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TJ, Esq.
TJ, Esq., Attorney
Category: Real Estate Law
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Experience:  JD, MBA
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My husband and I owner financed a condo to a young lady and

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My husband and I owner financed a condo to a young lady and her mother signed a guarantee. I collected mortgage payments (principal, interest and taxes) for almost 3 years as she qualified for the 1st time home buyers rebate.
I recently became aware that no POA, HOA or mandatory club dues have been paid since closing, (almost 3 years) My paperwork indicates that the buyer is responsible for mortgage and any assessments on the property. Owner moved out in November 2012 and is now leasing the property. The lawyer we are working with says in order to foreclose, it has to go to auction. WHY? We just want the property back. Buyers guarantor says the buyer is going to file bankruptcy to hold up the process. The HOA is willing to work with me and let me foreclose instead of them. What are my options??? If we hold the note...why does it have to go to auction? Is this a Texas thing?
Hello and thank you for allowing me the opportunity to assist you.

Q: The lawyer we are working with says in order to foreclose, it has to go to auction. WHY?
A: You sold the condo to the buyer, and the condo became collateral for the debt. If the buyer defaults, then the recourse is to foreclose. As you stated, you financed the purchase ... that is what a bank does, and a bank's recourse is to foreclose. Your recourse is, I'm sorry to say, no different. But see below for an alternative approach.

Q: What are my options??? If we hold the note...why does it have to go to auction?
A: If the buyer wants to cooperate, then you could accept a deed in lieu of foreclosure. This would be beneficial to both of you. First, it would help you because you'd get the property back without the time and expense of auctioning the property. Second, it would help the buyer because she'd avoid a foreclosure on her record and a bankruptcy (assuming the possible foreclosure is the only reason she'd file for bankruptcy). She'd still remain personally liable for the HOA fees, but the HOA could still enforce the unpaid dues by foreclosing. Accordingly, there is a very good chance that you'd be stuck paying the HOA fees. If so, then you could sue the girl.

Does that answer your question? Please let me know if you need clarification, as I am happy to continue helping you until you are satisfied. Also, your positive feedback is much appreciated.

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Customer: replied 4 years ago.


We offered to pay all the past fees if she would just give us the deed in lieu of foreclosure and had our lawyer write it up accordingly. She also asked if we qwould do this on June 1st as this would release buyer from having to refund her tax rebate to the government. We agreed and wrote it up. All we asked was that the unit be returned with all like and kind apliances and left in good condition. She did not respond until today and said she was selling the refrigerator, washer and dryer and stove because she bought new ones. The contract shows ALL appliances turned over with the unit. She siad she was going forward with bankruptcy because she didn't believe that we would pay the past dues even though our lawyer wrote it up that way. We have instructed our lawyer to go ahead with foreclosure proceedings but do NOT understand why it has to go to auction and we have to bid on oiur own property. At this point we intend to sue for ALL damages, material, legal and otherwise and if we don't collect from the buyer herselfbecause of bankruptcy, can we go after the guarantor for ALL of this?

Hi again.

Q: We have instructed our lawyer to go ahead with foreclosure proceedings but do NOT understand why it has to go to auction and we have to bid on oiur own property.
A: It sounds like you have a misconception, and that may be why you don't understand. You asked "why ... we have to bid on oiur own property"? That question assumes something which is incorrect: The property is not your property. You sold it. The girl owns the property. You merely have a security interest. In order to enforce a security agreement, a secured creditor must foreclose. Does that help to clarify?

Q: At this point we intend to sue for ALL damages, material, legal and otherwise and if we don't collect from the buyer herselfbecause of bankruptcy, can we go after the guarantor for ALL of this?
A: If the girl files for bankruptcy, then I'm sorry to say that you would be prohibited from going after her for anything. It is unlawful to sue a person who has an open bankruptcy case. Moreover, it is unlawful to sue a person for a discharged debt. But, you could certainly go after the guarantor for everything.
Customer: replied 4 years ago.

Are you saying if she files bankruptcy she gets to keep the condo?

Certainly, if she is not living in it, which she is not and has not since November 2012, (they are leasing it) we should be able to get it back?

 

How and when can we expect to get it back. I now understand the foreclosure, but does bankruptcy override and what happens with the foreclosure proceedings? I am very confused....We just want our property back...period. Stil lneed to understand our options. Help!

 

Are you still there? 10:11 EST

Hi again.

No, she would not be able to keep the condo unless she pays you. The bankruptcy can discharge the debt that is owed to you, but it cannot eliminate the lien that you have on the condo. Accordingly, after the bankruptcy you would still be able to foreclose if she is not paying you. However, the bankruptcy does mean that you would not be able to sue her personally for any of the debt.

If I were you, I would continue trying to work out a deed in lieu of foreclosure. I would have your attorney speak with her attorney and try to work out the details so that she is satisfied. That is certainly the easiest thing to do, Even if it means that you have to pay the associations fees. But if that kind of arrangement cannot be worked out, then you should proceed with foreclosure. If the bankruptcy is filed, then you will have to wait until the bankruptcy is closed in order to foreclose. Unless, your attorney files a motion to lift the automatic stay. If such a Motion is filed, and if the judge grants the motion, then you could proceed with the foreclosure even while the bankruptcy is still open.
Customer: replied 4 years ago.

If we wait for the bankruptcy to close and then we proceed to foreclose are WE responsible of any of the fees incurred by her? Is there a lien on the property caused by her that we have to pay in order to get clear title? Which way do we proceed to get clear title on the property when we finally DO get it back.


 


We tried everything for deed in lieu of foreclosure, EVEN offered to pay the past due fees and they turned it down.

Hi again.

Unfortunately, there is no way to guarantee that you will have a clear title. The association's fees likely have priority over your lien on the property, and that means even after foreclosure, the association's lien will remain. Accordingly, in order to prevent a foreclosure by the association, you may have to pay those fees. But you should speak to the association to see what they intend to do. It's quite possible that they will not proceed against you because they may think that their recourse is against the current owner.
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