All Forum Posts by: Justin Abdilla

@Patrice Boenzi has a great answer here.  Illinois being an attorney driven state makes purchasing pre-foreclosures more lucrative than in other states, because you have the opportunity to get it during the judicial foreclosure stage, the sheriff's sale stage and then again during the auction stage.  Your attorney should be able to secure you clean title to the foreclosure by working alongside the homeowner's attorney to get a good short sale going that will be approved by both the bank and the judge -- OR should assure you that the property you're going to bid on will be clean and marketable once the court approves your sale.

It's almost easier doing these short-sales than doing conventional properties because the seller is motivated, and the people on the seller's team need to be very good at their job to cut it in the market at hand.  There are fewer games and less trying to renegotiate last minute, but the problems include the judicial encumbrances on title, the locality specific inspection requirements and the need to get the bank to agree to your proposed sale price.  Other than that, it's gravy and I try to talk all my clients into investing in pre-foreclosure or judicial sales.  I really hope you find success in it!

I think maybe making a payment to the seller to execute a mutual release is the best way to go.  Suing for damages on a breach of contract isn't going to be great because as @Account Closed have noted, you have a claim here for fraud in the inducement or mutual mistake of fact.  Mutual mistake of fact is a really interesting defense here, because the seller is marketing the property as being comped to these duplexes and you believed the property is a good comp to these duplexes, but it's also true that it isn't a good comp with the selections. 

The thought that you're not represented is also interesting here, because the seller's attorney is technically representing you when providing statements that he or she knows you will rely on, as long as she didn't say something like "hire your own attorney to double check these" or "do your own due diligence."  This is a really common area of legal malpractice and claims against attorneys that our continuing education warns us about at least a dozen times every cycle.

Please don't construe any of the above as legal advice, it's really just an academic analysis of your situation that I hope you can bring up to your lawyer when you do hire one.  You need one, and this will hopefully get you googling in the right place to understand the types of claims against you and the defenses you may have.  Good luck getting out of this one and I hope it's not too painful.

I'd pay my realtor to do the paperwork on this close.  Keep the relationship in good spirits, pay for the paperwork, but not the finders fee of a commission.  There's still a lot to do, as you know, like the buyer/seller letter, inspections, maybe an appraisal, and then someone has to close the property.  You could have her do those things, or at least offer to your realtor to employ her to do those things even though you procured the property.

Congratulations on your new house!

In Illinois, the REMIC and Freddie/Fannie properties are most frequently listed through the websites for auction.  I read the original post to say that they were listed through the auction site, and so I assumed it was similar to how it typically works in my state.  Banks in Illinois frequently do this because of title issues, because Illinois requires attorney-certified title, and the Banks like to have their counsel do the title.

I've not found success with wholesalers buying post-judgment foreclosure properties in my state because the auctions are public and the competition is so tough.  I counseled OP about that difficulty because we usually see the Bank making an opening full-debt-bid on every single property that's up at these foreclosure auctions, just like you said. Illinois does not allow reserve bids on foreclosure auctions, they're pure auctions in my state, which is why I gave the answer I gave.

I think you're probably better qualified to comment on NY/NJ's situation than I am, because my expertise extends to judicial foreclosure states and not to non-judicial states.  I appreciate the answer and I'll tag out to you on this question.

I don't think you can wholesale an REO. The bank has absolutely no motivation to sell you the property, because they're simply waiting for someone to buy them out of their investment. They use auctions, usually, and it seems like in your case that's what's happening too. I just don't know how you get a wholesale from a bank auction, considering any motivated investor could buy that property at the same auction you plan to buy it at, and these are all public proceedings.

In my state, if the bank has already taken the property, they sell you the property at the auction and then it's up to you to make that property saleable to the third party. Most jurisdictions won't allow bank-owned to resell without inspections in my area, and title gets very iffy about writing these because the encumbrances on the property are hard to discover (old HOA debts, old water bills, etc.). I had one of these last year where I brokered a bank-owned to an investor and we must have discovered $5500 in liens that the Bank didn't even know about. This turned a $120k auction into a $127k transaction (by the time we had stripped these liens). This made our basis too high to short-term flip this property, and we had to simply reno and sell.

I usually recommend that my investor clients buy pre-foreclosure or probated properties instead of bank-owned or sheriff sale properties.  The pre-foreclosure properties require the current homeowner to sell it to you, which means you're directly rewarded by your business relationship and put into a position that lets you profit.  Same with the recently inherited probate properties.

