All Forum Posts by: Jason S.

+1 for J Scott on the advice.

These days the unscrupulous workers are looking for a free ride. When your job is complete they do not have another job to go to - this gives the unethical an incentive to get hurt and sue. Especially when they are working for a "rich investor".

The safest "assumption" in this situation is that you will be responsible for the Workers Comp - check with your insurance company to determine how to cover the workers, if this is even something you want to do. Hopefully it is a one story home with 8' walls and no ladders needed. Though paint can still get in their eyes......

Also, if this is a pre-1978 structure then the painter is subject to the new EPA lead based paint rules/license (are they doing any sanding or prep?) - if they do the work after April 22 and it is a pre-1978 structure make certain you are in compliance.

There may be reasons to take a second to sale even if there is minimal to no equity.

1. I know a private lender that may just do it because the borrower refuses to pay them yet they are current on the 1st - they refuse even a nominal payment - so the lender will take it back. This is not hypothetical by the way - I have seen him do it.

2. Take a 2nd to sale that has little to no equity in order to extinguish junior liens, take title, and no have "standing" in order to negotiate direct with the bank.

3. If the first is for say $230K on a $220K house I might take the second to sale and then sell the house to someone else that has cash but is unable to qualify for a traditional mortgage - They cash me out and also cure the first - Yes they are a little under water but many RETAIL buyers will do this in order to have ownership. You can say the due on sale clause will be exercised but it is not very often - especially for a cured mortgage and if you work out a plan to re-fi in a few years with the beneficiary/servicer.

4. Let's say I have a second and the first lien is current. Why not take it to sale and then have the homeowner buy it back from you? If they are keeping the first current they have some cash flow and they are not paying the second because they think they can get away with it - so take them to sale and have them pay you back. I have a friend who lent a couple 30K on a second, they owed $250K on the first (home worth roughly $250K) and they are current. He took it to sale and suddenly they came to him with $10K in cash and resigned a note for the rest.

5. There are many more reasons to take it to sale. If you had no scruples and were heartless, why not buy a second for $1K, offer to settle as you stated above, if they do not then take it to sale and re-sell it again to another for a cash down of $10K and they take over payments? Or some variation of this?

Just for the record - these strategies are not ones I would ever implement because I have a heart - but for the heartless ..... and Yes I understand that sentence does not belong in anything posted by someone with an Ayn Rand avatar.

In fact you can buy a second, foreclose, and take ownership without regard to the amount of equity. In the end the second trust deed includes the right of sale.

I do not know why it does not make sense. Why would I lend money as a second mortgage if I could not sell the property in case of default? What would the point of the "collateral security" be in that instance?

Yes, you can buy the second for $1 and evict the tenant - I have never bought a second for such a little amount - it seems to me that - especially in California you may have a little fight on your hands for the $1 - a judge may give you a little grief - but technically if you buy at the sale - you own the property - that is the point of the trustee sale.

You specifically asked if I paid off the lien and took sole possession - the answer is that I evicted, sold the property - in escrow the first lien was satisfied in order to complete the sale with clear title.

If you are thinking of buying a second and then taking it to sale or buying a second at the auction - be careful and do your research .... nothing is ever as easy as it may seem. And I am not giving legal advice at any point in any of my posts and you need to seek out legal advice if you are planning to take action on any "plan". Buying properties at trustee sale has many pitfalls.

I have purchased property in CA from a second lien holder who foreclosed and evicted homeowner. Fortunately for the homeowner I cured the first and sold the property (on sale the first was satisfied)- but I could have just the same cured the first and kept the property with the first lien in the previous owners name until of course the first lien holder chooses to enforce their due on sale clause.

Oddly enough, if the first were current and the second takes the property to auction - there is case law/legal precedent that limits the first lien holders ability to enforce their due on sale clause.

Either way - you can bid on a second lien at the courthouse steps and take title to the property, evict the previous owner, and proceed from that point. And you can do all of this without any acknowledgment or permission or money going to the first lien holder.

Now that's what I wanted to know.

This is what I have been telling everyone each time I have been asked - but as I put in the original post I was beginning to doubt myself.

Thank you for the affirmation of my original position.

Edwin,

Read through the 43 page PDF on the program and many of your questions will be answered. The homeowner must enter the HAFA program, which, among other things requires the homeowner to make monthly payments while in the program. It will be interesting to see how many homeowners who have not been paying their mortgage for 12+months suddenly start making payments just to ensure they can get a short sale, something they can already get approved. either way - this is what he said by "entering the program" - the homeowner has an option of whether or not to participate - unlike health care - oh sorry wrong forum.

I fully understand the points made including the issue of creating a situation where one would fall under "the Equitable Mortgage Doctrine"

Please let me reiterate - I know why not to do it - I wanted to know if anyone had a LEGAL model that is working.

Are you talking a literal $435?

If so, check with authorities (code enforcement etc) to ensure you are not taking on any code violations from previous owners.

For $435, and assuming you can put a sign on it, and it is a very busy area - seems like you have a great deal. Of course you need to make certain you can put a sign on it - but even a "lot for sale" sign and then under it an advertisement for whatever you do - seems worth it.

If I could buy a lot, in a heavily populated area, for $435 - I would scoop it up if I could put a sign or banner on it.

Things to consider:

1. Is it fenced? You need it secured to reduce potential liability.
2. Outstanding and unrecorded liens / claims against the lot
3. Zoning etc - make certain the authorities will let you do whatever it is that you plan to do with the lot.

Have Fun.