All Forum Posts by: Sean OToole

Thanks @Chip Towner  N

Best Regards,
Sean O'Toole

@Tom Keith Note that there are services that provide more detailed information on properties in foreclosure than Zillow as well, including owner name and address. I provided a list of the more popular services in my post above, but the moderator removed it, so you'll have to figure it out on your own.

Best,
Sean

@Tom Keith Your options for more information include:

• Finding the NOD at the county recorder. The notice will contain most of what you need.
• Asking your title company for a copy of the NOD.
• And of course, Zillow, would like you to use their service to contact one of their foreclosure agents. I know the product manager at Zillow responsible for this service and they do work hard to screen agents they offer these leads to, to try to make sure they know how to look more information, how to contact owners, etc.

@Eric Black From my experience it isn't usually the first person that knocks on the door that gets the deal. Especially on NOD's. With foreclosures now taking 1-4 years to go to sale from the first NOD, most owners know they've got nothing but time and that it rarely makes sense to walk away from a year or more of free rent. I actually think being as late as possible in the process is best. One of the best is after the NTS, and after a motion for relief from bankruptcy stay.

I'd just add to be careful not to confuse true appreciation (the value of the house going up) with inflation (the value of the dollar going down) or credit cycle driven price increases (the cost of borrowing going down). 

In my opinion the only time you are likely to see true appreciation is when an area goes through economic transformation - small town turns to resort destination, local industry (ie tech or oil and gas) booms, or something of that sort. Historically there is little evidence of other real appreciation, which can not be better explained by inflation or credit terms.

I'm not saying that its not ok to invest in credit cycles, or to use real estate as an inflation hedge. Just please don't bank on price increases to make your deal work when there is little or no economic transformation in your target area, we have historically very cheap credit, and inflation is low (at least officially).

@Account Closed It's called "Bid Rigging" at the federal level as well. Most were charged with that and "Mail Fraud". The mail fraud one is bizarre to me, from what I understand it is because they received the trustees deed that they fraudulently obtained through bid rigging by mail. Seems like a stretch, but there you have it.

I don't think much bid rigging happens in CA anymore. Three reasons: 1) you can see the results of every sale including opening bid and winning bid on PropertyRadar (makes it very easy for authorities to track), 2) there are a lot more investors at the trustee sales then there used to be, hard to get that many people to collude, and 3) the feds have filed charges against quite a few folks which was a wake up call to anyone dumb enough to still be doing it.

@Jay Hinrichs that must have been a nice plane. I'd sure like to have something that could get in and out of here safely and reliably. ;-)

@Ryan LaRocca You are not going to find a perfect answer because laws are never black and white, and often other less obvious parts of the law apply that you don't realize. There were a handful of guys who thought bid rigging at foreclosure auctions couldn't cost them more than $10k or 1 year in jail because they read the state law (CA civil code 2924), and then found themselves charged federally and screwed. If your mindset is to look for loopholes, or to take some legal chances you'll likely find yourself in trouble someday.

If your mindset is to be honest, fair and law abiding, there are no guarantees but you'll probably be fine - even with preforeclosures. Bill is definitely right though, there are easier, smarter places to get started, all of which you'll find discussed at length here on BP.

@Account Closed no, in fact CA 1695.3(f) specifically states that "the terms of any rental agreement" need to be included in the purchase contract, which implies its ok so long as all terms are agreed upon.

There was talk about adding it in CA, but it looks like it wasn't adopted - hadn't checked in a while, sorry for implying otherwise.

Hi @Mike D'Arrigo, thanks!

@Jay Hinrichs, on the fraud thing, that was the most interesting part. It was definitely brought to the attention of local, state and federal law enforcement, but they could find nothing to charge them with. The homeowners were told it was a civil matter - nothing illegal about having a trustee wind down a corporation, and at the time, nothing illegal about the rent back. The BK judge's position was the only thing he could do was bar them from future actions.

@Jay Hinrichs I've worked a bunch with state legislatures on this issue. Primary issue on rent back was that is was so abused they decided it was simply easier to say no then to try to craft rules around it.

We had one guy in CA that would approach homeowners (in foreclosure, with equity) with the pitch that he'd take over their payments, rent back to them (super cheap), and then sell the house back to them when they were back on their feet for $1. Doesn't make much sense to us honest folk, right? Well here's what he'd do... he'd put the whole thing in a corporation with himself and a buddy as shareholders. He'd put maybe 20 properties in, and would use the "rents" to make payments. The rents were less than the payments, so the corporation would quickly be unable to pay its debts and he'd declare bankruptcy.

Here's where it gets interesting. The federal bankruptcy court would appoint a trustee to take over the company. The trustee would then review the month-to-month rent agreements and mortgage payments and come to the conclusion that the tenants need to be evicted and the assets sold. Despite the cries of homeowners, and in some case despite state law, the federal trustee would evict the homeowners, sell the properties, and then... hand the cash (minus reasonable trustee fees) back to the shareholders.

After the 2nd or 3rd time, the bankruptcy court judges finally got a clue that they were being used to steal homes and barred the principals from ever declaring bankruptcy again. Never saw the principals face any consequences though. :-(

More to it, but long story short. ;-)

To expand on what @Jon Holdman said, and given that you mentioned getting calls from people in foreclosure (or preforeclosure - same thing), I'd add the following points:

1. Depending on your location we are getting back to a time where not all preforeclosures are underwater and require a short sale. For a while there, almost all were. But pre-2008, most foreclosures were due to the 5 D's - Death, Disease, Divorce, Drugs, and Denial - where people end up in a situation where they are losing their home, rather than just being underwater and walking away. In these cases, where there is equity, it is likely possible to do deals.

2. One of the reasons that some advise to steer clear of these deals is that many states have equity protection laws to protect homeowners in foreclosure. For example Civil Code 1695 in California. It doesn't make it impossible to buy a preforeclosure, but it definitely adds some hoops that you need to jump through, and increases your risk should the homeowner have a change of heart. Even long after the purchase potentially.

3. Given 2 above, if you do these deals, I'd strongly advise being very upfront with the owner about your plans, whether to rent, fix and flip or wholesale. You'd b surprised by how many people are still willing to sell even when you fully disclose that you intend to make money. This is definitely not the place to be trying to convince them that it is worth less than it is (I personally don't think there is ever the place for that actually, but the risks are higher here).