Which state are you in?  Maybe if you supply some detail you could get the perspective of someone who buys these properties and can mentor you in acquisitions somewhat.

1) I'm not so certain it's realistic to operate that fund and see a cash flow that you can take out of the business as a profit on the part-time.  Being a landlord is so frequently a full-time job, especially if you have 4+ units.  If you've only got the three days a week to participate, you're going to need to have an awesome team.

2) I actually love the idea to come into someone else's deal as an LP.  Getting to know the business model, seeing what people do with their money, and how they make money is a lot easier than trying to make your own deal work for the first deal.  I think learning the business model first is great, especially if you haven't already targeted property for acquisition.

3) I'd start with the CPA because the money is always going to be the first thing on your mind as an investor.  I would then hire a property manager and ask both the CPA and the property manager for a recommendation on a landlord-tenant attorney.  You probably won't need a full-fledged real estate attorney unless you're developing the project or going for rezoning.  Just a local firm that knows the ropes and the game is definitely good enough for your model.

4) Who are you looking to communicate the deal to, your investors or the sellers?  If you're having difficulty getting the deal correctly worded for your investors, maybe hire the law firm first so that everyone feels like they're properly protected.  It's so important to get these things started with harmony in management.

5) Think about your exit strategy.  I tell my investors this all the time, I want them to think under what circumstances they'll sell and look to move on to a new project.  If you know you're take-and-hold as a strategy, then you know that you're gonna have to budget reserves for long term capital improvements.  If you know that you're 3 years from flipping, then you hold enough for 3 years expenses.  You need to know how long to visualize trends in the area and what kind of variance to predict.  I would also tell you to really look into how you're going to keep these units occupied as apartments in the rural south.  Rural tenancies can be difficult because there aren't often many young people looking to get started on moving into their first place.  They can also have a strange habit of staying vacant during the low-times as they're not so near development and jobs.

I also think your purchase price numbers are a bit high variance. You want $1mm-$4mm, which is a huge spread. A $1mm building (in my area) is a 6 unit in good condition that is ready to rent. A $4mm building in my area is a 20 unit or a 24 unit. A $1mm building is something you can do yourself if you're handy and self-motivated, a $4mm building is something you definitely need staff for. I believe it might be best to narrow your search criteria a little because you're really looking at multiple different REI opportunities of immensely varying complexity given the price points you've named.

I do think you've got a solid starter plan, I hope you can realize it and succeed in 2020 and beyond!

Can't tell you much about Minnesota attorneys, but normally the best way to find someone is to contact the bar in the locality you're looking for, or to reach out to some agents in the area to see who is on their team.  Hopefully that gets you started for vetting someone.

@Antoine Ferguson

We have no idea what you're trying to do.  If you're just starting out, I think maybe a title company is probably better if that option is available to you.  No attorney does more closings than a title company, and the title companies are in the business of minimizing risk.  Attorneys are typically in the business of maximizing benefit.  Title companies are usually a little pricier than attorney closes, but they usually flow better and are more orderly than attorney closings.

I think you must have misheard.  You could put the costs owed and pending from a remodel onto the ALTA if all parties agree, and note that the work is getting paid through the settlement statement on your affidavit of title. 

You can't go back and amend the ALTA to change payments.  Think about it.  Once you leave the closing table, the money is already disbursed.  How would changing the ledger on the ALTA create money to pay anyone?  I don't think it would be possible to sort of go back in time to get lending from the future pushed back to pay for a past remodel. 

If you find out a way to do this though, I'd be really impressed, because this is like next-level OPM.  Good luck in 2020 and beyond!

Specific Performance.

Agreements to sell real estate, if broken by the seller, can be forced to complete by a Court.  No two pieces of real estate are the same, and when you agree to sell a piece of real estate, you agree to sell that piece for that price.  This is a pretty textbook specific performance case where you could demand in a court case that the judge orders the seller to sell the property to you for what you proposed.

Also, how did you not discover the foreclosure?  All foreclosures are in public record by a document called a lis pendens, required by the Uniform Commercial Code.  I think you need to talk to your Realtor about his or her errors and omissions for not finding that the property was in foreclosure, because that's one of the most basic things to check about a property.  Title insurance should have caught it too!  Can you tell me a little bit more about how far the transaction got?  Did you order title insurance, did you do a records search on the property?  Did you only have a signed contract but it was within the inspection or financing contingency deadlines?

This is a bit of a weird one, so I'm curious to know more details.