANKS!!!  

Tracey in Oregon

[Tracey Hamilton]

Thank you for the replies!!  I think I have been so fried from all our showings on this house, and getting the new property in Idaho ready that I wasn't connecting dots I already knew, LOL.  AFter a good night's sleep I pretty much remembered that I know most of the answers to my own questions.   :-) 

So, here in Oregon, what I'm talking about is not called a wrap around.  It's called a Land Contract Sale.  And we have done them, on both sides as buyer and as seller, in the past.  They work well.  THere are options for foreclosure that need to be spelled out in the contract, and a non-judicial foreclosure is one of them.   The buyer gets equitable title, which is simply a legal concept, not any kind of paperwork, while seller retains legal title.  A memorandum of contract is recorded at the county level, but just the terms and parties, not the full contract.  This helps protect the buyer's interest, yet keeps things low-key to prevent an acceleration on the underlying debt against the property.  LOL, it's amazing what my brain re-connected after a good night's sleep, haha!  

You are right that the HELOC is the tricky spot, although since it has an upper cap on the withdrawal amount, I think that it is simply treated as if the maximum amount has been withdrawn, because it is possible that the sellers may continue to draw against it during the payoff period.

We do have an attorney, but I haven't yet been able to do the sit-down with him and go over details.  I believe he has the experience we are looking for.  I will make sure to ask if he's been involved with actual foreclosures or forced evictions.  I do think that Oregon has strict statutory foreclosure, but it includes a 180-day right of redemption if you go that route, which I would NOT like.  YOu can specify in the contract that foreclosure will be by judicial suit, and the judge can make a ruling for immediate eviction, and things can get done much faster, I think like 2-3 months time in our county.  But I need to confirm that with the attorney.  

We will still go forward with this as a Land Sale Contract, although I am getting weary with sorting through the potential buyers, LOL. I went ahead and inactivated my Oregon Real Estate Broker's license, between the move to Idaho and the fact that we are definitively selling this property outside of the MLS, there's no reason to keep hanging on the license any longer.

My latest potential buyer is a very nice young man, but I am not even certain at this point if he is in this country legally, he has a good down payment, but it's in cash in his father's safe 4 states away, and he had never heard of earnest money, nor did he keep that kind of cash around ($1000) but could get it in a few days, LOL.  He is experienced in the most profitable industry in our area (cannabis) and works steadily with that, and I do believe he could make the payments with little to no trouble, but his lack of financial "adulting" has me worried.  Last potential buyer looked good, seemed respectable and on the ball.  Did a very cursory google and facebook check, and found he had multiple, I mean half a dozen arrests and charges in California on armed robbery, real estate fraud and conspiracy, theft, etc.  All dropped or dismissed after an expensive defense attorney got involved.  I suspect his father, who was a powerful and well respected businessman in their smallish NorCal community, helped smooth things out.  SIGH.   

I love real estate.  I love creative financing deals.  I even love second chances.  But I am getting weary, haha.  Going to get this deal done, get up to our off-grid cabin in nowhere, north idaho, and hibernate for the winter with NO real estate deals for a while, haha!   (Actually, husband already is looking for another property closer to town up there so we can flip the cabin and live closer to a day-job.  OMGOODNESS!!)  

Next phase in our plans will be buy and hold rentals.   But we will start those after we're up north, and start with them in our general area up there.  

THANKS guys, for the comments and support here!   We are slowly but steadily making the climb up to our dreams, and BP community has been a HUGE, HUGE contributor to our successes!!   

Tracey in Oregon (soon to be North Idaho!)