All Forum Posts by: Account Closed

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

Over a year ago I did a wrap around mortgage on a place here in Phoenix at 3.5% over 27 years. Everything was smooth until it wasn’t. 6 months into it the tenant called and the toilet had failed in an upstairs bathroom. The house was flooded to the tune of $70,000 in repairs. 

No big deal, I worked with insurance and contractors to get the repairs done. Six months later my insurance dropped me and here is where it gets sticky. I got a new insurance policy at a higher rate. I let the original borrower know they needed to update the lender on the new insurance policy. 

The higher insurance premium required a higher escrow payment which the original borrower didn’t let me know.  A few months go by and unbeknownst to me the escrow account had now drawn negative which triggers the lender to no longer apply what’s considered a “partial” payment to them, given that I’m now paying less that what’s due given the escrow increase required but not relayed to me even though I expected it at some point.

Last month I’m on Zillow looking at the value of my properties. One of my properties says it’s going to auction in March because it’s being foreclosed on. My heart rate goes through the roof as I have about $90k in equity in that house. I reach out to the original borrower and ask them what’s going on. They weren’t paying attention to it, and why would they, it’s not their house anymore. 

They send over 3 months of notices from the bank. $10,000 has been collected by the lender and is in an “unapplied” status due to the short payments. They are foreclosing and are not open to discuss it. I call them, they won’t speak to me about the loan at all BECAUSE ITS NOT IN MY NAME. 

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

Take it all for what it's worth, I've learned plenty of lessons and made my share of mistakes. One thing is for sure, if I ever wrap another mortgage I am getting a POA to access the docs on the original loan so that I am never again at the mercy of that borrower to relay information. If it wasn't the insurance it would have been the property taxes. FFS

THE END. 

Let me know what you would have done differently?!

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

Over a year ago I did a wrap around mortgage on a place here in Phoenix at 3.5% over 27 years. Everything was smooth until it wasn’t. 6 months into it the tenant called and the toilet had failed in an upstairs bathroom. The house was flooded to the tune of $70,000 in repairs. 

No big deal, I worked with insurance and contractors to get the repairs done. Six months later my insurance dropped me and here is where it gets sticky. I got a new insurance policy at a higher rate. I let the original borrower know they needed to update the lender on the new insurance policy. 

The higher insurance premium required a higher escrow payment which the original borrower didn’t let me know.  A few months go by and unbeknownst to me the escrow account had now drawn negative which triggers the lender to no longer apply what’s considered a “partial” payment to them, given that I’m now paying less that what’s due given the escrow increase required but not relayed to me even though I expected it at some point.

Last month I’m on Zillow looking at the value of my properties. One of my properties says it’s going to auction in March because it’s being foreclosed on. My heart rate goes through the roof as I have about $90k in equity in that house. I reach out to the original borrower and ask them what’s going on. They weren’t paying attention to it, and why would they, it’s not their house anymore. 

They send over 3 months of notices from the bank. $10,000 has been collected by the lender and is in an “unapplied” status due to the short payments. They are foreclosing and are not open to discuss it. I call them, they won’t speak to me about the loan at all BECAUSE ITS NOT IN MY NAME. 

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

Take it all for what it's worth, I've learned plenty of lessons and made my share of mistakes. One thing is for sure, if I ever wrap another mortgage I am getting a POA to access the docs on the original loan so that I am never again at the mercy of that borrower to relay information. If it wasn't the insurance it would have been the property taxes. FFS

THE END. 

Let me know what you would have done differently?!

 So you have a 0% interest rate, no property taxes, no insurance cost, and no maintenance/repairs? 

@Dave Meyer it is hands down still the best asset class. As an investor and an agent I can put 5% down and get 3% (more or less) back in commission. If the property cash flows $0, gives me $0 in tax benefits and appreciates at 3% per year on pace with traditional inflation it’s still a massive winner. Let’s put some numbers to it.

$500k purchase price. $25k down. $15k in commissions on an 80/20 split yields a $12k commission. $13k net cash out of pocket (plus closing costs if you can’t get a seller credit to cover, I usually can).

3% appreciation is $15k per year on my original investment of $13k. 

Show me another asset class where I can make 115% on my money. It simply does not exist. I did this 8 times in the last 8 years. It is simple and repeatable.