Need Advice On First Potential Deal w/ Title Issues

[Chris Nwoke]

After doing some searching, I ran across an ad by a motivated seller. His asking price is $60K for a 3 bedroom house that needs $30K in repairs and has an ARV of $160K. From what I can tell, this sounds like a good deal for my potential end buyer and myself.

I'm trying to tread softly though and make sure I make the right moves. According to his ad, he wants to get rid of the house, but also needs to clear the title. Technically speaking, he's selling the home for $55K. The additional $5K was added to pay a lawyer to clear the title. He says the original lender tried to foreclose on the house, but they went bankrupt and that fell through.

I'm wondering how I should go about this. Should I tell him that the title company will handle this at closing? Do they handle these type of things? Is this something that my end buyer will be responsible for? Or does the title need to be cleared before any moves can be made?

Sorry for the crazy amount of questions. I'm just excited about what could be my first deal and nervous about making a mistake that'll screw everything up.

[Dion DePaoli]

Not enough information who the mortgagee is. Speaking from experience as a mortgagee, just because a company went bankrupt does not mean a mortgagee who purchases the loan can not foreclose. I have purchased a couple of loans from firms that went out of business and the borrower was given poor advice from a uneducated title agent which gave him a sense of power and thus I was forced to foreclose him since he would not communicate with my servicer.

Many lenders from the old days are out of business. It maybe the pool of assets has not been liquidated yet to a new owner. It is also very possible to cure the defect in the chain of ownership by getting a proper Assignment(s). Depending on the time frame this happened, it may have been a buyback in the trade and the loan reverted back to the a seller who is working on curing the ownership.

It generically sounds like he talked to an attorney and the attorney thinks he can do a quiet title action. Again, we here can not know without seeing the title and perhaps the names of the companies.

I would put it under contract subject to curing title. I would first pull title and see what is going on. A mortgage or deed of trust which encumbers title can not just be "cancelled". For both liens to be faulty seems a bit of a stretch. I would not just pay the attorney just yet as it maybe looking at title you deem it to be a waste of money to have an attorney try to remove a valid lien. (well, two liens) Get the name of the mortgagee and the name of the plaintiff on the foreclosure case. Some BP folks might be able to provide color around who they are and give you some more options.