Help with a short sale

[Josh Palmer]

Hi Bigger Pockets friends, I have a very unique situation with a property that I'm trying to buy and I need some help. It's quite a long story, but I'll try to include as many details as I can. My wife and I found a property in the neighborhood that we want to be in that has a basement apartment, perfect for a house hack. The house is being foreclosed on. Our friends used to live in the basement and we were able to get contact information from them for the seller. Turns out the owner is deceased and her daughter hired a real estate agent to try to do a short sale. They listed the property, we made an offer, and because of the relationship we had made with the seller, she accepted our offer. We signed the contract, the short sale package was submitted to the bank, and everything was looking great. This was back in February. Since then, we have had very few updates from the listing agent on the status of the short sale. We (my agent, lender, and myself) have tried to reach out to her a couple times a week to try to get updates, and no response. There are currently tenants living in the property (not paying rent) so we haven't seen the upstairs or been able to do an inspection. We found out about a month ago that the eviction process (which we were told was started months ago) has come to a halt because of a title issue. The daughter of the owner didn't want to pay legal fees to file for probate and they were hoping to be able to sign a document that will allow the descendants to sell the property without filing for probate. Apparently the judge denied that request. So essentially they can't take the tenants to eviction court because there is technically no one that owns the property right now. After finding this out, we decided to still move forward, wait for short sale approval from the bank, and then handle the eviction ourselves (possibly cash for keys). After not hearing any updates for quite awhile, I called the seller again today to see if she could give me any more information. Turns out the bank is not cooperating with her nor her agent. They won't give them any information on the short sale because she is not listed on the title. The seller has no motivation to pay for any legal fees to fix the title issue because she's getting nothing out of the deal. She essentially doesn't care anymore what happens to the house. My questions for anybody that might be able to help are these: What would you guess the bank's plan of action would be from here on out? We know that they have postponed the foreclosure auction indefinitely, but maybe they're going to schedule a new auction and go that route again? Can they do that with a title issue like this? Do I have any other options in this situation? Can I front the money for the legal fees to file for probate on the sellers' behalf in order to keep things moving? Any information you can give me would be very helpful. Thank you in advance!!

[Steven Warner]

Ok Josh: 

I will try to help you get in front of this and understand what is happening.    

Yes, the daughter did not have the power to sale the property to anyone until such time as the Court issues an order allowing her to sell it.  Before the court will give such an order it will want to know about all heirs of the estate and all liabilities of the estate. So, are you sure there are no other heirs?  A brother or sister of the decedent?  children?   and what else is owed out of the estate?  Even is there is no money from the sale of the property, what about personal possessions/ account to pay those liabilities?  You will need to be very clear about this prior to offering any monies for a probate attorney.  

But keep this in mind as well, if the deed did not have a right of survivorship or some sort of community property implication, there is a good chance the bank will have to start a probate to take it to sale.   The bank will show the total amount owed and will show an estimated value and then a auction will probably take place right there in the courtroom.   The bank is only do what is legal with regards to its security interest.  If the house is clearly upside down and the security is in jeopardy then chance are they will at a minimum go to probate court for the limited issue of the banks security in jeopardy and the estate have no equity.  Once they have the order resolving title, they will take it to sale- either via the court or non-judicially. 

The key is that you need to get the daughter to assume the role of Administrator/Executrix of the Estate.  Once she has an order in this role, she then can contact the bank to begin the short sale process.  Keep in mind that it is again be all about the value of the home vs. what is owed on the home.  A short sale can be tough but if she is willing to work with you then it can be worth it. 

As for the tenants, once again if she has the order of the probate court allowing he to act as administrator and the tenant as not paying her then she should file for a UD immediately after the probate order. 

So the next question is how bad do you want this place? I had a friend that use to say if it is a mess getting into the deal it will be a mess getting out of the deal.  But that was her saying which was usually right. 

Before I would do anything I would make sure that I had the daughter on board 100% - this is no overnight thing so it is going to take take time and commitment from her and you to follow it through to the end. 

Not sure if this helped... 

Steve

PS.  Do not get too emotional about the deal - somethings are just not meant to be and then something better will come along... Been there done that - just and additional thought.