So I Assigned A Sub 2... Now The Buyer Has Messed Up!!!

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Good morning Bigger Pocket Community. We need all of the help we can find to make this a win-win for everyone!!! Last year we came across a 3 bed/ 2 bath, all brick home, in an ok neighborhood, and the seller was about to let the bank take it back. The home is worth about $65k, the mortgage was just under $60k, with monthly payments of $555 (piti). We put it under contract as a sub 2... We always use attorneys, even for sub 2's.... And assigned it to a colleague of ours who was newly separated from his wife. Since we weren't going holding this one, we wanted to insure that the Seller was somewhat protected... So we employed the 'double warranty/ deed in lieu of,' strategy at time of closing -- that's when you have the buyer sign a deed from him back to the seller... The attorney keeps this deed on file and it is not filed at the county unless there is a case of default; it would avoid the original seller from having to foreclose. He paid the seller $2k and paid me $2k on a note, which is satisfied.

A few months ago, this colleague and his wife decided to work it out. So, he moved out of that house and rented the place out... I wish he would have contacted us first, as he obviously knows nothing about being a landlord. Now, the payments are 3 months behind and the original seller has contacted the attorney to file the deed. 

We have attempted to contact this colleague by phone, facebook, and even stopping by his residence... Still, nothing -- which means we have no lease agreement neither. We stopped by the home, which is now occupied by some unfavorable tenants -- from what we can see... Of course, they wouldn't answer the door. The attorney will be filing the deed here shortly... And we're wanting to gather as many suggestions as to how you would handle this situation from here... The seller is still motivated and the mortgage is 3 months behind (foreclosure territory), ~$2,200. The property looks like it may need cosmetics, from what I can see. The property should rent for $700-750/mo. What would you do? There's no idea too crazy... We're open to all suggestions... And A Win-Win Is A MUST! Thanks in advance.

[Jon Holdman]

And people think these sandwich deals are a good idea!

When you say you assigned this deal to your colleague, what do you mean?  If you bought the house sub 2, you can't just "assign" the house to someone else.  You could sell it to him, lease it to him, or assign the purchase to him (making him the buyer from the original seller), but there must have been some transaction between you and the colleague.  What that transaction was will affect your options.

AFAIK, any pre-written deed in lieu is completely worthless.  You cannot give away your rights.  So, assuming the colleague is the actual owner, you would need to foreclose to take possession of the house.  If the sale was directly from the original seller to your colleague (i.e., you assigned the purchase contract) then the seller would be the one to foreclose.