TX Foreclosure Purchase Question

[ReInvestor]

Millionaires and Future Millionaires:

I am working on purchasing a single family home with cash that is 2 weeks away from foreclosure auction.

There are about $6000 worth of back payments due on the mortgage. My question is, should I make the back-payments to catch the mortgage up before I close on the property? Is there a legally binding contract that would allow me to catch the mortgage up and be guaranteed title to the house? Or do I need to wait until I close on the house to catch the payments up?

Thank you in advance,


Ben Finney

 

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[CEBenz]

I think that's a question for a real estate attorney.

 

[Runum]

Welcome to the fastlane Ben.

You need to learn foreclosure law and procedures in Texas before jumping into this arena. I am not a lawyer and I do not work with preforclosures so I am not up with the latest info myself. I have had a few classes on it so here's my 2 cents.

In Texas you have 21 days from the auction notice until the auction. The notice has to be posted on the property and at the courthouse. The auction is to be held on the courthouse steps on the first Tuesday of the month. Each county's auction location may differ but the date is dictated by state law.

During those 21 days the owner has the opportunity to negotiate and pay to bring the note current. On average the note is around 10 months in arrears. Also, during those 21 days the lender cannot speak to anyone else about the note except for the owner without written permission from the owner.

Even with written permission, many lenders will not discuss the loan with anyone except the owner. After you get written permission to negotiate the settlement with the lender you may have a difficult time finding the exact lender person to talk to if the lender is a big bank. If you are lucky and find the person and begin negotiations, get all agreements with them in writing. Also, understand that there could be a second mortgage and you may not even be aware of it. AND you may just be negotiating with the second mortgage and you have no weight with the first(out of luck). At auction, second mortgages are wiped clean. IRS and hospital liens are never forgiven, they stay with the property.

Then you need to negotiate taking over the mortgage with the lender or refinancing. Depending on loan to value and other variables, this may be difficult.

You also need to find out what it will take to get the home owner to walk. He is emotionally attached to this house and you are buying it from under him. He will eventually resent you and you need him to leave. Keep in mind, his credit is already screwed up and he's probably close to broke. He has very little to lose by riding this out to auction and eviction.

The auction in big counties is organized chaos. In Tarrant county there may be 3-4 auctions taking place on the steps at the same time. The lenders are auctioning their properties and the sheriff is auctioning tax liens. No auctioneers speak loudly so you have to be close to hear. You need to know the name of the auctioneer and what time he intends to be there. The time may change at any moment. You need to learn how that auctioneer will identify the property in question, some use legal description and some use physical address. The actual auction of one property usually takes about 2-3 minutes. If you win you have about an hour to come up with funds or they will auction it off again.

Most of the properties I have seen are bought back by the lenders for the minimum bid price because it is above current market price. Then the property can be listed and sold by realtors as an REO(real estate owned). If you buy one of these, please use a good title company. The title may be messed up due to the foreclosure process and any other encumbrances to the ownership of the property(tax liens, second mortgages not released, etc).

Please verify everything the homeowner tells you. You may chase a deal for 2-3 intense weeks that isn't really a deal.

Lots of roadblocks and opportunities. I wish you well.