All Forum Posts by: Joe Henry

Well I've got myself into a pickle. It's been a long time since posting here, I hope everybody is well! This is a tough one, I've spoken to lots of investors but this is outside the normal realm of knowledge for most - but I doubt that's the case for bigger pockets members!

Last July I purchased a home from HOA foreclosure auction. It was previously owned by a husband and wife, the husband being active duty military since mid 2000s. It did have a first mortgage of theirs open on it, which they have not made payments on since ~2014, just 6 years after the house was built. A lis pendens from the bank was filed 10 years ago, but the foreclosure was put on hold because of the SCRA restrictions protecting an active duty service member from being foreclosed on. The state is Florida.

I did not consider this first mortgage an issue because I was simply going to live rent and mortgage free in this property myself, rent bedrooms, make good money and recoup my investment in short time (netting 4k income per month if you count not having to pay my current rent). The couple had dragged out the HOA foreclosure for 3 years, and by the time the husband gets out of the military, is served bank foreclosure documents, and the bank foreclosure is finalized, my lawyer said it could be anywhere from probably 3 - 10+ years given all the information.

The catch now is the HOA foreclosure - how was the HOA able to foreclose (beginning 3 years ago) when the husband is active duty? I have been notified that currently the bank is looking into this exact question. But there's more to the story.

What I've gathered from speaking with the previous owners realtors, is that the husband and wife went through a divorce proceeding back around 2014, the husband agreeing to quit claim the property to the wife, in return for her within 1 year refinancing him off the loan.

In a brief conversation with the husband, he seemed to confirm that the quit claim was signed, but by her, because he had given her POA on the house (for which there is public record filed regarding the POA). However, my title search and the cases regarding the divorce and both foreclosures do not contain a quit claim filing at the county clerks office. The bank has also confirmed that he is still on the mortgage, so the wife never refinanced him off.

Stranger still, the HOA foreclosure did not list the husband on the case, only the wife "et al". The bank is informing me that if the HOA foreclosure was done solely against the wife, then the husband is still on the title, and my ownership is subordinate to his. Ouch.

I have my attorney looking into all this, and the ramifications of everything. But bigger pockets I know has combined experience that is not to be topped. 

Some questions:

- What are the ramifications if a quit claim was signed before the HOA foreclosure began, but never filed? Could the wife file it now and have it be valid from the date of signing?
- Is it possible for the HOA to foreclose just on one of the two owners or is this reason to contest the HOA foreclosure? Or was the husband included in the "et al" because he gave the wife power of attorney?
- If the husband still had rights to the home, has the HOA violated SCRA protections by conducting the foreclosure, or did the family need to object for the foreclosure to be halted?
- I've been looking into resale options, however without being in contact with the preivous owners (they are not open to contact) my options are limited. One investor said sometimes you can "pay to sign" and make decisions on someone else's loan, is this really an option? One said I can go direct to the underwriter to get a deal from them regarding the mortgage, since the servicer will not negotiate the payoff (150k+ interest and fees alone) and I don't have the note holders consent to do a proper Subject To deal. I'm unfamiliar with these tactics, it would be helpful to know if there's any avenue there or otherwise any options I'm not aware of.

I know the bank and my lawyer will have their own answers to these questions, but I'm looking for ideas in general. Because of my personal schedule I don't have as much time to fix up the property anymore, so I'm looking for an exit probably as the most preferable outcome. Still, if there's no exit but I can live in the property that would be acceptable too. But if I live there and rent bedrooms, I also don't want the husband to come knocking some time in the future saying "hey, you owe me part of this back rent as I'm a priority owner". 

I'm open to hearing any and all ideas and options that come to mind. Thank you all!

Hey Carl, very interesting stuff. I haven't had luck other than a few personal websites of people who have tracked this stuff themselves for their particular towns, but nothing even for Jacksonville, where I'm looking. But maybe that means there is someone in your area who has the data. If you go to your local RE Investor Association, maybe some older experienced people who have been investing since the 70s or 80s have that data?

Please let me know if you find anything. I'll do the same.

To follow up with the suggestions made here I've uploaded a new version: https://www.biggerpockets.com/files/user/JoeH29/fi...

1. Added instructions page
2. Added monthly cap ex row
3. Added explanations to some of the rows in Deal Evaluation  
4. Added Permits and Inspection costs to the up-front cap ex calculations 

@Immanuel Sibero,

- First point. Thank you for bringing this up. Yes, I am missing a place in monthly expenses for cap ex. There are two types of cap ex expenses - the ones going into the project up front (e.g. the house needs a new roof immediately) and the ones you need to save for monthly, (e.g. in 5 years it will need a new water heater). So the cap ex I have listed is for the up front cost, costs you know you'll have just by purchasing the property. Thus, they are added to the all-in figure and CoC. You can either factor monthly cap ex into the monthly repair row, or add a row for saving monthly income for future cap ex. I think I will update the sheet to have it's own monthly cap ex row.

- Second point. Yes it's very detailed haha. I am new to RE as well, so I wanted to make a sheet that would help prevent me from overlooking things, thus the amount of detail. You can just add a number in the column next to each cap ex section heading (e.g. B13 for demo), instead of filling out all the items in each section. That way you can do ball-park estimates for each cap ex category.

@Christian Costa, thanks! I think I need to add some instructions maybe about how the three pages in the workbook interact, and do please let me know if there's anything else you notice.

One thing I remembered is not included is cost of construction inspections and permits in the Cap Ex sheet. Don't forget those if you need them ;)

@Joe Splitrock, thanks for the advice.

@Christian Costa, the number from B41 should be a negative value. If you enter a percentage for management you'll see the calculated management cost is a negative number because it's an expense. All the other expenses you enter should be negative numbers, not positive, which will make B41 a negative number.

If you use the form this way the NOI formula is correct. If you like using positive numbers for the expenses though that's fine (it is easier to enter positive numbers there), and then you could change your formula for NOI to what you posted above.

Thanks for asking though, hope you get some use from the spreadsheet.

@Michaela G., I don't know why you are insinuating feelings. But I do appreciate your thoughts on my original question regardless, so thank you.

I just went to one of these the other day. They gave a lot of misinformation about how tax liens and tax deed purchasing works. They try to make it sound very difficult for you to pursue by yourself. Here in Duval County, the county makes it very easy - everything is done online.

Then they try to sell you on purchasing a 1k membership to their club, which is usually like 2k or something, and you can only get the deal that day! Turns out you can go to any of their other seminars and get the same exact 1k deal.

I wouldn't recommend doing it, ask you can get a great education from books, real relationships and networking, and online. But if you do do it, don't worry about the "deals" they offer. Go home afterward and do your homework to see if what they said is true.

I would also argue that it does matter what prices were 10 or 15 years ago. If you know that a property was purchased for 100k during the height of the bubble, and a seller is asking 100k now, you are most likely overpaying - maybe not overpaying by market price, but by true value, yes.

This is not how successful investors make their money - they don't buy good deals for the market, they buy good deals, period. Deals that are judged good by true value.